Article 6: Premises

As regards the control over the premises three main alter natives may be envisaged.

  1. The first alternative is that the franchisor controls the premises (as owner or lessee) an puts them at the disposal of the franchisee by virtue of a lease (or sublease) contract or by a contract implying a lease of t he busin ess as a whole (and not only of the premises as such). This second solution (affitto d’azienda, location gérance) may in certain cases avoid the application of domestic mandatory rules on commercial lease contracts.
  2. The second alternative is that the franchisee owns the premises.
  3. The third, and most common, alternative is that the franchisee holds a first-hand lease with an external landlord. The model assumes that is third alternative, with the option of a three-party agreement, entitling the franchisor to enter into the lease agreement in case of termination of the franchise.

6.1 Site Selection

6.1.1 The Franchisee must not operate at the Premises, use any of the IP Rights from or at any location, or make any commitments about a location until the Franchisee has the Franchisor’s written Premises acceptance. The Franchisor will not unreasonably withhold acceptance. Acceptance by the Franchisor of any location is not a recommendation, approval or endorsement of that location of the Premises. The Franchisor makes no representations or warranties as to the success of any Premises or as to any other matter of any kind relating to the Premises.

6.1.2 All matters related in any way to the Franchisee’s selected location are the Franchisee’s sole responsibility, regardless of any assistance the Franchisor may choose to provide. The Franchisee is responsible for obtaining any architectural and engineering services required for the Premises and for ensuring its compliance with local law.

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6.2 Acquisition

The Franchisee must use its best efforts within a period of ninety (90) days from the date of this Contract to acquire Premises in the Territory, in compliance with the format in the Manual. The Franchisee will at its own cost negotiate and enter into a lease but will prior to the completion of negotiations refer the suitability of the proposed premises and the terms of the proposed lease to the Franchisor for its prior approval and consent which consent will not be unreasonably withheld. During the entire term of this Contract, Franchisee shall hold a lease for the aforesaid premises. The lease is attached to this Contract as Annex 2-B. The Franchisee may not relocate without the prior written approval of the Franchisor.

146.3 Three-Party Agreement

In connection with the lease of the Premises approved for the carrying on of the Business and at its own cost and expense in all regards, the Franchisee shall ensure that a three-party-agreement is concluded between lessor, Franchisee and Franchisor, entitling the Franchisor, in the event of the termination of this Contract and provided Franchisor so desires, to assume the tenancy instead of the Franchisee subject to the same terms and conditions.

Since in many countries commercial lease agreements are subject to specific mandatory rules, parties are advised to check the conformity of the lease agreement with local law.

6.4 Development of Premises

6.4.1 The Franchisee will within …. (…) days of the signing of a lease, at the Franchisee’s cost, refurbish and equip the Premises strictly in accordance with the requirements of the Manual so as to bring the Premises into conformity with the System. Such fitting out and alteration may be under the supervision of the Franchisor whose reasonable directions will be immediately implemented by the Franchisee. Any conditions imposed by any lessor of the Premises must be referred to the Franchisor for approval which approval will not unreasonably be withheld.

6.4.2 The Franchisor, or an approved supplier the Franchisor designates, will provide the Franchisee with a Premises plan template and consult with the Franchisee in the build-out of the Premises to provide space plan suggestions, among other advice, and will facilitate compliance with design standards issued by the Franchisor by interacting with the Franchisee’s architect, contractor, materials suppliers and/or other persons engaged by the Franchisee. The Franchisee will pay the Franchisor or the approved supplier, as instructed by the Franchisor, a facility services fee at the time of signing this Contract; provided that no such facility services fee will be due and no such services will be provided if the Franchisee is obtaining this Contract as a renewal franchise agreement or as a result of a transfer of the Business at existing Premises. The services provided for the Facility Services Fee are limited to advice to the Franchisee. The Franchisor will have no authority or control over, or responsibility for, the acts or omissions of any architect, contractor, materials supplier or other persons hired by the Franchisee and with whom the Franchisee will have a direct legal and business relationship.

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6.4.3 The Franchisor will submit a list of approved contractors. The Franchisee is solely responsible for the selection and work of any such contractor.

6.4.4 The Franchisee will use only furniture, fixtures and signs that comply with Franchisor’s standards and purchase them only from approved suppliers, in the development and operation of the Premises and its equipping as the Franchisor may require.

6.4.5 The Franchisee will open its Premises for business immediately upon the Franchisor’s notice to the Franchisee that all of the pre-opening obligations have been fulfilled, pre-opening training has been completed, all amounts due to the Franchisor or its affiliates have been paid and copies of all insurance policies, leases, subleases and other required documents, together with proof of up-to-date payment, have been received.

6.5 No other Business

During the Term of the Contract, the Franchisee shall not operate any business other than the Business in and from the Premises without the prior approval in writing of the Franchisor.

6.6 Termination on failure to obtain or develop Premises

If the Franchisee does not

  1. secure suitable premises or agree suitable lease terms, or
  2. after having secured suitable lease terms pursuant to Article 5.4, develop the Premises within the respective periods referred to in Articles 6.4.1 and 6.4.5, then the Franchisor will have the right on giving written notice immediately to terminate this Contract according to Article 26.1.

6.7 Franchisee’s Duties Regarding Lease

The Franchisee shall, if and to the extent possible, align the duration of the lease agreement to the duration of the Contract and ensure that the property is organized in such a way that it lasts for the whole duration of the Contract and that Franchisor can obtain control over the premises when the Contract terminates. The Franchisee will at all times perform and observe the terms conditions and covenants of any lease pertaining to the Premises and perform and observe the procedures in the Manuals.

6.8 Refurbishing During Term

The Franchisee will upgrade and maintain the Premises in accordance with the then current requirements as to their presentation at other times during the Term as directed by the Franchisor.

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