Franchise Territory: Understanding Your Rights
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?
AAMCO Franchise Opportunity
AAMCO is a well-known automotive franchise specializing in car repair, especially transmissions. People trust them for their expertise in complex car repairs. AAMCO’s successful business model, along with training and support, gives franchisees a profitable and lasting chance for success.
The widespread national presence of AAMCO franchises underscores the brand’s scale and universal appeal. AAMCO is the top leader in transmission repair franchises. They prioritize customer trust, strategic marketing, and strong support for franchisees.
To learn more about starting a successful transmission repair franchise, request a free franchise information report.
