Business lease agreement (forpagtning)

What is forpagtning?

«Forpagtning» is the Danish term for leasing out a running business. The operator (forpagter) runs an existing business at his own cost and risk, while the owner (bortforpagter) keeps ownership. The operator pays a lease fee and in return may use the fixtures, name, goodwill and usually the premises. This differs from a purchase, where ownership changes, and from an ordinary commercial lease, where you rent empty premises and build the business yourself.

Business leases are common in the restaurant trade and are also used for cafés, canteens, kiosks, shops, hotels and campsites. You can browse current business leases and restaurants for sale on Sitavo.

When is a business lease a good solution?

• The owner wants to step back from day-to-day operations without selling, for example before retirement or in a generational handover.
• An operator wants to run his own business without financing a purchase price, possibly with the option to buy later.
• Operations need to continue during a transitional period, for example during illness or while a sale is prepared.
• A municipality, association or property owner is tendering the operation of a canteen, café or similar.

If the parties would rather complete an actual sale, the asset purchase agreement is the right document, and if only premises are to be rented, use the commercial lease.

What the template contains

• The leased business: the business, the premises, the inventory list, name, domain and social media.
• Licences and permits: who applies for and is responsible for, for example, the alcohol licence, food business registration and outdoor seating.
• Term and fee: duration, and whether the fee is fixed, turnover-based or a combination, plus VAT.
• Deposit and security: what the operator provides as security for the fee and the fixtures.
• Operation and duty to operate: opening hours, concept and standard, so the value of the business is preserved.
• Maintenance and replacement of fixtures: who pays when an oven or a chilled display breaks down.
• Stock at start and end: how stock is counted and paid for.
• Employees: how staff are dealt with when the lease starts and ends.
• Suppliers, alterations and sub-leasing: contracts, utilities and what the operator may change or transfer.
• Purchase option and right of first refusal: whether the operator may, or is entitled to, buy the business.
• Termination, breach, return and non-compete clause.

Points to watch

• The inventory list is the foundation. Describe condition and value, and take photos at handover. Without a good list, it is hard to settle what must be returned.
• Licences are often personal. An alcohol licence does not normally follow the business, and the operator will usually have to apply himself. Contact the municipality and the police in good time, and register with the Danish Veterinary and Food Administration (Fødevarestyrelsen) before taking over.
• Employees: the Danish Transfer of Undertakings Act (virksomhedsoverdragelsesloven) can mean that staff transfer to the operator, and back again when the lease ends. Have a lawyer look at it if there are employees.
• Turnover-based fee: agree access to the till system and accounts, so the fee can be checked.
• VAT: the fee may consist of a VAT-liable part and a VAT-exempt part. Clarify the treatment with an accountant.
• Landlord’s consent: if the owner is himself a tenant of the premises, the business lease usually requires the landlord’s written consent before it is signed.
• Purchase option: agree a price or a pricing mechanism from the start. An option without a price often leads to disagreement later.

Restaurant, shop or something else

In a restaurant or café, the fixtures, licences and staff matter most, and the duty to operate ensures that regulars and reviews do not disappear. In a shop or kiosk, stock and supplier agreements play a bigger role. Leasing out an online business is rare; a licence or management agreement is often more natural there. Read more in the chapters on physical businesses and the handover.

How to use the template on Sitavo

The business lease template is available to you if you have an active or pending listing or an ongoing deal on Sitavo, for example a listing for a business offered on a lease. You fill in the fields with the editor in your account, can edit the wording directly and download the agreement in Word or PDF. The agreement text itself is in Danish, as Danish law governs it. Before the operator takes over, it is a good idea to review the business with the due diligence checklist. If you need help, you can find a commercial broker, and to know what the business is worth, start with a valuation.