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Exclusive vs protected franchise territories: Which is best for you?

On Behalf of | Jun 29, 2022 | Franchise Business Models

Before committing to a franchise, you need to understand what, if any, territorial rights you have. You may be O.K. with a free-for-all situation where anyone and everyone can fight it out to sell the same product because you think you can outdo all comers and expand your territory.

Yet most franchisees want some guarantee that they will not face direct competition. There are two ways to secure this. You either ensure your contract gives you the exclusive right to a particular area, or you ensure it gives you a protected territory.

Here is how they differ.

Exclusive territories provide the most protection

If you want to be the only person to offer the franchisor’s products and services in a region, you need an exclusive territory. An exclusive should ensure that the franchisor does not give anyone else a franchise to work in your area. It should also ensure that the franchisor cannot sell directly to clients on your patch, whether via physical premises or online.

Protected territories can be tricky

There are various degrees of protection, so it is essential to understand precisely what is guaranteed before signing the contract. For instance, the agreement may prevent anyone else from setting up the same store in your neighborhood, but it might allow the following:

  •     People to set up stands or areas within larger stores
  •     The franchisor to target online customers in your area

Both of those could seriously affect your business, so think carefully before you proceed. If you are unsure about any of these issues, seek legal help to find out more before you purchase a franchise.

NOTICE: This blog is intended solely for informational purposes and should not be construed as providing legal advice. Please feel free to contact us with any questions you may have regarding this blog post.