ON THE SIDE OF TENANTS
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DIY lease negotiations hand landlords all the aces, warn Parallel Directions
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Peter Scott, Parallel Directions: 'Our clients can save the cost of our service many times over'
The franchisee’s CBD location and premises were perfect for her. They were the right size for her business and situated next to her major customers. She was planning to sell the business at the end of her second four-year lease term and retire with a nest egg. Then, out of the blue, the landlord told her that he wanted to demolish the building so he wanted her out – pronto! To continue, she’d need to find and fit-out new premises, face the disruption of a major relocation and risk losing her largest customers. She argued her case and, after an initial charm offensive failed, the landlord resorted to emotional blackmail with statements like: ‘Dear friend, you know my family. Think how they’ll suffer should you stand in the way of my constructing a multi-storey building on this site.’
Fortunately, at this point a concerned friend contacted Peter Scott of Parallel Directions, the specialist commercial property advisors and negotiators. ‘A very relieved franchisee was able to step back while we did our legal and other homework. We quickly spotted that she had a right of renewal in her contract and, in fact, couldn’t be forced out. This gave us the ability to negotiate a substantial relocation settlement with the landlord which would enable her to relocate in a higher rent market, pay for the fit-out and so forth. Having basically bullied all the other tenants out of the building for nothing, the landlord put up a real battle but in the end he agreed to settle. Our client moved to a great location that we found for her and was able to follow her original plan.’
As the above example shows, there’s huge risk for both franchisees and franchisors in taking a do-it-yourself approach to lease negotiation. ‘That case was about a non-renewal,’ says Peter, ‘but, all too often, the risks start earlier than that. Franchisees might use professional services for financial and legal due diligence, but then they hand over the location and premises search to commission-driven real estate agents.
‘Real estate agencies are restricted by what premises they have listed and have a fiduciary duty to represent the best interests of their client – the building owner, mall manager or landlord. Few franchisors have all the knowledge or skills necessary to negotiate the right premises at the right price, which is where we come in.’
After two decades in commercial leasing as landlord and tenant, Peter established Parallel Directions 19 years ago to be an independent interface between a franchisor or franchisee and landlord. ‘We work on a negotiated fee basis, never on a commission, and are here to fight for tenants, not landlords,’ Peter confirms. ‘And our clients can save the cost of our service many times over.’
Peter says that being involved at the start of a franchisee’s journey can maximise profit potential through everything from finding the best location and securing fit-for-purpose premises, to providing ongoing strategic advice on leases and premises, to negotiating rent reviews and lease renewals. ‘Get it right and you’ll have better sales, better profitability, less stress and better results all-round for the franchise.
Peter says landlords hold most of the aces in the property game. ‘They have a daunting array of property consultants, commercial valuers and real estate agents on their team. But our clients have Parallel Directions. ‘We’re highly experienced, astute and tactical negotiators focussed on ensuring our clients are better off. We’ve got our clients’ backs. We can simplify the whole decision-making process by providing objective reporting based on current market rental data, and determine the impact on your bottom-line, staff productivity and company culture.
‘Whether you’re a franchisor or franchisee, and wherever you are in New Zealand, Parallel Directions can represent your interests in ways that maximise your success and profitability. With a free first consultation, it only takes a phone call to find out how we can help you turn a major cost into a major benefit.’
See this advertorial on page 10 of Franchise New Zealand magazine Year 26 Issue 2
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