expert advice: Robert Toth | Partner | Marsh Maher Richmond Bennison Lawyers
This land is my land - or is it?
Territory & on line sales issues in Franchising the franchisee can market its services and products.
Exclusive Territory rights The territory granted to a franchisee may be exclusive or non-exclusive. If it is non-exclusive you need to consider the impact on your business and the impact on the value of the business when you sell in the future. Many franchises will offer a territory however many retail franchises do not and only provide a right to operate from a specific site. In some franchise business there is a need for a territory which is part of the rights the franchisee will pass on when they sell the business.
Non-Exclusive As stated often with hospitality and retail type franchises, there is no area or territory at all. For example, in the CBD you might see four or five 7 Eleven stores all in close proximity to each other and all able to compete with each other. The franchise is granted for that site and cannot move without the approval of the franchisor.
When purchasing a franchise many agreements provide the franchisee an exclusive territory set out by way of a map or postcodes or other description of an area or region in which the Franchisor and other franchisees will not compete with the Franchisee.
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The franchisee therefore has the right to market and “farm” customers in that territory or area.
Local Area Marketing (LAM) A LAM is the local area marketing area granted in the agreement which may be different to the defined Territory. Often the LAM is the same as the Territory granted but it may differ. The LAM is the area in which
Where it is non-exclusive another franchisee or the franchisor could open a franchise close to your business and you have no right to object to it. This must be clearly set out in the franchise agreement and the disclosure document. For many services and mobile franchises, it is vital to have a protected territory for the viability of the business. The issue then arises as to how do you know if the territory being offered is right for the Business? The Franchisor ought to have done its demographic and market research to determine the territory required to service the
