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Is your franchise territory exclusive or protected?

On Behalf of | Mar 10, 2021 | Franchise Law |

Defining your territory is vital when you sign up for a franchise. You do not need to mark out your boundaries physically. What you need is to define your territorial limits in your franchise agreement.

Franchise document wording uses two terms to talk about territory: exclusive and protected. An exclusive territory is not the same as a protected territory.

What is an exclusive territory in a franchising agreement?

An exclusive territory means you are the only one who may offer the franchisor’s goods and services in the defined area. If anyone in your area wants the product or service, they must come through you. It stops you worrying someone else will set up in direct competition, including the franchisor themself.

What is a protected territory in a franchising agreement?

This offers less protection than an exclusive agreement. You need to scrutinize the franchise agreement to learn what is and is not allowed where. For example, the agreement may still permit the franchisor to sell their goods online to customers in your area.

Not all franchise territories come with a form of protection

Do not assume there is any form of protection or exclusivity included in your contract. Some franchisors prefer to promote their products through as many channels as possible. If you feel you need some form of territorial protection, you can negotiate it in the terms.

If you feel you can outcompete others, it may be beneficial to work with a franchisor who does not define territories. It could allow you more scope to expand. Review your franchise agreement with an attorney before signing. Territories are one of several key issues to define that could mean the difference between success and failure.