I’m interested in a small fast-food restaurant franchise, but I’m nervous that after I send my proposal with location and area information, the company will disregard me and bring the restaurant to the area on their own. Are there any stipulations concerning franchise territories that say they cannot do this?
Assigning and owning franchise territories
First of all, we don’t think you could hold the company from moving into a new franchise territory if they chose to do so on their own whether you found a location first or the franchisor spotted it.
However, here’s reality. Most franchisors are primarily interested in building franchise territories and their franchised network as opposed to expanding company owned operations. This is especially true once the franchisor has its franchise legs and is in full franchising mode. It is to their advantage to work with franchisees for many reasons, but the two biggest are these: 1. Franchisors are in (or should be in) the business of using OPM (other people’s money) for expansion (this flies in the face of expanding with more and more company owned units); and 2. Franchisees provide huge operational savings, namely, the franchisee provides staffing and management. Make sense?
On another level, consider the following mindset. New franchisors usually are successful entrepreneurs who have proven their concept through hard work over a long period of time. They are (or at least should be) interested in assuming another role in life, that of mentor and network developer as opposed to owner/operator of the concept they proved successful. The best of franchisors understand that they moved into the business of franchising as developer and teacher, and shifted away from the operational duties of the businesses they now franchise.
Good franchise territories make for good business
Now… as stated above, prior to signing the franchise agreement both you and the franchisor are free to go about your business in that location without much regard for one another. Once the franchise agreement has been signed and the territory is clearly mapped and defined, you own an area, but you still must (in accordance with most franchise agreements) obtain the franchisor’s acceptance of the particular location or spot within the territory where you would like to place the franchise operation.