MRM EXCLUSIVE: Credit Remains King in Multi-Unit Franchise Lease Negotiations

Thanks to the strengthening U.S. economy, both rents and occupancies are on the rise at better shopping centers around the country. Does this mean multi-unit franchisees are losing leverage in lease negotiations?

Not necessarily.

To be sure, landlords today can be a bit more aggressive provided their centers are well located and enjoy strong foot traffic. Personal guarantees, in which tenants agree to be liable for the landlord’s losses in the event of a default on the lease, are one expression of this. Back during the recession and its aftermath, some landlords reluctantly agreed to shorter guarantees than they would have preferred (in some cases, the guarantees were for just one year). Today, most landlords in my home state of New Jersey are seeking longer guarantees than before, sometimes substantially so.

Multi-unit franchisees have good reasons to continue to feel emboldened at the negotiating table.

Guarantees vary from state to state, depending on what is customary among the…