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
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.
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!