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What exclusivity do I get with a franchise?
Many franchise systems grant their franchisees exclusive rights, which will vary according to whether the franchise business is fixed or mobile. In the case of a retail shop, the exclusivity will be based on a radius from the premises within which the franchisor will not operate itself or franchise another to operate a franchise unit. It is difficult to lay down any set radius, for what is reasonable will vary on a case by case basis and can depend on whether the franchise unit is operated in a densely populated urban area, small town or rural location.In the case of a mobile franchise, the franchisee may be granted an exclusive area within which to carry on his business, which means the franchisor and other franchisees of the franchisor cannot provide goods or services in the franchisee’s exclusive territory, while the franchisee may be forbidden to solicit or tout for business outside that area. There should be a grant clause in the franchise agreement that will set out the rights you have been granted by the franchisor. In particular, it should state if you are granted an exclusive or a non-exclusive territory. The nature and extent of the exclusivity you are granted needs careful consideration. In some cases, the franchisor may continue to sell via the internet or mail order, and may reserve the right to do this in the franchise agreement. This would allow the franchisor to sell to customers based in a franchisee’s ‘exclusive’ territory.Issues relating to exclusivity may be subject to UK and European Union competition law, depending on the type of franchise being operated and the market share of that franchise. Competition law is complicated and there is not sufficient room to deal with it fully here. Franchisees should seek legal advice from a British Franchise Association affiliate solicitor on the exact nature of the rights being granted by a franchisor.
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