What Is A Non Exclusive Franchise Agreement

Most, but not all, agreements will have some form of exclusivity. In a franchise, this measure is usually based on geographic parameters, so the franchisee is the only person authorized to operate under the brand in its specific territory. In the case of a licence, exclusivity could be based on geographical areas or industrial sectors. For example, a license may provide that a manufacturer of a particular type of product is the only authorized producer to manufacture these products under the brand name. While it is not necessary to include any form of exclusivity in either type of agreement, non-exclusive agreements are more common in licensing agreements than franchised networks. Even if you have obtained exclusive land rights under your franchise agreement, there may be a clause allowing the franchisor to make changes to your territorial size or exclusivity over time. The franchisor may be tempted to do so in the event of two events: many franchise agreements, including those that provide for exclusive territories, give the franchisor the right to change the territory or create a new franchise within the territory if circumstances allow it to maintain another franchise. Such circumstances may include a change in the demographics of the franchise territory or an evolution of the technology used by the franchise system, which makes it the market leader and in turn results in a much greater demand for the product or service offered under the franchise system. It is not uncommon for the franchisee to be granted a right that obliges the franchisor to offer the franchisee the first right to refuse the offer to purchase the new franchise that begins in the territory.

In this way, the franchisee would have the opportunity to expand its business and keep the territory exclusively for itself. In successful franchise systems, franchisees often tend to exercise such rights when expansion opportunities are granted and where franchisees take the opportunity to continue to invest in a system, this can often be seen as a strong sign of a successful and well-managed franchise. Exactly what a territory can define differs from a franchise system to a franchise system. The territories come in many shapes, sizes and styles. The most frequent franchisors are exposed as follows: franchisors require franchisees to apply their business methods and meet their operational standards. The purpose of these requirements is to protect the reputation of the franchise – if the company works inefficiently, provides poor customer service or meets incorrect cleanliness standards, the economic value of the franchise as a whole could suffer. In scenarios where problems may arise between neighbouring areas, there are often strict controls over how advertising can be done, so that no franchisee is considered an attempt to attract stores to another franchisee`s territory. There are often checks to see if a single franchisee can have its own website. It is more normal for there to be a website for the entire franchise system that is controlled by the franchisor. In these circumstances, the franchisee must have confidence that the franchisor does not overstep the market with franchises, so that its franchises are diluted to the extent that it does not offer a reasonable return.

An intelligent franchisor is not in a position to over-season the market, as such an action will lead to disgruntled franchisees, resulting in greater litigation within the franchise system.

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