What Franchise Issue 21.1

N ot all franchise agreements grant franchisees an exclusive territory – in retail franchises, for example, that would be unusual. In this situation, franchisees may well compete in the same town for business, although they would hope their franchisor would not allow them to operate so close to each other that their potential for profitability is impacted. Without careful planning, this kind of close proximity can create tensions between competing franchisees and lead to disputes around poaching customers or encroaching on each other's trade. In the other scenario, an exclusive territory is granted to a franchisee. However, competition law doesn’t allow franchisors to prevent franchisees from responding to unsolicited enquiries from customers outside their territory. All a franchisor can do in this situation is prevent a franchisee from actively selling in another franchisee’s designated patch. For example, having a website that is accessible nationally or internationally doesn’t constitute active marketing. On the other hand running geo- targeted online ads in another franchisee's territory could be in breach of a franchisor's terms and conditions. Therefore, if enquiries come in direct from the website there's nothing to stop a franchisee from acting on these leads, regardless of whereabouts in the country they come from. Complexities can arise when the clause granting exclusivity is analysed, as it can either relate to customers or premises. In the latter, a franchisor simply confirms that it will not allow another franchise to open in the exclusive territory. It's important to understand that this clause doesn’t stop other franchisees from actively marketing in territories outside their own, provided they don't engage in what's considered to be targeted selling. John Pratt, partner, Hamilton Pratt How do franchisees co-exist without encroaching on each other’s trade? “Having awebsite that is accessible nationally or internationally doesn’t constitute activemarketing” Experts from across the industry tackle the topics concerning you most John Pratt, partner at Hamilton Pratt, explains how territorial rights work in franchise agreements – and why exclusivity isn’t always as clear-cut as it seems 45 WHAT-FRANCHISE.COM Ins ights