A franchisee signs two contracts that have to fit together: the franchise agreement and the lease. When they do not, the gaps fall on the franchisee, who is personally on the hook for a lease built to the franchisor’s specification, on the franchisor’s timeline, and often assignable to the franchisor on default. The terms that tie the two together are the ones to confirm. For the dollar math, see the franchise exposure breakdown; for general terms, the commercial lease checklist.
This is an observational checklist. Each item names what to find in your lease and why it matters — it does not tell you what to decide. Confirm what your document actually says for each point, and treat any protection that is simply absent as information about where your exposure sits. The legal judgment about what to do with what you find is yours.
1. The Franchise-Alignment Terms
These tie the lease to the franchise agreement, and gaps fall on you.
- Lease term vs franchise term. Confirm the lease term (including options) matches or exceeds the franchise agreement term, so you are not left with a lease after the franchise ends or a franchise with no location.
- Collateral assignment to the franchisor. Find whether the lease permits the franchisor to step in or take assignment on your default, which is a standard franchisor requirement, and what it means for your liability.
- Franchisor approval of the lease. Confirm whether the franchisor must approve the lease and whether the lease already meets the franchisor’s required provisions.
- Build-out to brand spec and remodels. Find whether the build-out and any mid-term remodels the franchisor mandates are addressed, and who pays for landlord-side approvals.
2. The Operating and Signage Terms
The brand drives how the space looks and runs.
- Signage to brand standard. Confirm the lease permits the franchisor’s required signage and branding.
- Permitted use and exclusivity. Find that the permitted use matches the franchise concept and whether you have any exclusivity in the center.
- Hours and continuous operation. Confirm the operating hours and any continuous-operation requirement, which can compound a franchisor’s own operating mandates.
3. The Money Terms
Franchise economics are tight, so the rent structure matters.
- Lease structure, CAM, and percentage rent. Confirm whether the lease is gross or triple-net (NNN), whether CAM is capped, and whether percentage rent applies on top of franchise royalties. The CAM charges calculator estimates pass-throughs.
- Escalation, free rent, and restoration. Find the annual increase, any build-out free-rent period, and the surrender condition. The restoration cost estimator gives a range.
4. The Liability and Exit Terms
The franchisee usually carries the personal risk.
- Personal guaranty. Confirm whether you are personally guaranteeing the lease and whether it is capped. An unlimited personal guaranty puts your own assets behind the full remaining lease value; negotiated leases commonly include a cap, time limit, or burn-off. The personal guaranty calculator sizes the exposure.
- Assignment on resale and early termination. Find whether you can assign the lease when you sell the franchise unit, any early-termination right, and the holdover rent. The early termination calculator estimates the exposure.
5. The Dispute Terms
These decide the outcome if the relationship goes wrong.
- Default, cross-default, and cure. Confirm how default is defined, whether a franchise-agreement default cross-triggers a lease default, and the cure period.
- Attorney fees, jury waiver, and venue. Confirm whether fee-shifting is one-way or mutual, whether you are waiving a jury trial, and which state’s law governs.
How to use the result: Mark every item you cannot answer from the lease text. The unanswered items are your shortlist for questions, negotiation, or counsel review — and a missing protection is itself a finding, not a blank to ignore. Related reading: franchise lease risk, the franchise exposure breakdown, and the personal guaranty guide.
Frequently Asked Questions
What should I check in a franchise lease before signing?
The key items tie the lease to the franchise agreement: the lease term should match or exceed the franchise term, the lease should accommodate collateral assignment to the franchisor, franchisor approval and required provisions should be satisfied, and the build-out and remodel obligations should match brand spec. Then confirm the personal guaranty, assignment on resale, and any cross-default. Confirm each against both documents before signing.
What is collateral assignment to the franchisor?
It is a lease provision that lets the franchisor step into or take assignment of the lease if you default, so the brand can keep operating the location. It is a standard franchisor requirement, but it affects your liability and exit, so confirm how it is drafted and what it means for you.
Why does the lease term need to match the franchise term?
If the lease is shorter than the franchise agreement, you can be left obligated to operate a franchise with no location, or paying a franchisor for rights you cannot use. If it is longer with no exit, you can be stuck with rent after the franchise ends. Aligning the terms (including options) avoids both gaps.
Should a franchise lease be reviewed by an attorney?
Franchise leases have to be read against the franchise agreement, carry collateral-assignment and cross-default terms, and usually include a personal guaranty, so they are commonly reviewed by counsel before signing. A checklist and an automated scan can tell you where the exposure sits; the legal judgment about what to do with that information is yours.