How to rent a commercial property to a big franchise?

Investment in commercial real estate is beneficial as it provides higher rentals. People prefer renting out their commercial property to a big franchise. Finding a reputed brand involves time and effort. One must explore the digital space to find big companies rather than approach local brokers.

What is a commercial property?

A commercial property is a property used for conducting business activities and refers to any building purchased or used with the intent to generate a profit.

Types of commercial real estate

Before investing in commercial real estate, it is essential to understand the types of commercial property and identify the right location for buying the property. Common types of commercial properties include:

• Retail store
• Office space
• Co-working space
• Warehouse
• Industrial building
• Restaurant/café

What is a franchise lease?

Franchise lease refers to all leases, sublet agreements or contracts under which a company or any of its subsidiaries has granted a franchisee the right to lease, use or occupy a property.

How to get a big franchise to rent your property?

Once you have invested in a commercial property, visit a real estate portal and list out your property by providing the details such as:

• Type of property
• Building type (business park, mall, standalone building)
• Super built-up area
• Location (main road or corner property)
• Floor details (e.g., 3rd floor out of 10 floors)
• Furnishing status (fully furnished, plug and play, etc.)
• Age of the property
• Locality details (street name, landmark and position on the map)

Specify the benefits to attract interested franchises. These could include:

• Expected rent
• Deposit
• Lease duration and lock-in period
• Date of availability
• Property is best suited for (restaurant, retail, office, etc.)
• Pictures and videos of the property
• Amenities, such as power backup, parking, security, etc.

Things to consider to make the listing standout

• Specify the address of the property, mentioning the exact location and landmarks. Post pictures from different angles.
• Describe the location advantages, such as proximity to public transportation, upcoming infrastructure projects, market hubs, etc. Mention reputed tenants and footfall counts.
• Describe the type of property (showroom), floor, property configuration, size and super built-up area.
• Add information on furnishing status, age of the building and the lock-in period for the lease.
• Specify the rental amount and lease period along with the security deposit.
• Add details of available amenities and facilities (elevators, parking spaces, furniture, CCTV, security features, intercoms, gadgets, etc.)
• Clarify the availability date
• Add a video if possible

One should note that franchisees have their franchise lease agreements that they want showroom owners to sign. One should be careful when entering into these agreements and get the documents examined by a lawyer.

Key aspects of a commercial property when leasing or renting out

• Is the showroom located in the right location to attract a big franchisee? Is it in a high footfall zone, such as an established commercial area or transport hub?
• What is its proximity to transit points, retail outlets and residential areas?
• Is the property the right size for the outlet of the franchisee? Big franchises have specific regulations on sizes, types and amenities in their outlets.
• Does the location have the customer profile that reputed franchisees require?
• Will the owner be required to make repairs or be allowed to make additions or modifications to attract big franchisees?
• Will the owner offer flexibility in terms of signage and branding along with the required space?
• Will the owner offer exclusive usage rights to the showroom and other zones (If leasing the property to multiple tenants)?
• Is there a facility management or supervision structure for managing commercial assets after the big franchisee takes over?

Why invest in commercial real estate?

• Long-term capital appreciation.
• Low borrowing rates and rapid cost appreciation.
• Owing to the presence of multiple tenants, one is not dependent on one tenant for monthly income.
• Tax benefits under Section 24 of the Income Tax Act of 1961 on loans for the purchase, construction, repair or reconstruction of property.

Ways to attract big franchises to rent your property

• Posting ads on social media: Advertisements on social media have a wider reach than billboards. Owners can explore social media platforms, such as Instagram, LinkedIn, Facebook, etc. Make sure to post attractive images and video walkthroughs to give a detailed tour and information about the property.
• Setting up a network through commercial real estate associations: An effective way to find a reputed tenant for a property is to join a commercial real estate organisation to broaden one’s network. With access to franchise owners, resources and opportunities, you can build your credibility as a commercial real estate owner.
• Billboard advertisement: You can rely on the traditional method of commercial real estate billboards. Choose a catchy commercial real estate tagline and mention the benefits.
• 3D virtual tours: An innovative way to promote commercial real estate is through 3D virtual tours on real estate portals.
• Hire a commercial real estate expert: Commercial real estate brokers engage in leasing and selling commercial real estate, such as office, retail and industrial premises. As per their contractual responsibilities, they will charge a percentage of the total lease amount. The owner is not required to pay until the lease is over.

How to rent a commercial property?

• Validation of title ownership: Check the property title document. Before agreeing to a lease, do thorough research to ensure there is no sub-rent or other type of rent linked with the property.
• Power of Attorney: Check the title deed and commencement certificate to find out if the property is under construction. Check the occupation certificate before renting the commercial space in a built-up property. In the case of indirect rent, clarify if there is any power of attorney involved.
• Renting agreement: Ensure that the renting arrangement is allotted based on operations before entering into a mutual commitment. Make sure to check the nature of the rent and whether you are signing a rental leasing agreement or a co-working office space arrangement.
• Verification of income taxes and mortgages: Check the income tax history of the property owner to know if there are any disputes or illegal proceedings. This way, you can find out if the property is classified as ‘commercial’ or ‘residential’ under the Development Control Regulations under the Income Tax Act of 1961. If this categorisation is unclear, you may be assessed a TDS in the future.
• Property agent’s background check: When hiring a real estate agent, perform a background check. Ask the agents to share information on previous clients. If they are reluctant, it could indicate previous fraudulent conduct.

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A lease agreement must be finalised by considering all terms and conditions, including the lease tenure, renewal, rental escalation, amount, security deposit, repair and maintenance duties and responsibilities of both the landlord and tenant.

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