Letter of Intent for Franchise Coffee Shop Lease: Key Terms

A letter of intent, or LOI, puts proposed coffee-shop lease terms on paper: the space, rent, lease term, and concessions. For a franchise site, the negotiation also needs to account for the franchisor’s site-review process and required lease documents.

This guide uses PJ’s Coffee and The Human Bean’s 2026 FDDs to show how those requirements affect lease planning. Start with the drive-thru coffee site-selection guide when evaluating locations, then use the LOI to identify the terms and approvals to resolve with your attorneys.

What an LOI is, and what actually binds you

An LOI records proposed terms for a lease negotiation. Whether any clause binds depends on the document’s wording. The LOI should say explicitly which sections are binding and which are not. Ask your attorney about confidentiality, exclusivity or no-shop, and governing-law clauses, alongside rent, lease term, and the tenant-improvement allowance. Do not assume that calling the document an LOI resolves whether its provisions bind you.

The lease terms to address in an LOI

These definitions describe terms to discuss with your attorney, not a promise that a landlord will offer them. Confirm each clause’s wording and effect before signing.

• TI allowance. A landlord’s contribution toward your buildout costs. Use the cafe buildout cost calculator to organize the construction budget alongside the proposed allowance.
• Percentage rent and the natural breakpoint. Percentage rent adds a share of sales above a threshold to base rent. The natural breakpoint equals minimum annual base rent divided by the percentage rate; above it, the percentage applies to the overage.
• Kickout clause. A performance-triggered early-termination right, such as a right tied to sales falling below a specified threshold after a defined operating period.
• Co-tenancy clause. A rent reduction, delayed-opening right, or termination right triggered by a named anchor tenant or minimum shopping-center occupancy not being open and operating.
• Exclusive-use clause. A restriction on the landlord leasing other space in the same center to a competing business.
• Personal guarantee. An individual’s obligation to answer for the corporate tenant’s lease obligations, subject to the guarantee’s wording.
• CAM. Additional rent covering the tenant’s allocated share of common-area operating costs.

Term	What it means	Franchise-specific twist	Where it shows up in an FDD
TI allowance	Landlord contribution toward buildout	Ask how the allowance fits the proposed franchise buildout	No allowance amount established by the cited FDD provisions
Percentage rent / natural breakpoint	Additional rent above a sales threshold; natural breakpoint = annual base rent ÷ percentage rate	Confirm the proposed lease calculation with your attorney	No percentage-rent term established by the cited provisions
Kickout / co-tenancy / exclusive use	Performance exit, occupancy protection, or restriction on competing tenants	Ask your attorneys how the proposed clause interacts with the franchise agreement	No entitlement established by the cited provisions
Personal guarantee / CAM	Individual liability / allocated common-area costs	Review these lease obligations alongside the franchise obligations	No negotiated guarantee or CAM terms established by the cited provisions
Lease rider / contingent assignment	Lease provisions addressing notices, assignment, and other franchisor rights	PJ’s requires its rider; THB requires its Lease Addendum	THB Item 8; PJ’s Item 11 and agreement 1.4; Item 22 exhibit lists and attached agreements
Site approval	Franchisor acceptance of the proposed location	PJ’s has a 30-day decision period after the required submission; THB site approval precedes the franchise agreement except for Area Developers	Item 11; THB Item 5 also gives site-fee and timing terms
Relocation	Moving the franchised outlet to another site	PJ’s requires prior written approval under stated conditions; THB requires written approval and a $5,000 fee	PJ’s Item 12; THB Item 6

Current market context

CBRE’s U.S. Real Estate Market Outlook 2026: Retail, checked October 14, 2026, states: “This will place greater emphasis on deal structure, with concessions and tenant-improvement allowances playing a larger role in many cases.” This is market context, not a quoted allowance for a particular coffee-shop lease.

What changes when the tenant is a franchisee

The two FDDs below require franchisor involvement in site approval and lease documentation. Read your own Item 11 site-selection and approval disclosures and the actual agreement before committing to a location. Use Item 22’s exhibit list to locate the contracts and lease riders, then give the required documents to your lease attorney and proposed landlord.

Collateral assignment assigns lease rights as security, with takeover rights governed by the document’s conditions. A franchise lease rider can address that assignment, default notices, and other franchisor requirements. The exact provisions matter, including whether the franchisor has an option or an obligation to act.

Relocation requires a separate franchise review. PJ’s April 10, 2026 FDD, Item 12, requires prior written approval and permits approval only if the franchisee loses the right to operate at the site through no fault of their own or the franchisor determines relocation is in its best interest. The Human Bean’s February 25, 2026 FDD, as amended May 5, 2026, Item 6, requires written approval and a non-refundable $5,000 relocation fee. THB also requires compliance with its site-approval process and franchise agreement and funds for the new outlet; it has no obligation to approve relocation. A lease-side relocation right is a separate ask of the landlord.

Sequence the lease inside your opening plan.

Our free coffee shop opening checklist puts the lease phase in order with financing, permits and buildout, including the lease terms to negotiate. Plus the due-diligence kit.

Email addressSend me the kit

Optional: connect me with a vetted franchise-development partner if I match what they're looking for. FranchiseFeast may be paid a referral fee for this. It is never required to get what you asked for, and you can withdraw at any time.Your background (optional)Prefer not to sayCorporate or executive backgroundEntrepreneur, no food experience yetI already operate multiple unitsSomething else

Company

The kit is educational only, not legal or financial advice. By subscribing you agree to ourterms and privacy policy. How we're paid, including referral fees:affiliate & referral disclosure.

What real coffee FDDs require before you sign a lease (2026)

PJ’s Coffee: April 10, 2026 FDD

PJ’s Coffee’s FDD, issued April 10, 2026, Item 11, states: “Franchisor must approve or disapprove the proposed site within 30 days after Franchisee submits a written summary of the lease terms and other information available for the proposed site.” The submission includes more than an address. Item 11 also considers the landlord’s willingness to accept required use language and lease provisions.

Franchise Agreement section 1.4 sets out the lease-review sequence:

1. Submit a lease-terms summary for each site. Give the proposed landlord the current “Contingent Assignment of Lease or any other Lease Rider” and “obtain written verification that each landlord is willing to include the provisions” of that document in the lease.
2. Obtain “verbal authorization to proceed with preliminary lease negotiations” once the franchisor is satisfied with the site and reasonably accepts the lease summary.
3. Submit “a final, unsigned copy of the lease” for verification that the required rider is included. The franchisor may withhold authorization if the rider is missing in substantially the required form or the lease contains provisions it considers excessively onerous or restrictive.
4. Obtain written authorization to sign. After signing, furnish the executed lease and attachments; final location acceptance follows verification that the signed lease has no variances from the accepted form.

Item 11 makes failure to acquire an acceptable site and open within one year of the franchise agreement’s effective date a default and grounds for termination. Section 1.4 also directs the franchisee to independent counsel for lease advice; franchisor review does not replace that review.

Exhibit L, PJ’s Contingent Assignment of Lease, shows what the landlord is asked to accept. Its notice provision states:

Lessor agrees to furnish PJ’s with copies of any and all letters and notices to Lessee pertaining to any default by Lessee under the Lease at the same time and in the same manner as any such notice is sent to Lessee.

Assignment is optional for PJ’s after franchise-agreement termination or expiration or a lease default, subject to Exhibit L’s conditions. Paragraph 2(b) states:

Lessee agrees to take any and all actions necessary under the Lease Agreement to effectuate assignment of the Lease Agreement to PJ’s;

That assignment does not automatically release the franchisee. Paragraph 2(f) states:

Nothing herein shall affect Lessor’s right to require Lessee to remain liable as a guarantor for the remaining term of the Lease, to recover from Lessee any and all amounts due under the Lease or to exercise any rights of Lessor against Lessee as provided under the Lease.

See the PJ’s Coffee franchise-cost guide for the broader investment context.

The Human Bean: February 25, 2026 FDD, as amended May 5, 2026

The Human Bean’s FDD, issued February 25, 2026, as amended May 5, 2026, Item 5, states: “The Initial Franchise Fee of $35,000 includes a non-refundable site analysis fee of $5,000.” After payment, execution of the Site Analysis Agreement, and submission of the required site information, THB evaluates up to ten proposed sites. Except for Area Developers, a site must be approved before the franchise agreement can be signed.

If no site is approved within nine months after payment of the site analysis fee, the Site Analysis Agreement terminates and THB retains the fee. The franchise agreement must be signed within 90 days after site approval to preserve the right to credit the site analysis fee toward the initial franchise fee.

Item 8 states:

If you lease the location, you and the landlord must use the THB Lease Addendum. The THB Lease Addendum is attached to the Franchise Agreement. It facilitates transfers of the lease by you, gives us notice of defaults, and allows us to act to prevent unplanned closures of the THB Outlet.

Franchise Agreement section 7.7 requires the addendum and says THB will not unreasonably withhold consent to modifications requested by the lessor. It also sets a delivery deadline:

Within thirty (30) days of signing a lease for the Premises, Franchisee will provide to THB signed, dated copies of (i) the lease for the Premises and (ii) the THB Lease Addendum.

See The Human Bean franchise-cost guide for the wider fee and investment picture.

Why the franchisor wants a rider

In the IFA article Key Issues in Franchise Lease Agreements, posted March 9, 2017, Matthew Brandt explains the franchisor’s perspective. He identifies three rider provisions: a conflict provision giving the rider priority over conflicting lease terms, a collateral assignment, and a notice provision requiring simultaneous delivery of landlord notices to the franchisor and franchisee.

Brandt states: “The landlord’s consent to the collateral assignment must be obtained prior to lease execution; otherwise, the landlord may not be obligated to honor the franchisor’s rights.” This explains why landlord consent belongs in the lease discussion before execution.

Questions to resolve before signing

Bring the proposed LOI, lease, franchise agreement, and required rider to your commercial real estate and franchise attorneys. Coordinate the lease phase with the coffee-shop opening timeline and review what to negotiate in a franchise agreement alongside the landlord negotiation.

• Which LOI sections bind the parties, and does the document identify them explicitly?
• What site information must be submitted, what starts the approval clock, and what authorization is required before negotiating or signing the lease?
• Has the landlord received and agreed to the required rider, assignment, and notice provisions?
• Should the lease and franchise agreement terms be coterminous, including renewal options, and what happens if one renews and the other does not?
• What franchise approval, fees, and landlord permissions would a relocation require?