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Franchise Agreements, Protected Territories, and Franchise Law

Protected TerritoriesAs part of your franchise agreement, you may be granted an exclusive, protected territory. The purpose of “protected territories” is to protect you, the franchisee. However, it is important to note that protected territories are not all the same. Every franchise agreement is different. So it is important to analyze the agreement before signing to ensure you receive the level of protection you desire.

Franchise Agreements, Protected Territories, and Franchise Law

  1. While franchise agreements often prevent another franchisee from placing or licensing other outlets within your protected territory, these agreements  typically do not prevent other franchisees from selling goods or services through alternative channels of distribution, like the Internet.
  2. Avoid protected territories defined by zip codes. If, for whatever reason, the zip code changes, your territory could shrink without warning.
  3. Oftentimes protected territories are measured in miles. For example, a franchise agreement could prevent another franchisee from putting a franchise within five miles of your franchise. But is that a five-mile radius or five driving miles? What may seem clearcut, e.g. “five miles,” in a legal contract may in fact be ambiguously defined . Make sure there is no ambiguous language in your agreement, especially in regard to definitions and responsibilites of each party. 
  4. Make sure your franchise agreement really provides you with a protected territory. Some agreements state that a franchisee is required to operate within a five-mile radius. This does not keep other franchisees from infringing on your territory.
  5. Some franchise agreements contain provisions that can remove your protected territory.

Before signing a franchise agreement, It is prudent for the prospective franchisee to obtain the assistance of an experienced franchise law attorney.  Franchise agreements are written by the franchisor’s legal team. It is important for a franchisee to have counsel looking out fo you. Franchisee counsel will be able to point out any potential problems or ambiguities in the agreement. Additionally, franchisee counsel will understand which provisions are typically “engraved in stone” and which are negotiable and may therefore be able to negotiate a contract on terms that are more favorable to you, the franchisee. 

Protected TerritoriesIf you have questions regarding Franchise Agreements, Protected Territories, and Franchise Law, please contact Offit Kurman franchise law attorney Brian Loffredo at 301.575.0345 or bloffredo@offitkurman.com. Mr. Loffredo is a commercial litigator with more than thirteen years of experience representing clients in the franchise industry. Prior to joining Offit Kurman, Mr. Loffredo worked at a franchise litigation boutique specializing in the representation of franchisees.

Offit Kurman Attorneys at Law: Franchise Law Practice Group

Understanding franchise law can be a daunting task. At Offit Kurman Attorneys At Law, the attorneys in our Franchise Law Practice Group are here to guide you in the right direction with the legal counsel you need, as well as provide you with the tools necessary to grow and protect your business. Our attorneys have experience resolving all sorts of franchise-related disputes, including those involving encroachment and impact studies, breach of contract and unfair termination claims and violations of state and federal franchise relationship laws and disclosure laws.

If you would like to learn more about Offit Kurman’s Franchise Law Group, please fill out our contact form to access the  sound legal guidance that our experienced  attorneys offer. You can also connect with Offit Kurman via FacebookTwitterGoogle+YouTube, and LinkedIn. Sources: Five Questions To Ask Regarding Your Protected Territory

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Five Questions To Ask Regarding Your Protected Territory