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Log In / Register | Oct 20, 2017

Standing in the Landlord's Shoes: What Landlords Want from New Franchise Tenants

Securing a commercial tenancy isn’t always an easy process. For one reason, landlords and tenants have different motivations. For the landlord, owning commercial property and leasing space to tenants are their primary goals. For the tenant, however, leasing space is not the primary goal. Instead, the tenant should focus on running a profitable business or providing great service. The property is a place to attract customers to your business – it’s not an end unto itself. Tenants don’t always want to lease space; it’s simply a requirement if they want to see their business goals come to fruition – a means to an end, if you will.

Therefore, landlords and tenants are not equal. The tail can’t wag the dog. If the landlord is the dog, then the tenant is the tail. And, as we know, dogs chase their tails. Consider that a franchise tenant typically only has one landlord, whereas a commercial landlord may have hundreds (or even thousands) of tenants. The relationship between a tenant and landlord is not like an equal marriage with common goals.

It amazes us how, during the leasing process, many landlords avoid meeting their tenants – and most tenants avoid meeting the landlord. When it comes to new lease deals, often there’s a real estate agent (or two) brokering the deal between the parties. Rarely, in our experience, does the agent try to bring the landlord and tenant together to meet personally or to even talk by telephone. Being busy is no excuse. If a tenant isn’t creating a relationship with the landlord and making deposits to that relationship, how can the tenant ever expect to make a withdrawal when they need a favor?

How can you encourage the landlord to take you on as a tenant?

Sweeten the pot. Why not consider giving a gift certificate for your business? This can help make you look good. 

Explain your business concept. Don’t assume that the landlord understands anything about your business. Depending on his age, marital status, and other factors, the landlord may or may not be familiar with your business and/or your offered product/service. Your business may also be targeted at a certain demographic or carries an exclusive line of products that sets your business apart from others. Be prepared to clearly demonstrate these aspects.

You may, however, have your tenancy request rejected. This may be done for any number of reasons. Often, a smart landlord is striving for a specific tenant mix within his/her property. Consider that if a landlord is developing a retail plaza, they may want a medical complex or a service-focused plaza and their vision does not include your type of planned store. Landlords may also prefer to hold out on leasing space to a retailer geared towards the broader population and look for a higher end store that attracts more affluent customers or perhaps a chain with a more recognizable brand name. Additionally, landlords sometimes reject tenants who have insufficient capital or bad credit scores. We have also seen landlords turning away prospective tenants who desire to lease less than available commercial space. If you want to save yourself a lot of time kicking tires on different properties, find out what the landlord wants right up front. Ask the agent, “Do you think the landlord wants a (“your industry”) tenant for this property?” The agent’s answer will let you know if the landlord does or doesn’t want your type of business in his property. It should be noted that commercial landlords typically prefer franchise tenants leasing in their property as they are more recognized than independent business owners and draw more customer traffic.

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