A Guide to Franchise Premises Leases in Taiwan: Check Permitted Use, Lease Terms and Opening Responsibilities Before Signing

When buying a franchise in Taiwan, once you have chosen a brand, the most easily overlooked issues are not the décor but whether the premises can legally be used for your business and whether the lease aligns with the franchise term. A franchisor saying ‘this site is suitable’ does not mean that building, fire safety or other operating requirements have been checked. Before committing to a franchise, treat the site assessment as a separate due diligence exercise: establish who will carry out the checks, who will submit applications and who will bear the costs if the requirements cannot be met.

1. Check the permitted use, not just what the premises are currently used for

The fact that the previous occupier ran a restaurant does not mean your brand can simply move in. Different equipment, seating layouts, fuels and building works may trigger different requirements, and the existing fit-out may not be entirely lawful. A franchisor’s site assessment usually focuses on footfall, visibility and operational layout; it is no substitute for checking legally permitted use.

First, ask the landlord for the land and building registration records, occupancy permit and relevant plans. Then, based on the exact address, floor and proposed operations, check with the relevant local authorities about land-use zoning, the building’s permitted use and whether a change of use is required. Where fire safety, interior fit-out works or catering equipment are involved, qualified professionals should assess the actual site conditions. Do not rely solely on what the property agent tells you.

When viewing premises, address at least the following questions:

• Can the electricity supply, water supply, drainage and fume extraction required by the brand be installed? Will any works need to pass through someone else’s property or communal areas?
• Do the landlord or building management rules restrict signage, outdoor air-conditioning units, temporary waste storage or delivery access?
• Are any mezzanines, rear extensions or outdoor spaces lawful, and are they actually included in the premises being let?
• What applications are needed, who will handle them, how long are they expected to take and which supporting documents must the landlord provide?

Record the findings in a checklist covering ‘item, supporting documents, outstanding actions and person responsible’. Completing company or business registration does not mean the premises meet every requirement for trading. Do not treat a single registration document as comprehensive permission to open.

2. Confirm the authority to let and separate the three parties’ responsibilities

Whether the person signing the lease has authority to let the property is a separate question from whether the franchisor approves your opening there. Check the landlord’s identity and the records establishing their rights over the property. If an agent is signing, ask to see their authorisation. Where there is joint ownership, a sublease or an arrangement under which the franchisor rents the premises and then makes them available to you, ask a lawyer to confirm that all necessary consents and authorisations are in place.

In particular, establish whether you are signing a direct lease, a sublease or an arrangement for using the premises within the franchise agreement. If the franchisor is itself the tenant, check the remaining term of the head lease, the right to sublet and the circumstances in which it can be terminated. Do not simply accept assurances that ‘head office will handle it’. If the head lease ceases to be effective, your operations may also be affected.

Ask for a table setting out the three parties’ responsibilities:

Matter	What to clarify before signing
Premises documents	What the landlord will provide, when they will deliver it and what happens if the information is incorrect
Site selection and design	Whether the franchisor’s approval covers commercial suitability only or also includes specific technical checks
Works and applications	Who appoints professionals, who pays and who follows up on requests for additional documents
Inability to open	How the cause will be determined and how rent, building costs and franchise-related fees will be shared

The landlord’s and franchisor’s commitments should each be recorded in documents that bind the relevant party. A statement in the franchise agreement that ‘the landlord consents to the works’ may not bind a landlord who has not signed that document.

3. Put the lease and franchise agreement on a single timetable

A lease expiring while your franchise rights are still valid is a risk you can identify in advance. Conversely, a long-term lease that obliges you to keep paying rent after the franchise term has ended can leave you with an ongoing burden. When comparing terms, do not just look at the number of years stated in each agreement. Check the commencement dates, handover date, fit-out period, planned opening date and deadlines for renewal notices.

Lease renewal should not simply be left as ‘to be discussed on expiry’. Negotiate the notice procedure, rent adjustment mechanism, renewal conditions and arrangements if the landlord refuses to renew. Also check whether renewing the franchise requires a new fit-out. Being required to spend heavily on refurbishment when little time remains on the lease could make an otherwise viable site unsuitable.

For premises where permitted-use or building-work checks are still outstanding, discuss conditional provisions with a lawyer. These might cover extensions or termination if necessary consents cannot be obtained by a specified date, together with the treatment of the deposit, rent already paid and building costs. These protections must be negotiated; they are not automatic statutory rights to a refund.

The rent-free fit-out period also needs to be clearly defined. Does it start when the keys are handed over or when work can actually begin? Will it be extended if the landlord supplies documents late, the franchisor delays providing plans or an application requires additional documentation? Do not let days when work cannot yet start quietly use up the rent-free period.

4. Check disclosure requirements and the limits of liability under Taiwanese law

Taiwan does not have a single, comprehensive franchise statute, but franchise transactions are subject to specific rules. The Fair Trade Commission has issued the ‘Fair Trade Commission Disposal Directions (Guidelines) on the Business Practices of Franchisors’ and addresses relevant unfair trading practices under the Fair Trade Act. Leases and contractual liability also fall within the scope of the Civil Code, while use of the premises must comply with applicable land-use, building, fire safety and other regulations.

Under those guidelines, the franchisor should provide important franchise information ten days before entering into a franchise or preliminary franchise relationship, or within a period considered reasonable in the particular case or agreed by the parties. Information directly relevant to the premises includes pre-opening costs and operating restrictions, such as designated fit-out contractors and equipment specifications. Before signing, prospective franchisees should also be given at least five days to review the contract, or a review period considered reasonable in the particular case.

If a franchisor fails without justifiable reason to provide important information in advance, and the conduct is obviously unfair and sufficient to affect trading order, it may breach Article 25 of the Fair Trade Act. However, this does not mean the Fair Trade Commission has approved your site, nor does every disclosure omission automatically invalidate the lease or franchise agreement.

Franchise recruitment transactions are generally not consumer transactions, so do not assume that the protections under the Consumer Protection Act apply directly. If a dispute arises because you cannot open, retain site assessment reports, versions of plans, responses from authorities, correspondence and payment records. A lawyer can then assess the respective responsibilities of the landlord, franchisor and contractors. Reporting a matter to a regulator and pursuing a civil claim for compensation are separate procedures.

Practical summary: Before signing a lease, obtain the results of permitted-use checks, evidence of valid authority to let the premises and a timetable that aligns with the franchise agreement. Anything still unconfirmed should be covered by written conditions, completion deadlines and cost-sharing arrangements, rather than left for discussion after opening.