A franchisee guarantee is a lease guaranteed by a franchise operator rather than the brand, and its strength depends on the operator’s size and financials.
Many fast-food and service brands are run by franchisees, so the entity on the lease may be an operator with a handful of locations rather than the national company. Their strength varies widely. Buyers should look at how many units the operator runs, its financial statements, and whether the guarantee is personal, corporate, or limited. Franchisee-backed leases are often priced at a higher cap rate than leases backed by the franchisor for this reason.