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How do exclusive territories work?
If you enter into a franchise agreement you will usually be given a territory within which to operate the franchised business. The territory may be granted on an ‘exclusive’or ‘non-exclusive’ basis and the difference between the two may be of great commercial importance. If you are granted a ‘non-exclusive’ territory it means that the franchisor may operate the franchised business in your territory and grant a franchise to another franchisee to operate in your territory. If you are granted an ‘exclusive’ territory the franchisor will only grant a franchise to you to operate in your exclusive territory, which means that no other franchisee in the franchise network will be able to actively advertise and trade in your designated territory. What you will need to clarify with your franchisor is whether it also means that the franchisor will not itself operate in your territory. One other point to look out for if you are granted an ‘exclusive’ territory is whether the franchisor has also reserved the right for itself or other third parties, including other franchisees, to service what are often called ‘national account’ customers who are based or operate in your territory. These tend to be large multinational organisations.
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