Launching a Franchise in Taiwan: Aligning Premises Leases, Franchise Terms and Renewals

When turning an existing business in Taiwan into a franchise network, franchisors can be quick to discuss the length of the brand licence while overlooking whether the premises will be available for the same period. The franchise agreement and the lease are separate documents: renewing one does not automatically extend the other. Before recruiting franchisees, establish a process for checking and aligning the two, so franchisees do not discover after fitting out their premises that they cannot operate there for the long term.

1. Map out the timelines for both agreements

Do not simply compare how many years the lease and franchise agreement last. Check their start dates, expiry dates, notice deadlines and any conditions individually. The lease may begin when the premises are handed over, while the franchise term may run from signing or opening day. Fit-out work, permit applications and training can all eat into the lease period available for trading.

For each proposed site, the franchisor can prepare a schedule setting out:

• The handover date, rent-free fit-out period and date rent becomes payable.
• The expected opening date and the start and end dates of the franchise licence.
• The deadlines for renewal applications and responses under both agreements.
• Notice requirements for early termination, relocation and handing back the premises.

Calculate the available trading period using actual dates; do not treat a rent-free period as extra time added to the lease. If the lease is shorter than the franchise term, require the gap to be addressed before approving the site. Do not approve it solely on the franchisee’s assurance that “the landlord usually renews”.

2. Distinguish landlord consent from franchisor approval

The franchisor’s approval of a site only means that it meets the brand’s requirements. It does not replace the landlord’s consent to alterations, signage, subletting or a change of use. Where the franchisor leases the premises and then makes them available to a franchisee, it is particularly important to establish the actual legal relationship and check the restrictions in the original lease. A franchise agreement alone cannot grant rights that the franchisor does not hold.

Taiwan’s Civil Code governs matters including leases and subletting. Whether the landlord’s consent is required depends on the occupancy arrangements, the extent of any subletting and the lease terms. Requirements relating to alterations, fire safety, permitted building use or particular business activities must also be checked separately.

Consider making completion of the site documentation a prerequisite for confirming that an outlet can open. Require the franchisee to provide the full lease, relevant attachments and any necessary written landlord consent, then have a designated person check them. The franchisor need not guarantee that the property is suitable, but should clearly explain the scope of its review so that franchisees do not mistake brand approval for a comprehensive legal assessment.

3. Set out a workable sequence for renewals

A common impasse arises when the landlord requires the franchisee to renew the lease before the franchisor has decided whether to renew the franchise agreement. Conversely, a franchisee may already have paid a franchise renewal fee when the landlord refuses to renew the lease. The solution is not a vague promise to “coordinate matters”, but an agreed decision-making sequence established in advance.

One option is for the franchisor to carry out a conditional franchise renewal assessment first, specifying the lease conditions still to be met. The franchise renewal can then be confirmed once the franchisee has secured a lease term that meets those requirements. If payment must be collected in advance, the agreement should clearly explain what the payment is for, when the renewal takes effect, how refunds will be handled if the conditions are not met, and the basis for any deductions.

Deal separately with the following situations:

• The lease is renewed at the existing site: Check that the new lease term covers the next franchise term.
• Renewal is available, but the rent has increased: Reassess the outlet’s ability to bear the costs rather than relying on the previous cost figures.
• The lease cannot be renewed at the existing site: Specify whether the franchisee may apply to relocate, how the new site will be assessed and how any temporary closure will be handled.
• The franchise agreement will not be renewed: Give the franchisee early warning so they do not commit to long-term rent obligations while the outcome remains uncertain.

These are contractual arrangements that can be negotiated, not automatic legal rights to renew either the lease or the franchise agreement.

4. Include lease-term risks in disclosure and regular reviews

Taiwan does not have a single dedicated franchise statute, but franchise recruitment is nevertheless subject to specific rules. The Taiwan Fair Trade Commission’s Disposal Directions (Guidelines) on the Business Practices of Franchisors set out requirements for disclosing material franchise information and allowing time to review the contract. Relevant conduct is also governed by the Fair Trade Act. Concealing material information in a way that is obviously unfair and capable of affecting trading order may engage Article 25 of that Act.

If the franchisor imposes a minimum remaining lease term, mandatory relocation assessments, refurbishment requirements on renewal or associated charges, these should be explained, as appropriate, under operating restrictions, fees, or conditions for amending and terminating the agreement. They should not be raised only when the lease is about to expire. Rights and obligations under the lease and franchise agreement must still be assessed under the Civil Code and the specific contractual terms.

In practice, one designated person can maintain an expiry schedule for all outlets and regularly check landlords’ intentions, progress on lease renewals and the status of franchise renewals. Reminders should be scheduled ahead of contractual notice deadlines, allowing time for assessment, negotiation and finding alternative premises. Automated alerts are no substitute for formal notices and records of delivery.

Practical takeaway: Before recruiting franchisees, prepare a contract-date checklist, a site-document checklist and conditional renewal clauses. Aligning leases with franchise agreements does more to protect relationships across the franchise network than arguing afterwards about who should bear the losses from a closure.