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The strongest option for the franchisor: direct control over the premises

The strongest option for a franchisor is direct control over the premises, either by owning or renting them. This approach ensures compliance with mandatory lease rules, such as Italian Law 392/1978. The lease of the universality of goods is vital for managing the business, including the right to use the outlet, interior decorations, contracts, and goodwill. Specific rules from the Italian civil code, like written contracts and non-competition obligations, further secure the franchisor's interests. A case study involving Mc.Donald's and MCI srl highlights the importance of thorough lease agreements in franchising.

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The strongest option for the franchisor: direct control over the premises

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  1. Silvia Bortolotti The strongest option for the franchisor: direct control over the premises

  2. Direct control: • 1) The franchisor owns the premises 2) The franchisor rents the premises from the landlord

  3. Typical situations: • 1) The franchisor (landlord) leases the premises to the franchisee 2) The franchisor (tenant) sub-leases the premises to the franchisee

  4. Mandatory rules on commercial lease contracts: • (Italian Law 392/1978, as subsequently amended) • - rules governing the duration of the contract; • - no freedom of the landlord to increase the rent; • - tenant's right to goodwill indemnity; • tenant’s right of first refusal, at the end of the contract

  5. Lease of the universality of goods necessary for managing the business (affitto d’azienda) • The “azienda” (business) normally includes: • - right to use the outlet; • - permissions and authorizations; • - furniture and interior decoration; • - all related contracts; • goodwill, etc.

  6. Articles 2555 et seq. of the Italian civil code: • - contract in written form, certified by public notary and registered in the companies' register within 30 days from its signature; • - presumption of assignments of all contracts related to the business (but the parties may agree otherwise) • - non-competition obligation for the whole duration of the lease (but the parties may agree otherwise)

  7. Cass. No. 18884 of July 10, 2008(Mc Donald’s / MCI srl) - Mc Donald’s was sub-tenant of the premises on the basis of a contract expiring on 1996 • In 1992 it signed a contract of affitto d’azienda with MCI, which provided for a duration of 14 years • On 1999 Mc Donald’s lost its right to occupy the premises and terminated the contract with MCI • The termination was considered unlawful and Mc Donald’s was condemned to pay damages to MCI

  8. Thank you for your kind attention! Silvia Bortolotti

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