As you’ve been searching for the right franchise opportunity for you, you may have come across a selling point from some franchisors: franchise territories. While you could probably make an educated guess as to what this term means, it’s always a good idea to avoid making assumptions and to verify your information. Let’s take a look at these territories and how they can affect your franchising opportunities.
The Textbook Definition
A franchise territory is a specific geographical area where a franchisor grants a franchisee exclusive rights to operate their business within that area. This territory is usually defined by a set of boundaries, such as zip codes, cities, or counties, and is outlined in the franchise agreement.
The purpose of these territories is to ensure that franchisees have a protected market in which to operate their business, without competition from other franchisees of the same brand. This allows franchisees to build a customer base and establish a strong presence in the local community, while also providing a level of control and consistency for the franchisor in terms of brand image and standards.
Franchise territories can vary in size and scope, depending on the franchisor’s business model and market demand. Some franchisors may offer exclusive territories that cover entire states or regions, while others may allow multiple franchisees to operate in the same city or town, but with different territories or customer segments. Ultimately, the franchise territory is an essential element of the franchising model that helps ensure the success and growth of both the franchisee and the franchisor.
Open, Protected, and Exclusive
Franchise territories can be broken down further into three different categories: open, protected, and exclusive. The key difference between these territories lies in the level of exclusivity and competition that franchisees face within their respective markets.
Open territories entail no restrictions on the number of franchisees operating within the same market, potentially leading to increased competition among franchisees.
Protected territories, on the other hand, provide franchisees with a certain level of exclusivity within a specific market. Franchisees in protected territories have the right to operate without competition from other franchisees of the same brand within their designated area. However, franchisors retain the right to sell their products through other vendors or open additional locations that belong to the company. For example, a pizza brand’s franchisor may grant franchisees protected territory, while still retaining the right to allow the concession stands at local sports stadiums or other entertainment venues to serve their pizza, or open locations in shopping malls and food courts in the area.
Finally, exclusive territories offer the highest level of exclusivity, with franchisees having the sole right to operate within a specific market. In an exclusive territory, the franchisor agrees not to open any additional locations or grant any other franchise agreements within that market, providing the franchisee with a more significant level of protection and control.
Overall, the type of territory offered by a franchisor depends on various factors, such as market demand, the franchisor’s business model, and the level of protection and control that franchisees require to succeed in their respective markets.
Be sure Before You Sign
When looking for the right franchise, it’s important to look at how the franchisor manages territories and what is and isn’t allowed under its franchise agreement. You would be wise to consult with a franchising attorney or business consultant that specializes in franchising while reviewing a franchise agreement to make sure you understand and are comfortable with the requirements and rules set in it. Different franchisors will handle territories in their own way. For example, we at GrassRoots Turf offer exclusive territories to our franchisees that are tailored to fit you, the franchisee, and the business you’re going to run. Market size and demand will also factor into the territory you’re offered.
Stake Your Business Territory with GrassRoots Turf
We’re eager to welcome you to the GrassRoots Turf team. We’re a lawn care franchise that provides our clients with a variety of lawn care services, including aeration, tree and shrub care, and mosquito control. We offer franchisees like you a steady revenue stream through our unique monthly billing model, as well as exclusive territories in available markets.
Contact us today to find out more about your franchising opportunity with us at GrassRoots Turf.