Understanding the construction process is key when leasing a commercial space, whether for a new franchise location or an independent business. One term that comes up often in commercial leases and build agreements is “build out”—a concept that plays a major role in how your space takes shape. It’s important to understand what a build out involves so that you can make informed decisions and avoid potential setbacks.
What Does Build Out Mean in Construction?
A build out, also called tenant improvements (TIs), is the process of customizing or finishing a commercial space to meet the needs of the tenant or business. This can include everything from installing walls and flooring to adding electrical, plumbing, and branded design elements. In most cases, franchisees are responsible for the build-out of their location to meet the franchisor’s standards.
Landlord vs. Tenant Responsibilities
While the specifics are negotiated in the lease agreement, the cost of the build out is often shared between the landlord and tenant, often through a tenant improvement allowance (TIA). A TIA is “an amount of money provided by a landlord to a tenant to pay for the cost of improvements to a commercial property…” so that the tenant can “customize the space they are renting to suit their needs while the landlord is able to maintain control over the quality and cost of the improvements” (Janover Commercial Real Estate Loans).
In some cases, the franchisor might also offer financial assistance, loans, or direct funding options tied to the construction.
Franchisor Support During the Build Out
There isn’t any guarantee that your franchisor will provide financial assistance for the build out, but most franchisors will offer the following support:
- Approved vendor lists – Helping you source trusted suppliers and service providers.
- Standardized floor plans and design specifications – Ensuring your location reflects the franchise’s brand identity.
- Construction project management assistance – Some franchisors offer in-house or third-party support to oversee timelines, budgets, and quality control.
- Pre-negotiated discounts with contractors or suppliers – Helping reduce build-out costs.
- Site evaluation and lease negotiation support – Providing insight into whether a space is suitable for build-out and assisting in securing favorable lease terms.
- Training for managing the build-out process – Offering guidance on how to navigate local permitting, inspections, and regulatory requirements.
This reduces the guesswork and helps ensure the space is functional, cost-effective, and fully aligned with brand standards.
Why Build Outs Matter for Franchise Owners
Build outs play a crucial role in the success of a franchise location. They’re not just about making a space functional—they’re about bringing a brand to life in a physical environment.
Franchisees are required to follow strict brand standards during the build out process. These guidelines often include exact layouts, approved finishes, required equipment, specific lighting setups, branded signage, and even details like seating arrangements. Skipping or altering these requirements can lead to costly delays, rework, or failure to gain final approval from the franchisor.
Furthermore, a well-executed build out ensures that the location not only looks like part of the brand but also functions efficiently according to proven operational standards—helping to set the franchisee up for long-term success.
Ready to Start Your Own Franchise Location?
A successful build out starts with the right foundation—careful planning, franchisor support, and a clear understanding of your lease and construction responsibilities. If you’re ready to take the next step toward franchise ownership, FranNet is here to guide you. Our expert franchise consultants will help match you with the right franchise opportunity and support you through every step of the process. Schedule your free consultation today!