question about importance of franchise personal guarantee?
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[{"id": "iq5t27b", "text": "I just did a deal with Burger King / RBI.  They are going to want the option to step into the shoes of the franchisee if they default.  \n\nI did a ground lease so didn't ask for a guarantee but that doesn't mean that you can't or shouldn't do a personal guarantee.  For a longer term deal the guarantee could only be for a portion of the lease term.", "replies": [{"id": "iq5tu9t", "text": "thank you. does a commercial real estate lawyer suffice to hire for lease for a franchise? or do you recommend me hiring a lawyer who specializes in franchises?\n\nthis is the first time i am leasing to a tenant who wants to open up a franchise so it is pretty new to me", "replies": [{"id": "iq5vt1y", "text": "You need to:\n\n1. Request financials\n2. Need a personal guarantee for initial term plus options. \n3. Fire your broker. What state are you in?", "replies": [{"id": "iq5wc8u", "text": "NY, the broker said franchise lease dealings are different than the mom and pop commercial restaurants. and he told me that popeyes would vouch for the tenant....", "replies": [{"id": "iq5wqoy", "text": "Is your broker in commercial real estate? \n\nI\u2019m confused as to why he wouldn't push for a personal guarantee?\n\nEdit: don\u2019t accept a guarantee from his LLC unless it has all of his Popeyes locations in there. Ex: If the franchisee just formed the LLC throw it in the trash.", "replies": [{"id": "iq5x9cl", "text": "he is, he does alot of franchises so i am also very confused...\n\nI already signed a LOI with a tenant who wanted to rent out my property. however, he said it wasn't necessary that i met with the tenant until we get the national popeyes to confirm that they could open up a place in my property. So i didn't even meet the tenant yet.", "replies": [{"id": "iq5xocs", "text": "Ok so you have a signed LOI with a non-national Tenant then Popeyes came to the table? \n\nI like the thought process from a credit perspective. \n\nThis is your broker representing you, correct? This isn\u2019t Popeyes broker?", "replies": [{"id": "iq5ydhg", "text": "this broker saw that i was renting out my property so contacted me saying he has a client who owns many popeyes in NY and would like to open it up in my property. \n\nso we signed a LOI a month ago...", "replies": [{"id": "iq5yljr", "text": "Ok. \n\nCouple questions: \n1. Did you get a 15 year initial term? \n2.  As is / where is?\n3. Triple NNN? (Popeyes responsible for cam, taxes and insurance?) \n\nWhat\u2019s annual rent?", "replies": [{"id": "iq608og", "text": "On LOI, base rent is 145k per year with 10% rent increase every 5 years. Lease term would be 20 years base followed by two 5 year options for max 30 years. Tenant will be responsible for 100% payment of maintenance and insurance and taxes", "replies": [{"id": "iq60gtp", "text": "Very nice! \n\nWhat are you paying broker? 3%?", "replies": [{"id": "iq60vu8", "text": "5% for first 3 years of rent and then 3% every year after.\n\ni'm not sure why broker told me i didn't need a personal guarantee bc  tenant would be responsible for insurance and taxes. i dont know if popeyes will necessarily back the tenant (again, this the the first time i'm dealing with a franchise)", "replies": [], "depth": 12}], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iq60p7v", "text": "Sounds like the broker contacted you about your property, not a listing agent but a tenant rep agent. If that is the case\u2026.This isn\u2019t YOUR broker\u2026it\u2019s the TENANTS broker. Look at the agency disclosure form.", "replies": [{"id": "iq61dx4", "text": "He initially had one client that was interested in leasing my building, but those plans fell through. He has become my broker and reached out to other individuals who were interested in opening a Popeyes at my location.", "replies": [{"id": "iq62f22", "text": "Do you have a listing agreement with the broker? \nHow does agency disclosure read in LOI or separate document? \nIs there a separate tenant rep agent involved in deal? \n\nRegardless, he was referring to a franchisor addendum which means the franchisor can take over a leasehold if the franchisee fails to perform. That does not protect you, it protects the franchisor\u2026Popeyes Corporate. \n\nIt\u2019s going to look like you are re-trading the deal now that you have had an LOI in place for 30+ days but that is non-binding. If the lease hasn\u2019t been negotiated or the documents are pending lease generation then I\u2019d introduce a guaranty into the lease document (again even though the tenant will see this as retrading) Lets be realistic with where you are at in the process if you want to keep the deal. You aren\u2019t getting a full guaranty at this point. I\u2019d suggest a rolling guaranty that covers your upfront costs and commissions for the initial 5yrs of term and then try to reduce to unamortized costs for the remaining 5yrs. That\u2019s if you want to move forward. Unknown what sort of situation you are in financially and your quality of real estate how long on market and what your market or submarket is experiencing with interest/growth/absorption.", "replies": [], "depth": 3}, {"id": "iq82azm", "text": "Not that is the norm, but typically I don\u2019t trust brokers who play on both sides as much. Especially if I didn\u2019t seek them out first. You should get a second opinion or insist on some level of security that you\u2019re comfortable with.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iq60zpo", "text": "Off topic folks but given inflationary environment it\u2019s time to go old school when negotiating lease increases\u2026.at least make the effort to tie it to CPI vs the standard % on annual (or in the case of long term leases standard % 5/10yr bumps)", "replies": [], "depth": 1}, {"id": "iq628xw", "text": "LL &amp; PM of 100+ properties.  This is 100% incorrect.  If it's a franchisee the corporate office DOES NOT guarantee the rent.  Only time the rent is guaranteed by the corporate office is if it's a corporate operated store such as Chic fi la, Starbucks, 7-Eleven, etc.  All are Tenants of mine.\n\nI also have two Popeye's franchisees.  Both leases have personal guarantees.  Find yourself a Landlord/Tenant attorney to draft the lease.  They have better understanding and experience with commercial leases.  Also, many of them are Landlords themselves and perform litigation.", "replies": [], "depth": 1}, {"id": "iq69akj", "text": "The franchise status doesn\u2019t really mean anything different other than it\u2019s unlikely you\u2019ll get a corporate guarantee and therefore you should always try to get a personal guarantee from the franchisee as a landlord or landlord rep. It\u2019s just additional protection for you and your investment.", "replies": [], "depth": 1}, {"id": "iq6rrl2", "text": "It depends on the operator and the LL.\n\nI rep'd our real estate office and our OP didn't want to personally guaranty the lease. Based on other locations and credit, we were able to put down an increased deposit rather than having to personally guaranty the lease.\n\nOther times you may get a Corporate guaranty rather than a personal one from the operator.", "replies": [], "depth": 1}, {"id": "iq93i06", "text": "I have popeyes as a tenant (NY Metro) and I have a PG from the franchisee.\n\nThe broker is saying that to not get push back from the tenant and make the transaction smoother for him.", "replies": [], "depth": 1}]