Leasing Premises for a Franchise: What to Check Before You Buy

Suitable franchise premises are more than just an address with good footfall. They must meet the brand’s requirements, be suitable for your intended business activity and remain available on acceptable terms. In franchising, site approval is often a separate stage of the transaction. As a buyer, you need to consider the lease and the franchise agreement together: approval of one does not remove the risks associated with the other.

1. Obtain the premises requirements before making commitments

Before buying the franchise, ask the franchisor for its site requirements in writing. Descriptions such as ‘main-road frontage’ or ‘premises suitable for a café’ are not enough to assess costs or whether the property can legally accommodate your business. You need specifications that can be checked during an inspection and compared with the owner’s documents.

The list should cover:

• acceptable floor area, layout, floor level and entrance position;
• required electrical capacity, water supply and ventilation;
• requirements for loading, stock storage and waste collection;
• permission to install signage and equipment on the building’s exterior;
• opening hours, staff access and building restrictions.

Establish separately which requirements are mandatory and where the brand allows flexibility. For example, approval of a smaller site should not leave any uncertainty about which equipment is still required. Record any agreed exceptions in writing.

Clarify who assesses the site: a development manager, a technical specialist or an external designer. Commercial approval of an address does not confirm that the electrical capacity is sufficient or that alterations are lawful. Ask for a description of the scope of the assessment and a list of matters the franchisee must investigate independently.

A useful outcome at this stage is approval of specific premises, supported by a floor plan, technical specifications and a schedule of required works—not a brief message saying ‘the location is suitable’.

2. Check the property and the landlord’s authority

In Russia, leases are governed by Chapter 34 of the Civil Code, while commercial concession arrangements—the legal framework used for franchising—are governed by Chapter 54. These create separate obligations: permission to use a brand does not give you the right to occupy premises, and a lease does not authorise use of a trade mark.

Request up-to-date information from Russia’s Unified State Register of Real Estate (EGRN), documents confirming the signatory’s authority and a plan of the space being let. Check that the address, cadastral details and property boundaries match the draft lease. If the party letting the premises is not the owner, verify the legal basis and limits of its authority.

For a sublease, examine the head lease: does it permit subletting, has any necessary consent been obtained, and when does it expire? As a general rule, a sublease cannot run beyond the term of the head lease. If the intermediary loses its lease rights, this creates a separate risk for your outlet.

Also check:

• whether the lease permits the business activity you will actually carry out;
• whether there are restrictions on opening hours, noise or customer access;
• what utility capacities are actually available;
• who is responsible for faults in shared building services;
• whether the lease requires state registration and who will arrange it.

A lease of a building or structure for a term of at least one year requires state registration; this rule also applies to leases of non-residential premises. It is best to have a lawyer review the particular agreement. Franchisor approval is no substitute for that review.

3. Agree the signing sequence and when payments begin

The main aim is to avoid becoming liable to pay for both a franchise and premises where the agreed business format cannot operate. Before signing, set out the sequence of steps: technical survey, brand approval, agreement of works with the owner, completion of the contracts and handover of the premises.

If the landlord requires a payment to reserve the property, establish its legal status. Calling it a ‘reservation payment’ does not, in itself, explain whether it is refundable. The document should specify the reservation period, each party’s obligations and the consequences of withdrawing, including where the technical assessment is unfavourable.

Ask for the franchise agreement to address what happens if suitable premises cannot be found: how long you have to search, whether you can propose a replacement site and what happens to your obligations if approval is not obtained. In the lease, agree separately on the handover date, when rent starts to accrue and the terms applying during the fit-out period.

Do not confuse a rent-free period with having no costs at all. Even if the basic rent is waived, utility bills and service charges may still be payable. Ask what these cover and how they are calculated.

Under Article 1028 of the Russian Civil Code, the grant of a package of exclusive rights under a commercial concession agreement must be registered with Rospatent, Russia’s intellectual property office. This registration does not replace the lease formalities or confirm that the site is ready to open.

4. Allocate fit-out costs and the risk of losing the premises

Before approving the budget, divide the works into those required by the brand, those needed to remedy defects in the property and improvements you choose to make. For each item, establish who pays, who must approve it and what happens to the resulting fixtures or improvements when the lease ends.

Pay particular attention to ventilation, electrical installations, partitions and other alterations that cannot be removed without damaging the premises. Under Article 623 of the Russian Civil Code, reimbursement for inseparable improvements depends, among other things, on the landlord’s consent and the terms of the lease. Do not assume reimbursement is guaranteed: the lease may exclude it.

Compare the lease term with the period for which you intend to operate under the brand. Check the grounds for early termination, the procedure for changing the rent and any obligations to reinstate the premises. Ask the franchisor about the approval process for relocation and the requirements for a new address: permission to operate at another site may not be automatic.

Practical takeaway: before buying a franchise, put together a single set of documents covering the brand’s requirements, the property documentation, the technical assessment and agreed drafts of both contracts. Sign only once it is clear who bears the costs and what will happen if you cannot use the premises.