Are franchisees in competition with the franchisor for customers?

Unless the franchise agreement says something different then, in theory, a franchisor can be in competition with its franchisees because there is nothing to stop a franchisor from operating company owned outlets/franchises itself.  Usually, however, the franchise agreement grants franchisees some sort of protection from such activity. If, for instance, the franchisee is granted an exclusive territory then the franchisor cannot compete with the franchisee in that territory and cannot allow anybody else to compete with the franchisee in the territory, subject always to the impact of competition law, which allows franchisees and the franchisor to respond to unsolicited requests from customers even in an exclusive territory allocated to a franchisee.  Further, franchise agreements often provide that some particularly important customers are designated as national accounts and these customers enter into contracts with the franchisor.  In such circumstances, the franchisee performs the obligations under the contract with the national account customer as the franchisor’s sub-contractor. Clearly, from a franchisee’s perspective the way that a national account customer is defined will be important to ensure that the franchisor cannot designate any customer it wants as a national account customer.