Lease Agreements: How Franchisees Can Make Informed Decisions and Negotiate with Confidence
Signing a lease is one of the most important commitments any franchisee will make. Beyond securing a physical space, the lease defines your operational flexibility, cost structure, and long-term sustainability. Because of this, understanding the leasing process and how to make informed decisions is essential.
Many franchisees, especially first-timers, enter negotiations feeling unsure about what can be discussed, what is mandatory, and how much influence they really have. The truth is more balanced: some terms are negotiable, some are industry practice, and others are set by regulation or landlord policy. Approaching the process with clarity makes a significant difference.
This article highlights the key considerations and common areas where franchisees often seek clarity and how you can approach negotiations with greater confidence and realism.
What You Can and Cannot Negotiate
In practice, commercial leasing involves both negotiable commercial terms and non-negotiable (mandatory) clauses. Understanding the difference is key to managing expectations and building a constructive relationship with the landlord.
Negotiable Commercial Terms
These typically include business-related cost items and operational considerations, such as:
- Base Rent
- Gross Turnover (GTO) Rate or Threshold
- Fit-out or rent-free periods (if applicable)
- Lease tenure or renewal options
These areas are often open for discussion depending on location, demand, and tenant profile.
Non-Negotiable or Standardised Terms
Some clauses are governed by regulation, retail tenancy guidelines, or landlord policy and cannot be altered. Being aware of these boundaries helps you focus on areas where negotiation is meaningful, rather than spending energy on terms that cannot be changed.
An example is the Security Deposit (SD). For qualifying retail leases and kiosks, the SD is generally capped and cannot exceed three months of gross rent. Attempting to negotiate below that may not be possible, as landlords are required to adhere to standardised thresholds.
Understanding GTO Clauses Without Overestimating the Risk
Turnover rent is common in high-traffic retail environments. It is structured so that landlords share in the outlet’s success, but it must be assessed realistically. Informed franchisees should focus on how the structure impacts their breakeven and profitability.
Areas that can sometimes be clarified or discussed include: the GTO percentage, the threshold before GTO rent applies, and whether there are seasonal considerations (e.g. peak vs non-peak months).
A collaborative approach through understanding the landlord’s rationale while assessing your business model often leads to more practical outcomes.
Why Professional Understanding Matters
Landlords have established processes, compliance requirements, and professional teams supporting negotiations. As such, Franchisees benefit by approaching negotiations with:
- Clear knowledge of standard leasing practices
- Realistic expectations of what can be adjusted
- Awareness of operational and financial implications
- The ability to compare different leasing scenarios
This creates a more collaborative negotiation experience and increases the likelihood of achieving a mutually beneficial outcome.
Build Foundational Knowledge Through Structured Learning
This article provides a practical overview, but leasing is a detailed and contract-driven process. The WSQ Franchise Site Selection and Lease Negotiations course by FLA (Singapore) is designed to help franchisees:
- Understand which clauses are truly negotiable and which are mandatory
- Evaluate rent structures realistically, including GTO models
- Approach negotiations collaboratively, grounded in industry norms
- Make informed decisions that balance opportunity and risk
The course equips franchisees with clear frameworks, practical knowledge, and the ability to navigate leasing discussions professionally in real-world situations. Before committing to a tenancy, equip yourself with the tools to make informed decisions.
Enrol in the WSQ Franchise Site Selection and Lease Negotiations course and build your capability as a confident, well-prepared franchise operator.