Franchise Territory: Understanding Your Rights as an Owner

Territory is a very important word when it comes to business. It’s how you lay claim to the community you are working in, where your business is located, and where your customers are coming from.  Franchise territory is equally important as it is the geographical area you receive as a franchisee where you are authorized to establish and operate your business.

Franchise territory is determined by a number of ways including zip codes, close proximity, county, or demographics. The exact size of a franchise territory is clearly spelled out in your franchise agreement and varies from brand to brand.  As a franchisee you get one chance at an effective location, so choose wisely.

What you are looking for is an area that has room for growth. For brick-and-mortar services or retail locations, you want a well-traveled area with good economic conditions and high population density so you can cast a wide net of obtaining customers who will keep you in business.

Franchise territory is synonymous with the terms, “operating territory or area,” often it may be referred to as “designated area or area of responsibility.” Your franchisor may use different terminology, so it’s important to be familiar with all these expressions which mean the same thing.

If you are buying a franchise, your territory is crucial information and detailed in your franchise agreement. Know this and be satisfied with it before you sign your contract. Specifically, see your Franchise Disclosure Document or FDD item 12. This is where the franchisor discloses its territory policies.

Exclusive Territorial Rights

Some franchisors grant “exclusive territories” to franchisees. This gives franchisees an opportunity to control a specific area, and to assure them that no other franchises will be sold in their territory. Exclusive territory means your business is the only source of the brand’s goods/services in that defined area. It provides a level of protection for the franchise owner. It means another franchisee from your brand will not be able to open a location within an agreed-upon scope of your brick-and-mortar location. Sometimes exclusivity comes with a contingency like you may be granted protection if your franchise location has high sales and is performing well.

Not all franchisors will offer exclusivity or any means of protection to franchisees. This varies by brand. It means that a franchiser could open another franchise or corporate location near yours. However, most franchisors understand the need for healthy competition in the marketplace, and saturating the market with the brand is extreme. For many franchises, such as AAMCO, there is a great strategy involved with research and analytics performed to ensure that not too many or too few locations will be placed in a certain locale making it detrimental to the growth of the franchise.

Often, opening locations close to one another can be a good deliberate move. It creates great brand awareness and puts the brand top of mind for potential customers as they drive by. The biggest take-away is that ultimately you as the franchisee need to be comfortable with the policy of the franchise you are potentially investing in.

If you are curious as to what serves you best as a potential franchisee, ask questions, and do research. Small Business Development Centers can answer questions and help with market research. Talk with your franchisor and franchisees. Ask them questions like how did you obtain your territory and is it working for you? Would you buy another territory, and do you have advice?

Franchising with AAMCO

At AAMCO we encourage you to ask us questions along with our network of franchisees. As an automotive franchise, we are dedicated to your success as a franchisee. AAMCO is a trusted brand name positioned for growth as the demand for complex auto repair increases.

As a franchisee, you are given all the tools to serve your customers in your territory including the iconic AAMCO name and hard-earned reputation for reliable, expert automotive repair services. We assist you with site selection, helping you choose the best location to build your business. Although we do not provide protected or exclusive territories, we do limit the number of AAMCO Centers to a maximum of one center for each 100,000 motor vehicle registrations in the Statistical Area as described in item 12 of our FDD.

As an AAMCO franchise owner, you have the opportunity for growth and expansion. Existing franchise owners are reinvesting in AAMCO in record numbers. Many are opening their second, third, or fourth centers.

If you want to learn more about our franchise opportunities request information to download our Franchise Information Report.

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