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| | Is territorial exclusivity important? | It is probably less important for some networks than others but, in
general, yes, it is important for the franchisee. The reasons for this are
as follows: If there is no territorial exclusivity, then another franchisee can set up in
the same street as you, in the same shopping centre or in the same town. It is, therefore, advisable to protect a franchisee’s profitability by
agreeing not to set up another point of sale within a reasonable distance. The difficulty is in knowing what a “reasonable” distance is. Franchisors
must also be prevented from profiting from the increase in strength of their
network by, for example, setting up their own business in a new shopping centre
if the potential is there. Who, for example, would have thought in 1970 that 750 McDonalds would be
established in France, the country of good food? The exclusivity areas
established at the time would probably have been too large. This is why certain networks give priority to established franchisees to set
up a second shop but not exclusivity. | | Jean Samper, Consultant |
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