What happens if your franchisor terminates your franchise or business is so lousy that you can't make a go of it, but you still have two, three or as many as ten more years to go on your commercial real estate lease? Well, that depends.
Let me explain my annoying lawyer answer.
In the absence of some fraud by the landlord that caused you to sign the lease in the first place, a prior and continuing breach by the landlord or some completely unforeseen catastrophe that made it impossible for you to perform your end of the lease (no, having your franchise pulled is generally not enough), you will still be held to the lease through its term.
Some dealers felt the pain of this result during the GM and Chrysler bankruptcies when dealership franchises were being terminated, where the dealer principal did not own the real estate on which the store was located. Some dealers were successful (particularly in private arbitration, where state law and the rules of evidence don't matter) in establishing that the Chrysler and GM bankruptcies were so cataclysmic and unforeseen that they made it commercially impracticable for the dealer to perform on the lease, such that the lease should be terminated and their obligation to pay rent under it, excused. But the law does not generally support that result.
So what can a dealer do to protect itself from a lengthy continuing term (or worse, a credit enhancement in the form of a personal guarantee) should the business take a dive?
Negotiate the lease's permitted use provision up front. Consider making it as broad as possible so that in the event you lose your franchise, you can open an independent automobile dealership, a body shop agency or rental car agency or other related business, just so you can generate income to cover your monthly lease obligations.
This can be difficult if a franchisor has site control at the beginning of the relationship and insists on the permitted use being limited to a particular franchise, though many states have passed legislation prohibiting or limiting site control. Barring a site control issue, any use can be negotiated. But care should be taken to review local zoning ordinances, variances obtained and conditional use permit restrictions before negotiating the permitted use. This due diligence will both give you the peace of mind to know the limits of your use of the property -- including whether it is properly zoned and whether you will have to obtain a variance for the intended use -- and give you the ammunition to negotiate a broader permitted use.
Unfortunately, many dealers fail to negotiate this provision, allowing it to be limited to the usual "automobile dealership and related service facilities" terminology. In that event, unless you find yourself in front of a compassionate arbitrator when the landlord enforces the lease, your commercial impracticability or impossibility argument is likely to fail.
Contact your attorney for advice on this and other lease terms or for assistance in negotiating your commercial lease and dealing with the local government to obtain the required use permits and variances.