Multi-Unit Franchisee Magazine Issue I, 2014 | Page 83
l e a s e n e g o t i a t i o n 101
lower rent against the chance of costly
surprises down the road.
• Common area maintenance
(CAM). These are expenses the landlord
passes on to the tenants. Shared expenses
can include maintenance, landscaping
and other upkeep, real estate taxes, or
specific references to triple net charges.
CAM charges are common in shopping
centers, where tenants are charged a
share of expenses such as parking lot
maintenance, snow removal, outdoor
lighting, insurance, property taxes, etc.
CAM charges do not normally include
capital improvements made to the property. Experts encourage franchisees to
understand these figures and negotiate
a fixed rate or a cap on CAM increases.
• Tenant improvement allowance (TIA): This is the sum the landlord agrees to spend on improvements,
based on square footage or as a lump
sum. The lease clause that covers this is
called “Improvements and Alterations.”
For franchisees, a leased space must be
customized to meet the franchisor’s
Jim McKenna
specifications. The tenant and landlord
should agree on who does the design,
the contractor, the timetable, and how
to allocate the cost. If the cost exceeds
what the landlord offers, the franchisee
must pay the overage; using your own
contractor provides more control over
costs. Also think ahead to franchisormandated upgrades, and be clear before
signing which improvements need the
landlord’s approval.
• Rider. A supplement or addendum
attached that becomes part of the lease;
the more specific and detailed, the better
for both franchisee and landlord in terms
of avoiding future disputes. Franchisees
frequently have unique requirements
based on their franchise agreement. A
good franchise attorney will ensure the
rider includes all the provisions required
by the franchisor.
• Personal guarantee. For those
new to franchising, it will be tough to
eliminate a personal guarantee. Cheng
encourages tenants to seek ways to limit
liabilities after a few years in business,
pay a larger deposit up front that will
be refunded in exchange for a shorter
personal guarantee, or inquire if other
properties can be used to guarantee
the lease.
One final thought: If the landlord
refuses to negotiate at all, most likely
you can find a better deal—and a better
landlord—someplace else.
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