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Does a franchisor sell its products exclusively through its franchisee network or is it able to make them available elsewhere?
John Pratt writes:
There’s no standard answer to this question because, for instance, a number of well known food brands do make their products available through supermarkets on the basis that such sales increases brand awareness and don’t take away franchisee sales.
What franchisors should not do is compete with their franchisees, which of course would make it harder for franchisees to operate a successful business.
Having said that, ultimately everything depends on the wording of the franchise agreement and, in particular, the terms of any exclusivity that may or may not be granted to franchisees.
Generally, because of the increased importance of the internet, exclusivity relates to the opening of bricks and mortar outlets or the operation of a vehicle from premises within a franchisee’s allocated territory. So a franchisor agrees that it will not allow anyone else to open an outlet or have premises in a territory, but exclusivity does not relate to customers, which would not prevent products being sold, for example, via a website or through other channels.
John Pratt is senior partner at specialist franchise firm Hamilton Pratt and has advised franchisors for over 25 years.
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