Q U I Z By Karsten Lee, Associate, & David Thompson, Partner, WeirFoulds LLP
Navigating
franchising
leasing agreements
With franchisors and
franchisees involved, lease
agreements can get fairly
complicated. In many
situations, it's not immediately
obvious where obligations lie,
or whether a clause will be
harmful or helpful. All of the
parties involved need a clear
understanding of leasing law to
ensure everyone benefits from
the tenancy arrangement.
1
You are the landlord of a shopping plaza. A franchisor has entered into a lease with you for
certain premises, as head tenant. The franchisor, as tenant, has the right to sublease the
premises to its franchisee without the prior written consent of the landlord. Since there is
no privity of contract between the landlord and the franchisee, do you as landlord have any
obligations to the franchisee, as subtenant?
(a) Yes
(b) No
2
You are a franchisor in Ontario and, as part of your franchise system, you are the direct
tenant under a lease, and you sublease such premises to a franchisee. As part of your
disclosure obligations, what lease documents should you disclose to your franchisee?
(a) Only the sublease
(b) Both the sublease and the head lease
(c) No disclosure is required
3
You are the head tenant franchisor of a lease, and you have an arrangement with the
head landlord and the subtenant franchisee, that the head landlord will deal directly with
the subtenant franchisee for day-to-day matters, including the payment of rent (i.e. the
subtenant franchisee pays rent directly to the landlord). Will this arrangement release the head
tenant franchisor from all of its obligations under the lease?
(a) Yes
(b) No
4
Tenants, especially retail tenants, normally prefer to have a very broad use clause in their
leases, as it leaves them a lot of flexibility to change their business and product offerings
throughout the term of the lease. Does having an overly-broad use clause in a lease
benefit a franchisor?
(a) Always
(b) Not necessarily
w w w. c a n a d i a n law y er m a g . c o m / i n h o u s E
august 2013
•
15
