Tutorial 20: Intro to Leasehold Improvements

 

Like many franchisees, your new franchise location probably falls under the popular brick and mortar category. This means you’re responsible for operating and up keeping a physical space, whether it be a retail, office or commercial location.

As such, before you open your new business to the public, you must install something called leasehold improvements. These improvements can include anything from installing new light fixtures and doors, to cabinets, floor coverings, and more.

The exact specifications of what these leasehold improvements entail will be outlined by your franchisor, who will usually provide standard prototype plans and drawings that reflect their vision for the brand.

Don’t think you can get by without making these upgrades. They are required specifically for the needs of your business and your success. Luckily for you, the franchisor will help you through every step of the design and construction process!

In fact, some franchisors have design services already in place as part of their franchise support, or will include them when you sign your franchise agreement for an added fee. Still, because you are the owner of the business, you are responsible for all costs associated with these improvements.

And these costs will not be low! Be prepared to spend anywhere from $100,000 to $700,000 depending on your business, location size, and the existing condition of your space.

In many instances, leasehold improvements are needed to bring older upgrades up to standard building codes, like installing an extra washroom or proper kitchen electrical, gas, plumbing and ventilation.

Overall, installing these leasehold improvements can be overwhelming. Follow these three steps to help you through the process:

  1. Don’t complain about the costs: Many franchisees comment that the cost associated with leasehold improvements are high. Even if you feel this way, avoid the desire to negotiate the improvements and reduce costs. Quality construction is expensive, but necessary for your business.
  1. Work with your franchisor: Franchisors will make regular site inspections during the construction process to ensure the brand is consistent and has the same look and feel across all locations. Make sure you understand exactly what the franchisor is looking for in each of their franchise units and ask questions if you are unsure. 
  1. Trust the system: There is a strategy behind the design of your business. Though you may feel something should be designed a specific way, your franchisor has the experience and knowledge to know what does and doesn’t work for the franchise. 

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Disclaimer
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