Leasing premises for a franchise: what to resolve before signing

Running a successful company-owned outlet does not mean you can open the same concept in any rented premises. When expanding a Czech business into a franchise network, you need a process that connects site selection, technical checks and the franchisee’s lease obligations. Otherwise, the franchisee may be paying rent while waiting for alterations, approvals or permission to start trading at all. This guide focuses on preparing the lease before opening your first franchisee-operated outlet.

1. Decide who will lease the premises and bear the risks

First, decide whether the franchisee will be the tenant directly, or whether your company will take the lease and sublet the premises to them. This is more than an administrative distinction. It determines who deals with the landlord, pays the deposit, is liable for rent and handles building alterations.

A direct lease held by the franchisee limits your own lease obligations. The franchisor can reserve the right to approve the premises in the franchise agreement, but this does not automatically give it any rights against the landlord. For example, it cannot unilaterally take over the lease or prevent its termination.

A lease held by the franchisor, with a sublease to the franchisee, gives the franchisor more control over who occupies the site, but also places the financial risk on it. If the franchisee stops paying, the franchisor’s obligation to pay rent generally continues. Check whether subletting is permitted and what landlord consent is required; do not rely on a verbal promise.

Before looking for premises, set out the division of responsibilities: who arranges the technical inspection, negotiates the lease, pays for alterations and checks the permitted use. Assign a named person to each task. Make a clear distinction between the franchisor’s approval of a location and any guarantee of its future profitability.

2. Check whether the premises are suitable, not just well located

An attractive shopfront is not enough. Use your existing outlet to establish minimum space and technical requirements, rather than trying to replicate it exactly. Distinguish essential requirements from fixtures and equipment that can be adapted. This will help prevent a franchisee from signing a lease for inexpensive premises that are unsuitable for the concept.

Depending on the type of business, checks should cover, in particular:

• Permitted use: whether the premises can be used for the intended activity and whether a change of use will be needed.
• Technical capacity: electrical supply capacity, ventilation, water, drainage, storage and access for deliveries.
• Customer access and operation: the entrance, accessibility, toilet and washing facilities, and any restrictions on opening hours.
• Brand visibility: whether signs, window graphics or other branding can be installed, including any necessary consents.
• Building alterations: who approves them, who pays for them and what happens to them when the premises are handed back.

Request the available documentation and have it assessed by an appropriate specialist with the intended operation in mind. A statement that “there used to be a café here” is no substitute for checking the current legal and technical position.

The outcome should be a brief written assessment: the premises are suitable, suitable subject to specified alterations, or unsuitable. Where approval is conditional, include a budget, assign responsibility and set a completion deadline. Until major obstacles have been resolved, do not place non-cancellable orders for bespoke fixtures or equipment.

3. Align the lease with the opening timetable

The lease and franchise agreement are often prepared separately, but their consequences come together in the franchisee’s budget. Compare not only the duration of both agreements, but also the dates for handing over the premises, starting rent payments, beginning alterations and opening the outlet.

The lease term should match the investment plan. If the outlet’s financial projections assume longer-term use of the site, a short lease without a securely agreed extension creates a risk. The possibility of discussing an extension later is not the same as a contractual right to extend.

Where possible, negotiate a fit-out period with reduced or deferred rent. Clearly distinguish rent from advance service charge payments and other charges: relief on one item does not automatically waive the others.

Also agree in advance what happens if a necessary approval is not obtained or the premises are handed over late. A lawyer can propose appropriate conditions for the agreement to take effect, a right to withdraw or another mechanism. A general statement that opening depends on obtaining permits is not enough; it must be clear who applies for them, by when and what happens if the application is unsuccessful.

4. Follow Czech rules and introduce a final review

In Czechia, there is no specific franchise law and no compulsory registration of franchise agreements. A franchise agreement is usually concluded as an unnamed contract under Section 1746(2) of Act No. 89/2012 Coll., the Civil Code. Leases of premises used for business purposes are governed by the same Act, particularly Section 2302 onwards.

However, the landlord’s consent under private law does not replace public-law requirements. Depending on the activity, the Trade Licensing Act No. 455/1991 Coll., the Building Act No. 283/2021 Coll. and the relevant hygiene, fire safety or other rules will apply. The franchise agreement itself does not grant the franchisee a trade authorisation or confirm that the premises are suitable for use.

Before signing, have the final lease, franchise terms, technical assessment and opening budget reviewed together. Record all unresolved issues and identify which must be settled before signing. Do not assume that good relationships within the franchise network will resolve conflicting contract terms later.

Practical takeaway: Approve the lease only once you know who bears the obligations, whether the premises can legally be used and what happens if opening is delayed. A single coordinated review before signing is more effective than trying to fix incompatible agreements afterwards.