I have been informed by a franchisor that I need to pay a deposit to reserve a territory and once th

The short answer is that the franchisor can largely do whatever it wants, but that does not mean that you have to accept it.  There is nothing wrong with being required to pay a deposit to reserve a territory. Franchisors are often subject to a very substantial number of enquiries and they need to establish which of the enquiries are serious - the best way of doing this is to ask for money.  That having been said, if you are paying money to reserve a territory before you have seen the franchise agreement, it must be clear the basis on which you are paying a deposit. Usually franchisors will want to be able to retain the deposit or retain at least part of the deposit to cover their expenses, but if all that you are doing is reserving a territory then the franchisor may not have incurred any expenses.  As a result, it would be important for you to have the franchisor’s agreement to the deposit being repaid should you decide not to proceed with the franchise.