Franchising: checking that the commercial lease suits your concept

A concept that is profitable at your own premises may be impossible to operate elsewhere if the lease prohibits an essential activity or prevents the necessary alterations. Before expanding your franchise network, establish a process for checking the leases proposed by prospective franchisees. The aim is not to become their property adviser, but to identify any mismatch between the rights granted by the landlord and the requirements of your concept.

1. Translate the concept into specific property uses

A commercial lease is more than an address, a floor area and a rent. Its permitted-use clause, known in France as the clause de destination, defines the activities the tenant may carry out. Wording that seems close to your line of business does not necessarily cover every operation your model involves.

Before looking for premises, draw up a specification setting out the essential uses:

• selling core products and complementary ranges;
• providing services on the premises;
• preparing, processing or storing goods;
• on-site consumption, takeaway sales or delivery, depending on the concept;
• order collection and access for carriers;
• installing the equipment needed to run the business.

For example, permission to sell food products should not be assumed, without checking, to allow cooking or serving food for consumption on the premises. The commercial description of your concept is no substitute for a legal review of the lease’s permitted-use clause.

Then divide these uses into two categories: those without which the concept cannot operate, and those that remain optional. This distinction allows you to rule out unsuitable premises quickly without requiring every candidate to find a property with unnecessary features.

2. Review the lease alongside other restrictions affecting the premises

In France, commercial leases are governed in particular by Articles L. 145-1 onwards of the French Commercial Code. Statutory procedures known as déspécialisation may, subject to conditions, allow activities to be added or the permitted activity to be changed. However, these do not provide automatic permission: franchisees must not start an activity outside the scope of the lease on the assumption that approval will follow.

The review must also go beyond the contractual permitted use. Ask the candidate to gather the draft lease, its annexes, any amendments and relevant documents relating to the building.

A review checklist can cover four areas:

• Alterations: which works require the landlord’s consent, particularly changes to the façade or structure, or the installation of an extraction system?
• Signage: is its installation compatible with the lease, the building’s co-ownership rules and applicable local regulations?
• Operations: are there restrictions on access, deliveries, disturbance or opening hours that conflict with the planned operation?
• Financial responsibilities: who pays for the works, maintenance and various charges specified in the lease?

The landlord’s consent does not replace any necessary regulatory approvals. Equally, regulatory approval does not override a contractual prohibition. The accessibility and fire and safety requirements applying to premises open to the public must also be reviewed in light of the layout and proposed activity.

3. Define exactly what the franchisor is approving

An overly broad approval of premises creates dangerous expectations. The candidate may understand it to mean that the franchisor guarantees the lease’s suitability and legal compliance, when the franchisor has only assessed the visibility of the shopfront or the layout of the space.

Set out a written procedure distinguishing three reviews: suitability for the concept, technical assessment and legal review of the lease. Specify who carries out each review and what supporting documents are required. The prospective franchisee will be the tenant and must have their commitments reviewed by their own advisers.

Your assessment should identify the premises, the documents reviewed, the requirements checked and any conditions or reservations. A condition such as ‘written landlord consent required for the extraction system’ must become an outstanding issue to resolve, not a forgotten note in an email.

This division of responsibilities does not relieve the franchisor of the need to disclose restrictions they know about. It provides a framework for useful cooperation within the franchise network without promising a blanket guarantee about the property.

4. Arrange the decision-making process before any irreversible commitment

Carry out this review early enough to prevent a candidate from signing a lease that is incompatible with the concept. Do not let pressure from a landlord or the apparent availability of a site take the place of reviewing the documents.

The pre-contractual rules for franchising continue to apply alongside this process. Article L. 330-3 of the French Commercial Code, introduced by the Doubin Law, requires, where its conditions are met, the pre-contractual disclosure document and draft agreement to be supplied at least twenty days before signing or making any advance payment covered by the provision. Providing this information does not amount to approval of the commercial lease.

Finally, keep a record of the decision: the version of the lease reviewed, advisers’ opinions, approvals obtained and the franchisor’s reasoned response. Any subsequent change affecting the permitted use or essential works must trigger a fresh review.

Key takeaway: before approving premises, compare the concept’s essential uses with the rights actually granted by the lease. An outstanding condition is not permission to operate.