How Important Are Franchise Territories?
I want to buy a fast-food franchise. I’m concerned that after I reveal my desired location the company might disregard me and take the location. Are there any stipulations concerning territories? They say that they wouldn’t do that.
Assigning And Owning A Territory
Franchisors establish and quantify territories in the franchise agreement. Unless you have that agreement or a legal document somehow giving you protection in a territory, we doubt you could stop a franchisor from opening in that location.
However, here’s reality. Most franchisors are interested in building franchise territories as opposed to expanding company owned operations. It’s to their advantage to work with franchisees for many reasons. Here are the two most critical reasons. Franchisors are in (or should be in) the business of using OPM (other people’s money). And, expansion with company owned units fly in the face of that strategy. So, stealing your dream location is not likely.
New franchisors usually are successful entrepreneurs who have proven their concept through hard work over a long period of time. Their next step is growth through successful franchisees. So it follows that their new role is mentor and network developer, not a competitor looking for more company space.
Logical Franchise Territories Make For Logical Business
As said above, prior to signing the franchise agreement both you and the franchisor are free to search out and acquire a business location without much regard for one another. Once the franchise agreement has been signed and the territory is clearly defined, it’s yours.