Buying a franchise: how to assess premises and their lease

Attractive premises are not always suitable for a franchise. They may fit the brand’s image yet come with restrictions on use, costly building work or lease terms that are incompatible with the business. Before joining a franchise network, assess the property as a contractual and technical decision, not just a commercial one.

1. Distinguish brand approval from legal suitability

In Argentina, franchising is specifically governed by Articles 1512 to 1524 of the national Civil and Commercial Code. The property lease is a separate contract, subject to its own applicable rules. The franchisor’s permission to operate at an address does not replace the necessary licences and approvals or establish that you can carry out your intended activity there.

Ask the franchisor for its premises requirements in writing: usable floor area, frontage, layout, services, accessibility, storage, and loading and unloading needs. Distinguish mandatory conditions from recommendations; this will help you rule out properties before paying for assessments or committing funds.

Next, consult a qualified technical professional and the relevant local authority to establish whether the intended use is permitted. Requirements depend on the jurisdiction and the type of business. Where applicable, also check the building’s co-ownership regulations and any restrictions affecting it.

Do not confuse three separate questions: whether the brand accepts the premises, whether they can be adapted from a technical perspective, and whether the business activity can be authorised. You need to verify all three. The fact that another business previously operated at the address does not, on its own, establish that your proposal is viable.

2. Investigate the building work before negotiating the lease

A commercial viewing should be supplemented by a technical inspection. Request any available plans, records relating to building services and documentation for existing works. Commission an assessment of anything that could affect operations: electrical capacity, ventilation, drainage, toilet facilities and safety provisions, depending on the business format.

Draw up a list separating:

• Pre-existing defects: property problems that need to be identified before you take possession.
• Franchise adaptations: changes needed to meet the brand’s design and operational requirements.
• Regulatory requirements: modifications needed to secure approval for the business activity.

For each task, record who approves it, who carries it out, who pays for it and what documentation confirms its completion. Do not assume that the landlord will fund an improvement simply because it becomes part of the property.

Request quotes with a clearly defined scope. A quote for decorative work will not necessarily include electrical upgrades, professional approvals or work on concealed services. Compare the cost of premises ready to operate, not just the advertised rent.

Also check that the landlord permits the essential alterations. A food-service franchise, for example, may need installations that affect communal areas or require additional approvals. The brand’s consent does not overcome these restrictions.

3. Align the two contracts without assuming they are linked

The franchise agreement and the lease may involve different counterparties, expiry dates and consequences. If one ends or never takes effect, that does not mean the other automatically ceases to apply.

Before signing, have both documents reviewed together. Prepare a table showing the dates for handing over the premises, access for building work, the start of rent payments, the planned opening and contract expiry. Check whether there is a rent-free period and which charges it covers: do not assume it also exempts you from building service charges or other costs.

Explicitly negotiate how situations such as these will be handled:

• The brand definitively rejects the premises.
• A technical assessment identifies an adaptation that is not feasible.
• The necessary approval for the business activity is not obtained.
• The landlord fails to hand over the premises in the agreed condition.

The conditions for withdrawing, recovering payments or terminating the lease must be precisely drafted and reviewed by a lawyer. These are not automatic rights simply because the business is a franchise.

Also review the property’s permitted use, signage, operating hours and obligations to reinstate the premises. If the contract requires you to remove all improvements at the end of the lease, budget for that obligation before accepting it.

4. Make your decision using a single property file

Bring together the brand’s written approval, the technical report, regulatory checks, quotes and the draft lease. Identify what has been confirmed and what remains conditional. An optimistic email is not equivalent to regulatory approval or a contractual commitment from the landlord.

Compare shortlisted premises using the same criteria. Lower rent may become less attractive if the property requires substantial work or imposes operational restrictions. Ask other franchisees about specific difficulties with their premises too, but do not treat their experiences as a guarantee for your chosen address.

Practical conclusion: do not sign a lease based solely on the brand’s commercial approval. Proceed once you have documented the suitability of the premises, the work required and the terms allowing you to withdraw if an essential check fails.