How is a franchisee’s trading territory protected?

Louise Harris writes:

Not all franchises operate on a trading territory basis, but those that do will need to ensure the franchisee has ‘protected rights’ to trade in that area.

First, the territory must be clearly defined. It may be geographically identified by postcodes, locations or addresses; industry types; designated mileage from a specific point; specific buildings; or similar options.

If the franchisor is granting exclusive rights to that territory, ie another franchisee from the brand is not permitted to trade in that area, they must take steps to ensure the territory is protected from intrusion by another franchisee.

It’s rare there would be an intentional breach, unless territories have in some way been poorly defined and/or badly managed.

These scenarios must be catered for in the franchise agreement and, if necessary, expanded on in the operations manual. Franchisees may be permitted to give permission for inter-territory work, but it must be explicit under which conditions this would take place.

A good franchisor will be able to track where business is taking place and prevent a franchisee trading in another franchisee’s territory using initial conversations, then ‘cease and desist’ notices and finally legal action.

Franchisees should note, however, that a franchisor may reserve the right to remove part or all of a territory in the event the franchisee cannot prove they are delivering full effort to exploit a protected territory.

Louise Harris is an experienced franchisor, having built and sold an award winning franchise. She is now franchise manager for easyStorage.