Having been around the franchise industry for many years. I can tell you with 100% certainty that in all cases the franchisor holds the head lease. The franchisor then has what's called an occupation agreement with the franchisee. Plus the franchisee pays a bond and provides a personal guarantee for the lease.
This is to ensure the franchisor keeps the location at all costs. meaning if the franchisee does not perform under the franchise agreement they can just kick them out and get a new franchisee or run it as a corporate store.
If the franchisee held the lease, there is very little stopping them from walking away. For example handing the space back to the landlord, sub letting out, finding a new tenant to take on the lease. Nothing really stoping them rebranding the site to a private cafe for example.
Bottom line is the lease is gold, it's everything. Without it you don't have a business.
That's why in every case the franchisor holds the head lease.
If a franchisee walks away for whatever reason, the franchisor will take back the space and then legally go after the franchisee because they have provided the personal guarantee. The franchisor can then sell the site to a new franchisee. For a hefty price of course.
RFG Price at posting:
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