Protecting Your Franchise Territory

Protecting your franchise territory is one of the most important things that you can do as a franchise owner. In order to be successful, you cannot have a competing franchise on every street corner. With this in mind, there are some steps that you can take in order to protect your individual franchise territory.

The Franchise Contract

When you are about to sign up to become a franchisee, you will be presented with several documents from your franchisor. These documents will include the terms and conditions of the sale and will cover the aspects of your territory. When people have problems with their franchise territory, it is generally because they signed a contract that was vague and ambiguous when it comes to outlining their territory. You need to make sure that the contract clearly outlines where your territory begins and ends. You need to make sure that the contract states that no one else can open another franchise in the same vicinity. Some contracts do not include specific language and they allow loopholes where other business owners can come in and take over your territory. When this occurs, they could potentially run you out of business or minimize your profit potential. Make sure that the fine print of your contract is very detailed when it comes to your territory.

Mergers and Acquisitions

Another aspect that you need to be aware of is mergers and acquisitions. When your franchise purchases an existing franchise, it could potentially hurt your territory. For example, sometimes a business will purchase an existing franchise company and then convert all of those franchises into their brand. If you are the business owner of the purchasing company when this occurs, it could create a lot of extra competition. In most areas, there are several competitors from different franchises. When one of the competing franchises changes brands, you may find locations that are very close to one other. They will typically have access to all of the same advantages that you have and they will be located in your territory.

In order to prevent this situation from occurring, you need to make sure that there are provisions against this in your franchise contract. When you sign up for a franchise, you need to make sure that there is no chance that another business can be included in your franchise family within a certain radius. 

Multiple Locations

In some cases, you may be able to secure a contract for an entire region that would house several franchises. If you are located in an urban area, there will most likely be several franchises from your particular company. If you can get involved early on in the life of the franchise, you can sometimes get a great deal and an exclusive contract to an entire region.