Hotline: 1800 102 2007
X
Loading
Search Business Opportunities

Franchise territory cause of concern

Are you witnessing a situation where a new outlet of the same brand as yours is being set up in your vicinity. Well to ensure that this does not happen to you, address the territorial issue before signing the franchise agreement. Read on to know what all

By Neha Malhotra Sub Editor, Franchise India Holdings Limited, Web Division

A franchise is taken up to gain profits and provide a financial stability. Gaining specific territorial rights is a must when taking up a franchise to fulfil the motive of gaining profit (Though that’s not just the reason for gaining profits). As a franchisee, you need to address this issue from your end.

Types of territorial rights

Most commonly there are two kinds of territorial rights that are available for a franchisee. These are:

Exclusive territory: In this kind of an arrangement, you can be the only franchisee operating in a given area. This gives you the advantage of a guaranteed client base with no threat of competition. However looking at the grim side, the franchisor might define the exclusive territory as a very small area and which will further tie up your hands to market yourself out of the defined boundaries.

Non exclusive territory: In a non exclusive territory, you can operate in other franchise territories and other franchisees may also operate in your franchise territory. The advantage is that this arrangement poses marketing and advertising freedom giving you an access to a larger client base. Increased competition is a situation which you can witness in an above mentioned situation and which can lead to a drop in your share of profits.

Franchise agreement clauses

To be at the safe end, you need to address the following clauses in your franchise agreement. These will put you in a better place in case of any infringement or dispute.

  • You need to ensure what territorial agreement you are signing? Is it exclusive or non exclusive? The definition of exclusivity needs to be well defined.
  • You should have the “right of first refusal” clause according to which the existing franchisee gets the foremost option to take over the new territory before it is offered to anyone else.
  • Infringement which may arise due to mergers or acquisitions should state in detail what would be the course of action in such a situation for you.
  • The possibility of future re-negotiation regarding the territory should also be talked about.
  • You must view and analyse the history of how the franchisor handled territory disputes in the past.

Words of caution

Whatsoever may be the reputation of the franchisor, you need to ensure that you have everything in writing. All your rights that have been promised by the franchisor should not be left to the goodwill of his word by mouth, have everything spelled out in the franchise document and make sure you have your lawyer takes a thorough look at it.

Prevention is better than cure fits so aptly to this situation. Go ahead, take the measures and enjoy your road to being a successful franchisee!

Comment
Related opportunities
  • Activity Centres, Day Care & Creches
    About:To tap the lucrative market of 'kids edutainment', "Play Streat™..
    Locations looking for expansion Telangana
    Establishment year 2016
    Franchising Launch Date 2016
    Investment size Rs. 30lac - 50lac
    Space required 3500 - 7000 Sq.ft
    Franchise Outlets -NA-
    Franchise Type Unit, Multiunit
    Headquater Hyderabad Telangana
  • Preschools
    Run your own preschool & provide quality education by joining..
    Locations looking for expansion Tamil Nadu
    Establishment year 2000
    Franchising Launch Date 2015
    Investment size Rs. 50 K - 2lac
    Space required 1200 - 1400 Sq.ft
    Franchise Outlets -NA-
    Franchise Type Unit, Multiunit
    Headquater Chennai Tamil Nadu
  • Pets – A Booming Industry for you to start a..
    Locations looking for expansion Gujarat
    Establishment year 2011
    Franchising Launch Date 2014
    Investment size Rs. 20lac - 30lac
    Space required 1000 - 1500 Sq.ft
    Franchise Outlets -NA-
    Franchise Type Unit, Multiunit
    Headquater Ahmedabad Gujarat
  • Kitchen
    About: ROXX World store offers more than 800 products under one..
    Locations looking for expansion West bengal
    Establishment year 1995
    Franchising Launch Date 2010
    Investment size Rs. 20lac - 30lac
    Space required 500
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater Kolkata West bengal
Insta-Subscribe to
The Franchising World
Magazine
For hassle free instant subscription, just give your number and email id and our customer care agent will get in touch with you
OR Click here to Subscribe Online
Daily Updates
Submit your email address to receive the latest updates on news & host of opportunities
More Stories