Franchise premises: how to approve the site and agree the lease

The success of your own outlet does not mean it can be replicated in any premises. When turning an existing business into a franchise, you need a dedicated site approval process: who gathers the information, who checks the restrictions and when the franchisee may sign the lease. For franchise businesses, this is a way to reduce the risk of costly mistakes before fit-out begins, rather than a formality before opening.

1. Turn your outlet’s experience into premises requirements

Start by identifying the conditions your business model depends on, rather than looking for a similar address. Some of your own outlet’s advantages may be easy to overlook: convenient unloading access, sufficient electrical capacity, space for ventilation equipment or a separate entrance.

Divide the requirements into three groups:

• Essential: specifications without which the business cannot operate or comply with applicable requirements. Examples include the necessary utility connections, permitted use of the premises and the ability to accommodate operational processes.
• Commercially significant: entrance visibility, the nature of pedestrian traffic, neighbouring businesses and facilities, delivery access and parking.
• Desirable: layout and design features that can be changed without compromising the core concept.

For each requirement, specify how it must be verified. A photograph of a socket does not confirm the allocated electrical capacity, and the owner’s assurance that an extraction system can be installed is no substitute for a technical assessment and the necessary approvals.

Prepare a premises specification sheet covering each criterion, the acceptable value, supporting documentation and the person responsible for checking it. Base the specifications on your existing business’s operational requirements and specialist calculations, not generic recommendations. If you allow different outlet formats, each needs its own specification sheet.

2. Assess the site before making financial commitments

Set a clear sequence: initial screening, document checks, technical inspection, financial assessment and a written decision. Franchisees should understand that an attractive property presentation is not enough to secure approval.

At the first stage, request the address, floor plan, photographs, proposed lease terms, utility information and expected handover date. Then check who is entitled to let the premises, whether the actual layout matches the documentation and which restrictions could prevent the business from operating. For a sublease, review the head lease and any required consents separately.

A technical specialist should assess not only whether a fit-out is feasible, but also the scope of work required. Low rent, for example, may offer little benefit if the premises need extensive alterations to building services. Allocate checks between a lawyer, a technical specialist and the development team so that important issues do not fall between responsibilities.

Carry out the commercial assessment separately. Count potential customers at the relevant times, not simply passers-by. Compare your observations with your opening hours, average transaction value and the characteristics of your existing outlet. Record the dates and conditions of your observations: a weekend or a temporarily closed neighbouring business can distort the picture.

3. Calculate the full cost of the site

Comparing premises solely by monthly rent is risky. For each option, prepare a consistently structured calculation of pre-opening costs and ongoing operating expenses.

The start-up budget should include the security deposit, design work, fit-out, equipment connections, approvals, moving costs and rent during the preparation period. The monthly budget should include fixed and variable rent, service charges, utilities and other mandatory expenses under the draft lease. Clarify whether the quoted amounts include VAT and how the relevant clause is worded.

Test several scenarios: opening on schedule, fit-out delays and slower sales growth. This is not a profitability forecast, but a check on whether the franchisee will have sufficient funds if things depart from the plan. Do not apply your own outlet’s revenue figures to a new address without adjusting for demand and operating conditions.

Define the grounds for rejection in advance. If a site requires unaffordable investment or can cover its rent only under optimistic revenue assumptions, it should not be approved simply to speed up the launch. Record your findings in the site assessment file so that you can explain the decision to the franchisee.

4. Keep franchisor approval separate from lease terms

In Russia, commercial concession relationships—the legal framework used for franchising—are governed by Chapter 54 of the Civil Code of the Russian Federation, while leases are governed by Chapter 34. Article 1032 requires the user of the rights, or franchisee, to follow the rights holder’s instructions intended to ensure that the package of rights is used in accordance with the established model. This includes instructions on the external and internal appearance of commercial premises. However, the detailed site selection procedure must be set out in the parties’ contractual documents.

In the commercial concession agreement or an appendix, specify:

• which materials the franchisee must submit for review;
• how long the franchisor has to respond once a complete set has been received;
• what preliminary and final approval mean;
• which changes require a further review;
• who pays for surveys and design work.

Franchisor approval does not replace permission from public authorities or guarantee that a location will be profitable. Equally, a disclaimer of any guarantee must not take the place of the professional assessment promised.

In the lease, separately agree the permitted use of the premises, fit-out arrangements, signage, contractor access, rent-free periods, rent indexation and the allocation of improvement costs. Ask a lawyer to check whether the lease requires state registration. Compare the lease term and renewal options with the franchise agreement’s term and the planned investment payback period.

5. Conclude the selection process with a written decision

Use three statuses: ‘approved’, ‘approved subject to conditions’ and ‘rejected’. Conditional approval must set out specific requirements, deadlines and evidence needed to confirm compliance. Wording such as ‘suitable after refurbishment’ is too vague.

Appoint someone to verify that the conditions have been met before irreversible expenditure is incurred. If the layout, rent or technical specifications change, submit the site for review again. Keep the decision together with the inspection reports, financial assessment and agreed draft lease.

Practical takeaway: before searching for premises, prepare a site specification sheet, a financial assessment template and a written approval procedure. Franchisees should enter into lease commitments with a clear understanding of the technical constraints, the full cost of opening and any outstanding approval conditions.