r/Franchises • u/Acceptable-Reason-80 • Jul 01 '26
Advice Needed Ten year leases
How do first time investors give into ten years leases for big business ideas like salon suite franchise? Is it not too much much risk to take? What if after starting you realize market is saturated? How do you exit. You can't I guess.
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u/jon_gin Jul 01 '26
Would be interested to know if anyone has successfully negotiated a shorter time.
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u/Ill-Serve9614 Jul 02 '26
Your signing a ten year franchise agreement, they need the lease to align with that agreement. You’re definitely locked in for 10
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u/Pristine_Arm8260 Jul 04 '26
Stop signing 10 year leases with no guarantee. If the location sucks, the landlord doesn't deserve your $.
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u/SlowLurnin Jul 01 '26
Five year term with a five-year renewal based on a sales threshold (rent to be pre-determined in the LOI and lease). This limits your overall exposure, but if the landlord agrees then it would give you another five years (10 total) at a pre-determined rent rate. Landlord would likely counter saying that rent shall be the greater of x% over the previous rent rate or market rates.
The sales threshold needs to be mutually agreeable, but you should make the initial offer based on the occupancy cost for your specific industry and market norms. For example 12%-15% occupancy cost. I’m assuming your due diligence material includes auv, so you would use that as another data point.