Commercial Leases for Restaurants and Franchise Operations

A lawyer can substantially increase a client's chance of success in a restaurant lease--or at least minimize the risk of failure--in two ways: first, by reviewing and negotiating the lease of the restaurant's premises, identifying and evaluating the risks and negotiating changes, and secondly, through the careful review and negotiation of the franchise agreement if the client pursues that option. Franchised operations are popular for people investing in restaurants as this purchase can give restaurateurs a head start in terms of brand recognition, marketing, consistency of food quality, and service. However, signing a boilerplate franchise agreement is not necessarily a recipe for success. It is essential that the franchise agreement and the commercial lease harmonize so that adherence to one document does not cause a violation with the other. Among the topics covered in the restaurant section are:

• Computation of rental charges and rent offsets
• Operational issues: hours, go dark provisions, definition of premises, and more
• Construction
• The emerging category of "grocerants"

This section concludes with an extensive array of restaurant leasing clauses, from CPI increases and rent stabilization clauses to language for premises issues such as lighting, valet parking, and more. Chapters focused on working with a restaurant franchise consider issues related to the client, choosing a landlord and location, management, architect and general contractor, he franchisor and the franchise agreement, and the lender.