Franchising: real-estate issues and solutions

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Franchising can allow a business to grow with a reduced capital outlay but there are issues to consider. A frequent conundrum is how to deal with premises – how can a franchisor retain statutory rights to renew the lease of premises that will be occupied by the franchisee?

Security of tenure under the Landlord and Tenant Act 1954 requires occupation of the premises for business purposes by the tenant. In many cases, the franchisor will want to retain the right to renew provided by the act, but the franchisee will usually be the person in occupation.

The ability for the franchisor to go back into occupation at the end of the term is often maintained to allow the franchisor to secure the renewal rights but, in practice, doing so is likely to be commercially unpalatable…

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