Considerations In The Continuing Debate Concerning Whether Or Not To Grant Exclusive Territories

The author’s recent attendance at the International Franchise Association Annual Legal Symposium in Washington, May 2006, provided an opportunity to compare approaches and solutions relevant to one of the fundamental tensions in the franchise relationship, namely, should the rights to commercialise granted to a franchisee involve exclusivity within a defined territorial area or should, in the interests of flexibility in the franchise system moving forward, those rights be granted on a non-exclusive basis¹.

To the franchisor, system expansion is a primary objective. Full system penetration gives enhanced brand recognition and acceptance, better positioning against competitors, greater royalty contributions and enhanced viability for advertising funds. These benefits flow to the franchisor and all of its franchisees.