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  • 13. Dezember 2020

    Non Exclusive Franchise Agreement

    To limit this risk, the franchise agreement will often contain the franchisee`s right to remove exclusivity or change the boundaries of the territory if the franchisee fails to meet the required performance targets or violates the franchise agreement. This protects the franchisor from a low-performing franchisee, who may be sitting on an untapped gold mine but refuses to develop it. Overall, franchise agreements and simple licenses have a lot in common. As a general rule, the more control the donor has over the operation and operation of the taker, the closer the agreement is generally to a franchise agreement. Conversely, the less control the donor has, the more likely it is that the agreement is a simple license. Each franchise agreement should define a geographic area in which the franchisee can operate freely, even if the area is limited to a single point of sale. Within the territory, the franchisee is free to create outlets and advertise on behalf of these outlets. The granting of the territory may be exclusive or non-exclusive. In many cases, the granting of deductibles is exclusively within a specific area, according to the American Bar Association. If the rights granted are not exclusive, the franchisee must share the territory with other franchisees. Since a court cannot rewrite a contract, it cannot impose on a franchisor the obligation to grant exclusive territory to a franchisee (unless the court finds a clause in the contract allowing it to do so). Each situation must therefore be assessed against a number of factors, including the sector in which the franchise network operates and the amount of the franchisee`s investment.

    In recent years, franchise agreements have contained less and less exclusive territorial clauses in favour of the franchisee. For young networks, choosing the size and location of each territory can be a particular challenge. If the surfaces are too small, there may not be enough sales potential for franchisees to succeed. Conversely, if the surfaces are too large, franchisees may not be able to fully exploit the territory, so that potential sales remain unused. However, if the franchise agreement does not provide exclusivity in favour of the franchisee, does this mean that the franchisor has the right to open a new outlet anywhere, including in the immediate vicinity of a franchisee`s store? There may be a particular challenge in terms of promotion and marketing activities.


    Verfasst von Stefan Oberhauser

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