Answer to Question #209215 in Management for Zizah

Question

When evaluating a global franchise opportunity, prospective franchisees must consider important legal and commercial factors before signing on the dotted line. There are many issues that should be considered depending on the chosen franchise system or business model and sometimes the industry in which you wish to operate. Please use the checklist as a guide to answer this question.

1.   Exclusivity

Are you being granted the exclusive right to use the brand in the territory?

Is exclusivity against third parties or does it also include the franchisor?

 

Answer 1

Exclusive right acts for the privilege given to franchisee so that it can relieve stiff competition from the franchisor or other franchisee within the territory. More opportunities are granted to the franchisee for the recovery of the initial cost of investment. The degree of exclusivity will depend mainly on the territory size and the brand's importance. Therefore, it is vital for the franchisee and franchisor to discuss this matter before the signing of the franchise agreement.

           However, exclusivity may be granted depending on different clauses, such as targets' achievements in a specific territory. Unless parties specify otherwise either by limiting or keeping out exclusivity, a franchise is exclusive for all parties