Franchise Lease Renewals Meet a 142% Rise in Toronto Retail Rents

The Canadian Franchise Association published a legal piece on August 27 on the franchise lease renewal wave. Cassandra Da Re, a partner at Dale & Lessmann LLP, writes that quick-service leases signed between 2013 and 2016 are reaching a first renewal, and that a rent increase of 20 to 35 per cent is where the unit model breaks. Most franchisees cannot absorb the ask, the article reports. For an operator with a renewal date inside two years, the step-up is a dated cash-flow event that belongs in the plan long before the notice deadline.

What the rent numbers show

Toronto retail rents rose about 142 per cent between 2019 and 2024, the article reports, from roughly $19 per square foot to nearly $50. It also cites the Toronto Regional Real Estate Board's Q4 2025 Commercial Report, which records average net lease rates at $29.97 per square foot, up 18.3 per cent year over year. That base mixes commercial and retail space.

The pressure is not Toronto-specific. The article reads CBRE Canada's H2 2025 Canada Retail Rent Survey as rental appreciation accelerating across 11 Canadian markets, at more than double the pace recorded six months earlier.

Where restaurant margins already sit

The article sets those rents against the operator's margin. It cites the Restaurants Canada Q1 2026 Quarterly Report, which found 81 per cent of quick-service operators reporting declining profitability and 36 per cent of restaurant operators at a loss or break-even. Angus Reid polling it cites found cutting dining out and takeout are Canadians' top two cost reductions.

The renewal right can lapse on a date

In the standard renewal option the article describes, the tenant may extend at fair market rent, settled by negotiation and, failing agreement, by arbitration. In Ontario, where the lease sets no other procedure, the article states that arbitration runs under the Arbitration Act, 1991, with hearings, evidence exchange and a binding award that typically take months at significant legal cost.

The calendar carries its own exposure. The article states that a missed notice deadline, absent exceptional circumstances, extinguishes the renewal right altogether.

Which document the operator signed matters here. In a head lease, the article describes, the franchisor is the named tenant and the franchisee occupies under a sublease or licence, so the renewal right sits with the franchisor. In a direct lease the franchisee signs, and the franchisor commonly holds a step-in right through a tripartite agreement, it says.

What the article tells operators to check

Step one is the option clause itself. The article says to confirm the form of notice, how far in advance it must be given, and whether the period has already passed.

Step two is asking the landlord in writing for the basis of the proposed rent before any counteroffer. Step three is for franchisors, told to run annual portfolio reviews so renewals are prepared ahead.

In lease negotiations, the article points to capped escalation of taxes, maintenance and insurance, index-tied renewal formulas, and appraiser-led rent disputes. It runs under one lawyer's byline, not as an association position, and carries a note that it is general information rather than legal advice.