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3 types of franchise territories

On Behalf of | Oct 29, 2022 | Franchise Law |

What’s one of the most important considerations when buying a franchise opportunity? Location. No one wants to go to the trouble of setting up a business only to have someone turn up and plant theirs right next to you. 

As a franchisee, you need to enter into a franchise agreement knowing exactly what protections over your territory you have. 

There are three different types of territory available. Familiarity with these terms helps you to make sure you know what you’re getting. 

Exclusive territory 

Having an exclusive territory means that no other franchises can operate in your pre-assigned location. 

Just exactly how much space a franchisee will get is usually up to the franchisor but it’s important to know just what you’re getting before you sign up. 

Protected territory 

With a protected territory, another franchisee can open up in your geographical location but if they open up too close, you may have a claim for encroachment. There are actions you can take if this happens, as explained below.  

Open territory 

Some franchises don’t offer any territory protection at all. In these circumstances, it’s going to be essential to make sure the franchise agreement is drafted in a way that determines what territorial rights you have. 

You may need to rely on this agreement at a later date if another franchisee sets up too close to you. 

Encroachment action

If another franchisee opens up on, or near, your territory this may be considered encroachment. Depending on your franchise agreement, you may have the right to stop it from happening or seek damages. 

If you’ve found yourself in this position, it’s wise to seek experienced legal guidance early on so you can take the action you need to.