Fast Food Tenant Leases (Absolute Net Lease)

[Jean H.]

Hello -

A friend that's part of an investment group owns an absolute net leased property occupied/leased by a national fast food chain operated by a franchisee that operates ~150 restaurants under several different entities. Issue is that the store is underperforming and the current tenant/franchisee is selling the business along with ~80 of their other stores and assigning the lease to another operator. They are allowed to assign their lease under the contract.

The would be new operator/assignee is larger than the current tenant and one of the largest fast food franchisees in the world in terms of stores operated and their properties sell at strong cap rates. If this franchisee assumes the lease, it should be a positive.

Issue is that they have asked my friend for a rent reduction as the rent to sales ratio for that particular store is low. They have threatened to create a new entity and throw my friends store into that entity rather than putting the store in the larger/stronger credit entity. I assume they would declare bankruptcy on the new entity and close my friends store down.

My questions for this situation are: 

1. Is it common for fast food tenants that are assigning leases to ask landlords for rent reductions?

2. Can the new tenant/assignee stop making rent payments at any point in time and/or declare bankruptcy without having their larger/stronger credit entity be liable in any sort of way?

3. The current lease has a personal guarantee provided by the owner/president of the franchisee/current tenant however this expires soon. There is also a guarantee that is substantially longer provided by 3 entities owned by the owner/presidents holdco. These entities also operate fast food restaurants. Issue is my friend does not know whether or not the restaurants held by the entities will be sold off in the same transaction or another. If they are sold off, would the guarantee still stand? If not, how would it be possible to ensure a similar guarantee?

4. What is the best way for my friend to protect himself?

Any input would be greatly appreciated. Thank you very much in advance!