Parking Pitfalls for Franchise Tenants

Author: Dale Willerton

Date: DEC 16th, 2014

Topic: Industry Experts

Do you have enough parking space for your customers, you and your staff? It’s a common problem The Lease Coach sees with both new and established franchise tenants. We’ve discussed the problems with parking in our new book Negotiating Commercial Leases & Renewals For Dummies in greater detail but here are a number of factors to consider.

Parking space availability: Does it appear that there are there enough stalls for all your customers to use?

Parking space location: Where are these parking spaces – in front of, behind or at the side of the building? Parking spots beside or behind the building may not be immediately visible to visitors.

Parking space status: Are the spaces “rush parking” (first-come, first-served) or assigned specifically for your clinic’s use? These “designated” parking spots are desirable and discourage others from taking your space(s). If your business is located near a major grocery store, consider that the best available parking spots may be taken by food shoppers. If your business is located near a major grocer, The Lease Coach recommends that the landlord provide you with “reserved parking” – specifically for your customer’s use. Parking spaces located close to your business door will be advantageous for elderly customers who do not like to or cannot walk too far.

For most franchise tenants leasing space in a retail environment, their customers will receive free parking. But for some, monthly parking charges for vehicles can range from $85/month to several hundreds of dollars per month. Even if you are prepared to pay for parking, don’t assume it will be available. If there are parking meters or a pay to park system, consider the cost of parking for your customers as well. With lengthy shopping trips or service calls, this cost can increase dramatically and your customers may not be able to simply run outside and put more money in a parking meter.

In our experience of working for franchise tenants, here are a number of real-life stories for you to remember.

  • We recall visiting a couple of tenants who had hired us to negotiate a new lease in a property they had found and liked. When we arrived at the property, it was around 10:00 a.m. and the parking lot was already packed with other cars. We pointed this out and questioned just how busy would this same lot be after the vacant units were occupied with more tenants. With hearing this advice, these two tenants wisely decided it would be in their best interests to not pursue this leasing opportunity.

  • We also well remember a couple of other tenants who had been leasing space for almost 18 years in the same property and hired us to negotiate their lease renewal. These two tenants were very frustrated that their landlord had converted the property’s free parkade into paid parking – this, of course, would greater inconvenience these tenants’ visiting customers. Our message here is to never assume that your parking situation will always remain the same.

If you are in a position to validate parking, it doesn’t do you any good if you don’t tell people. Tell your staff to tell your customers that reimbursement is available. Remember also that with two or three-story mall complexes, the parking allowing direct access to the property will be at a premium – while your staff may be tempted to park here, save these premium spots for your customers. And finally, if a commercial landlord puts in too many restaurants into a property, there will be parking congestion. This actually happened with one our restaurant clients in San Antonio – we heard that people would call to reserve a table, arrive at the restaurant, and then circle the building looking for parking. If unable to find parking space, many of these diners would simply pull up directly in front of the building, run in, cancel their reservation, and then head elsewhere to eat.

As some final couple words of advice, always assume that the only parking rights you will have are the rights you get in writing in your lease agreement. Also, remember that it’s best if the customers of the franchise tenants can park in the best stalls while franchise tenants and their staff can park elsewhere. Determine whether the landlord has a designated area for staff to park and whether there’s a parking policy that the property manager polices or regulates. Smart landlords require both tenants and staff to provide their vehicle license plate numbers to the property manager for this very purpose. If the landlord or real estate agent tells you that all parking is first come, first serve, you may want to include a clause in the lease agreement stating that if (in the future) the landlord gives special parking rights or privileges to other tenants that they will have to give those same privileges to you.Parking is often used as an incentive by a landlord trying to attract new tenants, and landlords have been known to unfairly divvy up the parking to suit themselves or to attract other tenants.