Franchise Territory Rights: The Basics + Examples

Some franchisors require franchisees to submit a business plan before launching the new franchise. One area that you should put careful thought into is the market, notably location. After all, some franchisors have stringent site requirements because of franchise territory rights. As a potential franchisee, it’s important to research your market and location before submitting your business plan. And to know more about franchise territory rights, read more here to get started!

How Do Franchisors Decide on The Territory?

Franchisors will set the territory, depending on the market and location. According to Chron, the common territory division is based on location (zip codes and distance) and population. 

Location-based franchise territory rights are easier to define, considering there are a set number of zip codes or distances (miles or radius) to determine where to add a new location. However, if your preferred franchise depends on population, ensure that the franchise fits the community.

For example, the area in which you want to set up a franchise leans toward young adults and families with younger children. Make sure to choose a franchise that caters to this demographic. You can never go wrong with a restaurant franchise. If your neighborhood is hipper, you can decide on a coffee franchise.

Other than these things, you’ll see these other terms tossed around across various franchise agreements.

Franchise Territory Rights – Terminologies

1. Exclusive Territory

Some franchisors can grant franchisees an exclusive territory. This allows franchisees to operate in a location without worrying about other franchisees operating there. However, even if you have an exclusive territory right, remember that competitors are bound to set up their franchises in your location.

Even though you’re authorized to run the franchise in the area, the franchisors can’t guarantee you can open another store in the same territory. You may ask the franchisor about this or refer to the Franchise Agreement.

2. Protected Territory

An exclusive territory can be mistaken for a protected territory. However, this territory right allows other franchisees to operate in the same location. For example, a franchisee can set up the first franchise in one neighborhood. Another franchisee can open another one 5 miles away from the first one.

3. Non-Exclusive Territory

The final territory right that franchisors define is the non-exclusive one. Even though there’s a “non-exclusive” right, franchisors can add restrictions to avoid encroaching and oversaturing the market. It’s best to consult a legal expert if a franchisor grants non-exclusive territory rights.

Other Points to Consider

Many experts are saying that you should also remember that even if you might have a protected or exclusive territory, there’s an exception to this rule. For example, if your franchise sells products, your franchisor can allow the distribution of these items to other sellers. You are also competing with them.

Should You Still Franchise a Big Brand?

Although you might worry about over-saturation, big brands are still open to franchising units to expand to unreachable markets. Sure, franchise territory rights may restrict you from opening your desired franchise, but with the right location or market, you can still open one!

That said, considering that big brands are dominating the market, you can help smaller and up-and-coming brands get recognized. It’s likely they’ll follow similar franchise territory rights to their competitors to ensure that the franchise is competitive.

Alternatively, you can have a work-from-home franchise. Some franchises allow you to operate trucks, kiosks, or other physical locations. However, you can work from the comfort of your home, assemble your team remotely, and work on-site when needed. Additionally, you can ask your potential franchisor about their territory terms. 

The same also goes for mobile franchises. Although it would be easy for franchisees to move around, franchisors may allot a specific location or territory for these franchises to operate.

Examples of Franchise Territory Rights

If you want to know the territory rights that franchisors grant, here are examples from well-known brands:

Info from Entrepreneur

Exclusive territories available

• Dunkin’
• Ace Hardware
• The Maids
• Planet Fitness
• Jan-Pro Cleaning and Disinfecting
• Marco’s Pizza
• Jersey Mike’s Subs
• Culver’s
• Wingstop
• Tropical Smoothie Cafe

Exclusive territories unavailable

• Taco Bell
• 7-11
• Hilton Hotels and Resorts
• Jiffy Lube
• Popeyes Louisiana Kitchen
• The UPS Store
• Kumon
• McDonald’s
• Servpro
• Burger King

Final Thoughts

Franchise territory rights vary per business. Franchisors disclose information about franchise territories on the franchise agreement, allowing you to research a location before submitting your business plan. That’s why it’s essential to be strategic when opening your franchise. You want to ensure that you want to cater to an underserved market that can raise profits and be exposed to a new business.