Another view

​The Franchisor takes a Lease of the premises in their own name, they will then grant the Franchisee a Sub Lease – making the Franchisor your immediate Landlord. The Franchisee will pay rent and other costs to the Franchisor who in turn would pay the rent and other costs to the Owner of the premises (their Landlord) in terms of their Lease. Therefore in the case of a sublease Imbalie will be a lessor and a lessee. IFRS 16.3 states: An entity shall apply this Standard to all leases, including leases of right-of-use assets in a sublease. A sublease is: A transaction for which an underlying asset is re-leased by a lessee (‘intermediate lessor’) to a third party, and the lease (‘head lease’) between the head lessor and lessee remains in effect (IFRS 16 Appendix A). If a lessee subleases an asset, or expects to sublease an asset, the head lease does not qualify as a lease of a low-value asset (IFRS 16.B7). IFRS 16.B58: In classifying a sublease, an intermediate lessor shall classify the sublease as a finance lease or an operating lease as follows: if the head lease is a short-term lease the sublease shall be classified as an operating lease; otherwise, the sublease shall be classified by reference to the right-of use asset arising from the head lease, rather than by reference to the underlying asset (for example, the item of property, plant or equipment that is the subject of the lease).