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Do all franchisors have to provide franchisees with a defined trading territory?
If a territory is not granted, then the prospective franchisee should be aware that, provided all other franchisees in the network have not been granted a territory, they will be in competition with all other franchisees and the franchisor. In these circumstances the prospective franchisee should carry out some careful investigations to satisfy themselves that they will be able to generate sufficient income to recoup the capital outlay purchasing the franchise and also make a living. In many franchise concepts it will be beneficial for each franchisee to be granted a territory in which they can operate the franchise concept. If a territory is granted, a prospective franchisee must satisfy themselves that the size of the territory is large enough to generate sufficient income. The prospective franchisee should also confirm the exact rights that are being granted in relation to the territory. For example, do they have exclusivity and if so what does ‘exclusivity’ mean? Does it mean the territory is granted to the exclusion of other franchisees or the exclusion of other franchisees and the franchisor?
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