Buying a US Franchise: Check Site Approval Before Leasing

A recognisable franchise brand cannot make an unsuitable location work. Before buying a premises-based franchise in the United States, establish who finds the site, who approves it and what happens if no acceptable property is available. Within the franchising community, site approval should be treated as one part of your due diligence, not a substitute for an independent assessment of the premises and lease.

Understand what the franchisor actually promises

The New York Attorney General’s franchise buyer guidance specifically recommends examining the site selection process in the disclosure document. Start there, then compare the description with the franchise agreement and any separate site selection documents.

Item 11 of the Franchise Disclosure Document (FDD) addresses the franchisor’s assistance, including relevant site selection arrangements. Identify whether the franchisor will search for premises, assess locations you propose, recommend a property agent or simply approve or reject your choice.

Ask for written answers to these questions:

• Who is responsible for finding and submitting potential sites?
• What information must a site proposal contain?
• Which criteria determine acceptance, and can those criteria change?
• Is there a stated period for reviewing a complete submission?
• Who pays for surveys, travel, demographic reports and rejected proposals?
• What happens if no site is approved before the contractual deadline?

Distinguish assistance from responsibility. A promise to review a location is not a promise to locate suitable premises. Likewise, approval may mean only that the property meets brand requirements, rather than that it offers sufficient demand or affordable occupancy costs.

Test the premises independently

Assess the actual trading location rather than relying on a broad description of the neighbourhood. A busy road may offer poor access; a popular shopping centre may have weak footfall during your intended trading hours.

Visit at different times and record what you observe. Check visibility, pedestrian movement, parking, delivery access and nearby competition. For appointment-based services, consider whether customers can reach the premises conveniently and whether the layout provides appropriate privacy or accessibility.

Then investigate whether the proposed use is legally and physically achievable. Depending on the business and locality, this may involve zoning, permitted use, building approvals, fire requirements, accessibility obligations and health permits. These are separate from the franchisor’s commercial approval.

Have suitable local professionals assess matters such as electrical capacity, ventilation, drainage and structural suitability before making an unconditional commitment. Ask the landlord for supporting documents rather than assuming that a previous tenant’s activities establish permission for yours.

Keep a written list of unresolved issues, the person responsible for checking each one and the evidence needed to close it. A franchisor’s enthusiasm should not turn an unanswered property question into an accepted risk.

Align site approval with the lease and opening deadline

The franchise agreement and lease create different obligations to different parties. Signing one does not automatically protect you under the other.

Ask a US franchise lawyer and a commercial property lawyer to review the sequence of commitments. Where negotiable, consider conditions covering franchisor approval, necessary permits, finance and an acceptable property inspection. Those protections need clear deadlines and consequences; an informal assurance that you can withdraw is not enough.

Compare the documents on practical points:

• Does the lease permit the full range of required activities and trading hours?
• Can you install the signage, equipment and ventilation the brand requires?
• When does rent begin, and what must the landlord deliver first?
• Does the opening deadline allow time for approvals and building work?
• What happens to deposits and franchise payments if the site falls through?

Model a delayed opening with your accountant. Rent, insurance and other commitments may start before sales begin. This is not simply a question of whether the headline rent looks affordable: the timing of liabilities can determine whether the project remains viable.

Apply disclosure rules without mistaking them for approval

The Federal Trade Commission’s Franchise Rule, 16 CFR Part 436, requires a 23-item FDD for covered franchise sales. Generally, you must receive it at least 14 calendar days before signing a binding agreement with, or paying, the franchisor or its affiliate in connection with the proposed sale.

That disclosure requirement does not certify a site’s suitability or make a third-party lease safe to sign. Do not assume the federal waiting period protects a deposit paid to an independent landlord.

State requirements can also apply. Under Virginia’s Retail Franchising Act, franchises generally must be registered with the State Corporation Commission before being offered or sold in Virginia, unless an exemption applies. Registration is not an endorsement of the investment or premises. Have your lawyer check the rules applicable to your transaction alongside local property and licensing requirements.

Practical takeaway: Before committing to premises, obtain written site approval, independently verify that the proposed use is workable, and align the lease conditions with your franchise obligations. If these checks cannot be completed in time, renegotiate the timetable rather than signing around the uncertainty.