Opening a Franchise: The American Dream or a Landlord’s Nightmare?

In today’s challenging and unstable economic client, many Americans, old and young, rich and poor, have left professional and service-related occupations and opted to open business for themselves. For some, this decision has been reached voluntarily—as an attempt to put one’s economic fate into one’s own hands rather than at the hands of corporate America. For others, the decision is one of necessity, as unemployment remains at levels unseen during the current generation’s time in the workforce.

As individuals seek to start their own businesses, many have turned to franchising—a business model by which certain trademarks, operational systems and geographic growth plans are established by a central corporate organization, but business operations (and business risk) is controlled to a great degree by the individual franchisee. The benefits of such a structure are well documented, but for lawyers, in particular leasing lawyers, the increasing prevalence of franchise-based operations have given rise to a specific set of legal issues which, if unaddressed, can pose dramatic challenges for franchisees, franchisors and landlords like. The purpose of this paper is to explore certain specific challenges—both when the franchisee’s real estate is first selected and when the operation is winding down—and to suggest strategies for dealing with such challenges on the front end so as maximize the chances of a positive relationship between all parties.

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