What is a Sublease by Franchisor?
If you're a franchisor who's rented commercial space and you want to let a franchisee sublease it from you, make sure the landlord's on board - that's often legally required. Or if you're the franchisee, and have a franchisor in your corner, you may want to lease space from them. One of the reasons you got into franchises was for the support. If your franchisor has commercial space available to sublet, that's one less big thing for you to worry about. A Sublease by Franchisor can benefit both the landlord and tenant.
When to use a Sublease by Franchisor:
- You are a Franchisee that purchased a Franchise and need to sublease space from a Franchisor.
- You are a Franchisor who has just franchised a unit and agreed that Franchisee is to sublease a certain location that you have already leased out for such purpose.
Sublease by Franchisor
THIS SUBLEASE FOR A FRANCHISE UNIT (this "Sublease') is made and entered into , by and between , , , doing business as ("Franchisor") and , , , as ("Franchisee").
A. Franchisor and Franchisee are parties to a Franchise Agreement for the operation of a franchised unit at the location described in the Master Lease; and
B. Franchisee desires to sublease the property described in the Master Lease on the terms and conditions set forth in this Sublease, for the purpose of operating the franchised business described in the Franchise Agreement.
The parties hereby agree:
a.Master Lease is the Lease entered between as Lessor and as the tenant or Lessee, relating to premises located at , , , as more specifically described in the Master Lease (the "Premises"). The Master Lease is attached herewith as Exhibit A.
b.Franchisor represents and warrants to Franchisee that as of the date of this Sublease, Franchisor is the tenant under the Master Lease, and there is no uncured default under the Master Lease.
c.Franchisee represents to Franchisor that Franchisee has read the Master Lease and has obtained from third parties any advice with regard to it which Franchisee desires to obtain.
|2.||Sublease of Premises|
Franchisor hereby Subleases the Premises to Franchisee and Franchisee hereby accepts such Sublease from Franchisor on the terms and conditions of this Sublease.
|3.||Relationship to Master Lease|
Franchisor hereby transfers and delegates to Franchisee and Franchisee hereby accepts, assumes and agrees to perform to and for the benefit of Franchisor and to be bound by each and every obligation, duty, and covenant of the Lessee under the Master Lease and to be subject to each and every condition of the Master Lease. However, the provisions of the Master Lease shall be:
(a) superseded by any provision of this Sublease requiring any particular act be rendered to Franchisor rather than to the Master Lessor;
(b) supplemented by the additional obligation, duties, covenants, and conditions set forth in this Sublease; and
(c) modified by this Sublease to the extent that
(i) this Sublease imposes a higher standard of conduct or greater duty or obligation on Franchisee than imposed on the lessee under the Master Lease;
(ii) this Sublease establishes a more stringent condition to continued possession of the Premises by Franchisee than is imposed by the Master Lease;
(iii) greater rights are given the lessee under the Master Lease than are given Franchisee in this Sublease; and
(iv) greater rights are given to Franchisor by this Sublease than are given the Lessor in the Master Lease. Franchisee shall have no greater rights under the Master Lease than are given it by this Sublease and shall have no greater rights under this Sublease than are given the lessee under the Master Lease.
|4.||Rights and Duties of Franchisor|
Franchisee hereby grants Franchisor all the rights and privileges of the Lessor under the Master Lease. Franchisor does not assume the obligations of the Lessor under the MasterLease, but shall use its best efforts to cause the Master Lessor to perform itsobligations under the Master Lease.
This Sublease shall commence on the date of the commencement of the term of the Franchise Agreement or on , whichever date is later. This Sublease shall continue for a period equal to the term of the Franchise Agreement, unless terminated prior to that date pursuant to the provisions of the Master Lease.
On or before the first day of each calendar month during the term of this Sublease, Franchisee shall pay Franchisor the minimum monthly rent and percentage rent described in the Master Lease, without deduction, offset, notice or demand.
Franchisee shall have the right to extend the term of this Sublease for the period of any renewal of the Franchise Agreement, subject to the limitations and on all the terms and conditions set forth in the Master Lease and this Sublease, by giving Franchisor written notice of the exercise of that right not less than days prior to the expiration of the initial term of this Sublease. Franchisee may not exercise this renewal right unless the Franchise Agreement is also renewed or at any time when Franchisee has breached and not cured or is in default under this Sublease or the Master Lease. Should Franchisee breach or default under this Sublease or the Master Lease at any time after giving notice of extension and prior to the first day of the extended term, Franchisor shall have the right to declare Franchisee's notice void and of no effect, and the term of this Sublease shall expire as if notice had not been given. In no event may Franchisee extend the term of this Sublease for any period after the expiration of the Master Lease.
|8.||Franchisor's Right to Cancel|
In addition to any right to cancel contained in the Master Lease, Franchisor shall have the right to cancel this Sublease by giving Franchisee notice of cancellation in the event Franchise Agreement is cancelled by Franchisor.
Franchisor shall have caused the leasehold improvements described in the Master Lease to be constructed on the Premises substantially in accordance with the plans and specifications set forth in the Master Lease. The provisions of this Section shall be deemed to supersede the provisions of the Master Lease relating to construction of leasehold improvements.
At the time of the signing of this Sublease, Franchisee shall pay to Franchisor a security deposit of for the timely and faithful performance by Franchisee of its obligations and duties under this Sublease and the Master Lease. This payment shall be in lieu of any payment of a security deposit required by the Master Lease. Without prejudice to or waiver of any other rights given it by this Sublease or by law, Franchisor may use all or any portion of the security deposit to cure a default by Franchisee in the performance of any covenant or condition of this Sublease, to compensate Franchisor for any and all damage sustained by it as a result of Franchisee's default, or to repair any damage to the Premises caused by any act or omission of Franchisee or Franchisee's employees, agents, customers, or invitees.
|11.||Use of Premises|
The Premises shall be used and occupied only by Franchisee and only for the purpose of conducting a pursuant to Franchise Agreement. Franchisee shall operate such business on the Premises throughout the term of this Sublease and shall keep the Premises open for business during all usual business hours. Franchisee shall employ Franchisee's best efforts to operate the business conducted on the Premises in a manner that will produce the maximum volume of gross sales.
|12.||Right of Entry|
Franchisor and its representatives may enter the Premises at any time during the term of this Sublease and upon its termination, without that entry affecting the enforceability of this Sublease against Franchisee or working a termination of it, and may inspect the Premises to verify Franchisee's compliance with this Sublease. Should Franchisor or its representatives desire to enter the Premises at any time when Franchisee is not open for business, Franchisor or its representatives may use a duplicate or master key to obtain entry.
|13.||Maintenance and Repairs|
Upon failure by the Franchisee to perform Franchisee's obligations to maintain and repair the Premises in accordance with the Master Lease within days of Franchisor's demand for compliance, Franchisor may cause that maintenance or repair to be performed or made and may enter the Premises for that purpose.
Franchisor shall be named as an additional insured on all policies of insurance carried by Franchisee on the Premises or its contents, or with respect to the business conducted on the Premises. All policies of insurance carried by Franchisee shall contain cross-liability endorsements and an endorsement requiring thirty days written notice to Franchisor before cancellation or change in the coverage, scope, or amount of the insurance.
Franchisee shall deliver to Franchisor before expiration of each policy term, certificates of insurance evidencing the coverage required by the Master Lease, together with evidence that the premiums have been paid.
In case of failure by the Franchisee to obtain and maintain any insurance required by the Master Lease, Franchisor shall have the right, but no obligation, to obtain that insurance for itself and Franchisee. Franchisee shall pay Franchisor on demand and any charges incurred by Franchisor to obtain and maintain that coverage.
Franchisee shall indemnify, defend, and hold harmless Franchisor, and its officers, directors, agents, and employees, from and against any and all loss, claims, costs, demands, liability, obligations, damages, actions, and expenses of any kind or nature whatsoever (including, without limitation, attorney's fees) arising out of or related in any manner whatsoever to this Sublease or Franchisee's use or occupation of the Premises.
If Franchisee maintains possession of the Premises for any period after the termination of this Sublease ("Holdover Period"), Franchisee shall pay to Franchisor lease payment(s) during the Holdover Period at a rate equal to [/F of the most recent rate preceding the Holdover Period. Such holdover shall constitute a month-to-month extension of this Sublease.
|17. Default and Remedy|
In addition to events of default described in the Master Lease, Franchisee shall be in default under this Sublease in the event Franchisee:
(a) fails to pay any rent, additional rent, taxes, or other sums payable by it pursuant to this Sublease or the Master Lease within five days after the payment is due;
(b) fails to deliver any report or other records required pursuant to this Sublease or the Master Lease within five days after delivery is to be made;
(c) fails to timely pay any rent or other sums payable by it pursuant to this Sublease on more than two occasions in any calendar year, whether or not consecutive;
(d) fails to timely deliver any reports or other records required pursuant to this Sublease or the Master Lease on three or more occasions in any calendar year, whether or not consecutive;
(e) fails to comply with each and every covenant and condition and to timely perform all of its obligations pursuant to this Sublease and the Master Lease on three or more occasions in any calendar year, whether or not consecutive;
(f) commits any act which violates any provision or constitutes a breach of the Master Lease and fails to cure that violation or breach within the period allowed for cure;
(g) purports to assign, sell, transfer, encumber, or otherwise dispose of any interest in this Sublease or the Premises, or to sublet the Premises, in violation of the assignment and subletting provisions of this Sublease;
(h) breaches any covenant, term, or condition of this Sublease other than those referred to in subparagraphs (a) through (g) of this Section and fails to cure that breach within ten days after receipt of notice from Franchisor;
(i) abandons or vacates the Premises, or fails to occupy and operate the Premises for five consecutive days, except if that failure is due to any labor action, national emergency, or Act of God;
(j) submits on three or more occasions during the term of this Sublease, whether or not consecutive, reports of gross sales which any audit reveal to have understated gross sales by two percent or more;
(k) defaults in the performance of any covenant, condition, or obligation pursuant to any other written agreement between it and Franchisor, including but not limited to any Franchise Agreement, and fails to cure that default within any period allowed for cure; or
(l) defaults in the maintenance of all business licenses, health permits, or otherwise failing to comply with all Federal, State or local law requirements including, but not limited to payment of applicable taxes, concerning the operations of the Business, and fails to cure any default within any reasonable period allowed for cure.
Upon the occurrence of any default by Franchisee, Franchisor shall have the following rights, all of which are cumulative and in addition to any remedies given it by law: (i) to enter the Premises without that re-entry working, a termination of this Sublease, forfeiture of the rents to be paid and the covenants, agreements, and conditions to be kept and performed by Franchisee, or Franchisor's right to collect rent when due for the full term of this Sublease.
|18. Estoppel Certificates|
Franchisee shall execute and deliver to Franchisor a certificate in recordable form stating that this sublease is unmodified and in full force and effect, or in full force and effect and stating how modified, the amount of minimum rent, the dates to which rent has been paid in advance, and the amount of any security deposit. Franchisee irrevocably appoints, constitutes, and designates Franchisor its attorney-in-fact to execute and deliver that certificate should Franchisee fail to do so.
|19.||Surrender of Premises|
Upon cancellation, expiration, or termination of this Sublease, Franchisee shall surrender the Premises and all improvements and alterations to them to Franchisor in good and clean order, condition, and repair, except for ordinary wear and tear, and Franchisee shall repair any damage of the walls, floors, ceiling, or any other portion of the Premises caused by nails, screws, or other attachments or by any act or neglect of Franchisee or Franchisee's employees, agents, customers, or invitees. Should Franchisee fail to surrender the Premises upon cancellation, expiration, or termination, Franchisee shall indemnify and hold Franchisor harmless from all damages resulting from Franchisee's failure, including, without limitation, claims made by a succeeding Franchisee.
Franchisee acknowledges that if Franchisor does not receive payment of any sum payable to it pursuant to this Sublease on or before the due date, Franchisor shall incur certain expenses not otherwise contemplated by this Sublease, the exact amount of which it would be impracticable and extremely difficult to ascertain. Those expenses include, without limitation, charges imposed by the Master Lessor and processing, accounting, and other administrative expense. Therefore, Franchisee agrees that if any payment due to Franchisor from Franchisee is not received on or before that due date, Franchisee shall pay with past due payment a late charge equal to $[12 Amount] per day past the due date. Franchisee agrees that this late charge represents a fair and reasonable estimate of the expenses Franchisor will incur by reason of late payments. Acceptance of any late charges shall not constitute a waiver of Franchisee's default with respect to the past due amount or prevent Franchisor from exercising any other rights given it by this Sublease or by law.
|21.||Subordination of Lease|
This Sublease is subordinate to any mortgage that now exists, or may be given later by Lessor of the Master Lease, with respect to the Premises.
Franchisee may not assign or sublease any interest in the Premises, nor effect a change in the majority ownership of the Franchisee (from the ownership existing at the inception of this Sublease), nor assign, mortgage or pledge this Sublease, without the prior written consent of Franchisor, which shall not be unreasonably withheld
Notices under this Sublease shall not be deemed valid unless given or served in writing and forwarded by mail, postage prepaid, addressed to the party at the appropriate address set forth at the beginning of this Sublease. Such addresses may be changed from time to time by either party by providing notice. Notices mailed in accordance with these provisions shall be deemed received on the third day after posting.
|24.||Attorneys Fees And Costs|
If Franchisor employs the services of an attorney to enforce any conditions of this Sublease, to collect any amounts due, the eviction of the Franchisee, or because Franchisee takes any action to recover deposits not due, Franchisee shall be liable to Franchisor for reasonable attorney's fees and costs incurred by Franchisor.
This Sublease shall be construed in accordance with the laws of the State of .
This Sublease Agreement contains the entire agreement of the parties and there are no other promises, conditions, understandings or other agreements, whether oral or written, relating to the subject matter of this Sublease. This Sublease may be modified or amended in writing, if the writing is signed by the party obligated under the amendment.
If any portion of this Sublease shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Sublease is invalid or unenforceable, but that by limiting such provision, it would become valid and enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited.
The failure of either party to enforce any provisions of this Sublease shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Sublease.
The provisions of this Sublease shall be binding upon and inure to the benefit of both parties and their respective legal representatives, successors and assigns
Any controversy or claim relating to this Sublease, including the construction or application of this Sublease, will be settled by binding arbitration under the rules of the American Arbitration Association, and any judgment granted by the arbitrator(s) may be enforced in any court of proper jurisdiction.
INTENDING TO BE BOUND, Franchisor and Franchisee have executed this Sublease on the date first above written.