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Franchise solicitor Manzoor Ishani explains how to
It is not uncommon, especially in franchises where the franchisee travels to the customer, for the franchisor to grant exclusive rights over an area to their franchisees.
But what happens if a
Many such franchisees can fully justify their actions (or rather the lack of them) to themselves. After all, it is their business and how much or how fast their business grows, is a matter for them only, right?
The franchisor, on the other hand, is not likely to stand by and watch prospective customers going to the competition. One solution that usually springs to mind is for the franchisor to put a company-owned unit in the franchisee’s territory to soak up the business the franchisee is letting go and, in so doing, is also likely to take customers from the existing
In granting exclusive rights, the franchisor agrees that it will not grant a franchise for that business to anybody else and also that the franchisor will not itself operate that business within the franchisee’s area. From the franchisee’s point of view, the advantages of being granted exclusivity are obvious. There can be real disadvantages in granting exclusive territorial rights from the franchisor’s point of view because, in doing so, a franchisor effectively gives up all rights to that territory.
In the case of fixed location franchises (
As a particular franchisor becomes more mature so the pressure grows on to find
Nowadays it is tempting for them to take the location for themselves and to operate the business, which could, if they are not careful, be to the detriment of the
Franchisors who are conscious of their public image go some way towards appeasing their franchisees by offering some sort of a deal or by buying the franchisee’s business if it is likely to be adversely affected. They will not necessarily pay top dollar for the business and some franchisees in this situation, who have little choice but to accept the offer, feel betrayed and robbed of their business.
Franchisors who are conscious of their public image go some way towards appeasing their franchisees by offering some sort of a deal or by buying the franchisee’s business if it is likely to be adversely affected. They will not necessarily pay top dollar for the business and some franchisees in this situation, who have little choice but to accept the offer, feel betrayed and robbed of their business.
1. the franchisor has deeper pockets than the
2. even if the
3. the franchisor can make life very difficult for the
The moral of the story is that franchisees must make sure they have adequate protection against encroachment before they buy the franchise otherwise they will only have the goodwill and good faith of the franchisor