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Territory Limitations Policies for Franchised Companies

Territory Limitations Policies for Franchised Companies
Author: Lance Winslow VIII

All franchised companies must have Territory Limitations to maintain the peace within their systems. Often the unspoken ethics of territory limitations are blurred with mobile, home based or online franchise companies. Territory limitations in fixed site franchises are fairly cut and dry. There is your store, no other stores will be placed in the surrounding area delineated on this map within your franchise agreement. Generally things run pretty smoothly in this case. However as co-branding methods, partnerships and online sales increase as consumer demand for the brand increases we often see the franchised companies embattled in encroachment lawsuits in an already litigious industry.

It might be necessary for non-fixed franchise companies to consider adding in their operations manual a chapter on territory limitations. We had to add this to our franchise Confidential Operations Manual to solve these issues. Below is an outline to this chapter if you wish to design your own. I recommend you print this article and outline and modify it to best fit your business model and then put pen to paper and write out a few paragraphs on each issues. This way you will have a rough draft. Type this up and run in by a “Franchise” attorney with some experience in larger franchise companies. You should expect to pay at least $250.00 per hour and this will cost you about 5-10 hours worth. Although I realize that as an entrepreneur you hate attorneys, realize that if you do not do this now, you may be embattled in large class action lawsuits or lose some control to franchisee ad hoc rights groups or internal franchise associations. By smart and do it right before you start. Put a section in your Operations Manual “Territory Limitations” and make sure it is legally tight. Trust me this advice came at a pretty big price and you would be wise to not repeat our mistakes and think on this.

TERRITORY LIMITATIONS

I. BOUNDARIES

A. Delineated On Map

B. Exclusive

C. Franchise Fee

D. Competing With Other Franchisees

II. UNASSIGNED TERRITORIES

A. Additional Business

B. New Franchisees

C. Twenty Percent Outside Only

1. Permission To Raise

2. Buy New Territory

D. Sell Business Accounts

E. Franchisor Replaces Business In Present Territory

III. EXPANSION OF TERRITORY

IV. DECREASING OF TERRITORY

A. Twenty Percent Of Bonzai And Blitz

B. Under 1.2% At End Of Five Years

C. Franchisee Written Request

V. RENEWALS

VI. PURCHASING ADDITIONAL TERRITORIES

A. Quality

B. Area Representative Reports

C. Open Areas

D. One Half Area

1. Costs

2. Royalties

VII. DEMOGRAPHICS

VIII. WEATHER

IX. COMPETITION

Lance Winslow VIII