LOI stands for Letter of Intent and in non-franchise industry terms it is any document outlining details of an agreement between two parties before the agreement is finalized. When it comes to franchising and site selection, submitting an LOI is usually the step you take to initiate lease negotiations on a desired site. The LOI is not a legally binding contract but an outline of desired terms for leasing a site. Before submitting an LOI there are a few things you want to consider.
First of all, don’t put all your eggs in one basket. Keep a few other locations in mind so you are prepared in case the negotiations don’t go through. You also want to make sure you are working with a commercial leasing agent who understands your individual situation and will keep your best interest in mind during the negotiations.
Once you find a location that you think will work, you can begin negotiations with the landlord to determine if the site will work for your new business. You will need to submit an LOI to the landlord, which signifies to them that you are seriously interested in leasing the space. For commercial leasing, an LOI’s primary function is to facilitate faster negotiations of a lease.
Typically, LOIs are much shorter than the text of the actual lease. They contain much of the same basic information as the lease will, but in a shorter easier to read format. The LOI should include an extensive list of desired terms including monetary terms deal contingencies, timing/scheduling, specified form of documentation, and who will prepare the documentation. You also want to include details on the financial situation of the site location. You want to make sure all expected costs are outlined as well as financial incentives such as free rent, or structural upgrade allowances.
It is important that you remain patient during the lease negotiation process. It can take weeks for a landlord to review an LOI, and just because you did not hear immediately back from a landlord does not mean you did not get the site. During the negotiations keep in mind that you will be running your business from this location so you want to make sure that all of your needs are met.
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About the Author
For over sixteen years, Roni Deutch has been recognized as an experienced tax attorney and founder of the nation’s largest law firm dedicated to resolving IRS back taxes. Roni Deutch has always put the needs of her individual clients first, and by so doing has helped thousands of Americans find an end to their IRS tax nightmares. This experience, dedication and commitment to helping American taxpayers can now be found at the Roni Deutch Tax Center.
