That kind of expansion appeals to shopping center landlords, as do franchise brand recognition, stable cash flow, well-established audiences and other favorable retail characteristics. Yet, when landlords lease to a franchise, they are in a way taking on two tenants for the same space: the franchisee and, by way of a special lease rider or addendum, the franchiser. And often, the franchiser is unyielding on the rider, which frequently overrides the lease with the franchisee and can include demands contrasting with what landlords require in nonfranchise leases.

“The franchiser’s role is to keep everything the same, so that they don’t have to worry about how a lease addendum in Phoenix differs from one in Dallas,” said Matthew Sanderson, a transactions attorney in the Dallas office of Gray Reed & McGraw. “It’s going to be a nightmare for the franchiser if the word on the street is, ‘Oh, they negotiate everything in the rider.’”

For those reasons, the rider is the most pivotal part of a franchise lease, observers say. It includes provisions that grant the franchiser rights to make the landlord whole on missed rent payments. It also gives franchisers the right to assume the lease or assign it to another franchisee operator in the event of a default or an early franchise agreement termination. Further, it empowers the franchisee to assign the lease to the franchiser at any time.

“The idea is that if the franchisee gets into trouble operating the business and even defaults on the lease, the franchiser wants to keep the operation going,” said Michael A. Corfield, a partner with San Juan Capistrano, Calif.–based Corfield Feld. “The franchiser typically doesn’t want to lose a location.”

Franchisers generally want the broadest language possible in their riders, attorneys say. Shopping center owners will not succeed in knocking down demands, they explain, but in many cases they have some wiggle room to narrow or massage them. As in other lease negotiations, landlords of strong properties tend to have more leverage than those of weaker ones. Jo-Ann M. Marzullo, a partner with Boston-based Posternak Blankstein & Lund, worked on one transaction in which the lease assignment language in the proposed rider did not specify the timing a franchiser would take over a lease in the case of default. Consequently, the landlord added language requiring the franchiser to cure the default in a timely manner before the lease would transfer, she says. “The addendum is an extra layer to think about and coordinate, but you don’t want to treat it as something that you wish you were already done with,” said Marzullo, who recommends that landlords request the rider when beginning lease discussions with the franchisee.

In cases where the franchiser wants the right to assign a lease to a different franchisee without the consent of a landlord, landlords can try to ensure that the new operator will meet a level of financial wherewithal, experience or other measures of business acumen, says Erica L. Delain, co-chairwoman of the retail real estate practice group in the Minneapolis office of Stinson Leonard Street.

Furthermore, a landlord that likes the financial strength of a given franchisee may balk at any rider term permitting a lease assignment to an unknown tenant if the franchisee should want to get out of the business, Corfield says. In such a case, landlords may push to keep the original tenant on the hook for the rent until the term ends, he says. As a rule, franchisers do not guarantee franchisee rents, although up-and-coming brands aggressively pursuing market penetration may, on occasion, he adds.

Among other terms, the rider also grants franchisers the right to remove brand-related fixtures, signs and other personal property upon termination of the franchise agreement. But shopping center owners often negotiate for provisions requiring franchisers to carry liability insurance during the removal and to advance rent payments on a per-day basis until the space is cleared of the items, says Marzullo.

Also, franchisers routinely want landlords to waive lien rights on personal property, says Delain. Retail property owners may want to push for a rider in the language requiring replacement of any furniture being removed, she says, but that may be in vain. “When you reach that point, the tenant is probably in default, and whether or not you’re going to get the furnishings replaced is another story,” she said.

Similarly, as part of a potential overhaul of the brand’s image, franchisers want the right to install newly designed space, logos, fixtures and furniture without the landlord’s consent. While retail center owners are typically not responsible financially for those improvements, potential exterior and nonstructural interior alterations could disrupt other tenants — or worse, could lead to liens on the property for unpaid material and construction bills, attorneys say. Landlords can mitigate these issues by subjecting tenants to the broad shopping center lease rules that govern the times of day when exterior work can be done, for instance, says Marzullo.

Permitted use-and-exclusivity provisions are also significant, and they are sometimes tricky considerations in franchise leases. Franchisers and landlords want a franchise use defined as narrowly as possible to conform to the brand — restricting a tenant to only selling coffee and donuts, say. But the franchisee may seek a broader-use definition in case it has opportunity to provide other goods or services, such as catering — options that may be critical to survival if the franchise agreement is terminated, sources say. “The franchisee has every incentive to try and maximize the permitted use, and the landlord and franchiser have every reason to limit it,” Sanderson said.

On the other hand, franchisers want some wiggle room when it comes to exclusivity, particularly with restaurants that anticipate broadening their menus in the future. A coffee-and-donut franchise that envisions selling soft-serve yogurt may have to decide whether to open a shop without that ability if another tenant in the center already has exclusive rights to sell such a product, says Corfield. “In some cases the franchiser and franchisee will decide that not selling yogurt in that particular location is worth it, but in others they’ll say that they can’t operate under those restrictions,” he said. “So landlords need to make sure that they understand all the products that a franchise sells.”

Shopping center owners may also want to require that a tenant maintain the franchise agreement throughout the lease term. At the least, they need to be cognizant of when the agreement is scheduled to end, says Delain.  “Obviously, if the lease is longer than the franchise agreement,” she said, “you can have an issue where you no longer have a brand that you counted on in a certain space.”