Opening a franchise in Italy: aligning your franchise agreement and lease

A compelling brand and well-located premises are not enough: before joining a franchise network in Italy, you need to check that the franchise agreement and the lease work together. They are separate legal relationships, often involving different parties. If one ends, the other does not automatically end too: you could still have to pay rent even if you can no longer trade under your chosen brand.

1. Identify who takes on the obligations for the premises

The first question is simple: who will be the tenant — the party named on the lease? You might sign directly with the landlord, sublet the premises from the franchisor or buy an established business already operating there. Each arrangement requires different checks and does not necessarily offer the same protections.

If you sign directly, the franchisor’s approval of the premises does not make it responsible for paying the rent. Italian Law No. 129 of 6 May 2004, which governs franchising in Italy, defines franchisors and franchisees as legally and economically independent parties.

Before making any commitments, ask for:

• the full draft lease and any accompanying documents;
• details of the landlord and anyone authorised to sign;
• the franchisor’s written approval of the premises, if required;
• a clear statement of who pays the deposit, rent and additional charges.

If you are taking a sublease, have the head lease reviewed too: its duration, whether subletting is permitted and the consequences of its termination may affect your ability to retain the premises. Do not rely solely on assurances from the franchisor.

2. Compare contract lengths and exit rights

For standard commercial leases, Italian Law No. 392 of 27 July 1978 generally provides for a minimum term of six years, with special rules for certain activities. This should not be confused with the rules governing franchising: Law No. 129/2004 requires a franchisor offering a fixed-term agreement to guarantee a term long enough for the franchisee to recoup their investment, and in any event no less than three years, subject to early termination for breach of contract.

These periods do not automatically align the two contracts. Even if their initial terms are the same length, their start dates, renewal provisions and deadlines for giving notice may differ.

Prepare a single timetable covering both contracts, showing:

• the signing date and the date financial obligations begin;
• the initial expiry date and renewal arrangements;
• notice periods and formal requirements for non-renewal or early termination;
• obligations that continue after the contract ends.

Article 27 of Law No. 392/1978 allows a tenant to terminate for serious reasons, known in Italian law as gravi motivi, by giving at least six months’ notice. The parties may also agree a contractual right to terminate without having to establish serious reasons. Do not assume that the end of a franchise agreement will always qualify as a serious reason: this depends on the circumstances.

Ask your legal adviser whether you should negotiate a right to terminate the lease linked to specified events in the franchise relationship, with manageable notice periods and costs.

3. Avoid property commitments without clear conditions

An accepted offer to lease can create binding obligations before the final document is signed. A payment informally described as a “reservation” also deserves scrutiny: what matters is what the agreement says, not the label used during negotiations.

Where crucial checks are still outstanding, discuss a precisely drafted condition precedent with your adviser. This could make the commitment taking effect dependent, for example, on signing the franchise agreement or on satisfactory results from specified technical checks on the premises.

The wording should identify the event required, the deadline for it to occur, who will document the outcome and how any money paid will be refunded if the condition is not met. Vague phrases such as “subject to approval” can lead to disputes.

Law No. 129/2004 requires franchise agreements to be in writing, failing which they are void, and requires the prescribed pre-contractual documentation to be provided at least 30 days before signing. Organise your property negotiations so that you can make proper use of this review period without already being tied to expensive premises.

4. Put building work and handover requirements in writing

Finally, check that any work required by the franchisor is compatible with the lease. The landlord’s permission does not replace any necessary regulatory approvals, and the franchisor’s consent does not replace the landlord’s.

Clarify who authorises and pays for alterations to building services, signage and building work. Also specify what will happen when you hand back the premises: which installations must be removed, which may remain and who will pay to reinstate the property.

To assess your financial exposure, consider any rent still payable, notice periods, removal costs and reinstatement costs together. Do not treat the security deposit as money automatically available to cover the final rent payments.

In practice: before signing, have the same adviser review both the lease and the franchise agreement. Ask for a summary of key dates, exit conditions and remaining costs: the premises should support your business plan, not become a separate obligation that is difficult to end.