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Territory Franchise Agreement

Territory Franchise Agreement

Finally, development agents and franchisees may provide technical assistance and training to franchisees, although development agents are not allowed to use brands or operate franchised units. Franchisees often misunderstve the justification that applies to the size of a territory and therefore insist on an area that is too large, which may be a disadvantage rather than an advantage for them. The size of an exclusive area does not determine the final success of the unit; however, it should be large enough for the franchisee to obtain the maximum power of its unit, but not to the point of preventing the franchisor from obtaining optimal market share. The franchisor is naturally reluctant to grant exclusive territory that could hinder its growth. Under Mexican law, franchises are governed by industrial property law and it is presumed that there is a franchise agreement if: many franchise agreements, including those in exclusive territories, give the franchisor the right to change the territory or create a new franchise in the territory in the event of circumstances that allow the territory to maintain another franchised operation. Such circumstances may include a change in the demographics of the franchise territory or an evolution of the technology used by the franchise system, which makes it the market leader and in turn results in a much greater demand for the product or service offered under the franchise system. It is not uncommon for the franchisee to be granted a right that obliges the franchisor to offer the franchisee the first right to refuse the offer to purchase the new franchise that begins in the territory. In this way, the franchisee would have the opportunity to expand its business and keep the territory exclusively for itself. In successful franchise systems, franchisees often tend to exercise such rights when expansion opportunities are granted and where franchisees take the opportunity to continue to invest in a system, this can often be seen as a strong sign of a successful and well-managed franchise.

The franchisee`s exclusive rights may be limited by the parties, for example. B the franchisor may reserve the right to operate units or businesses owned by the company under the franchised brand or exclusivity may be conditional on compliance with certain other obligations by the franchisee (for example. B compliance with the development plan). The inclusion of specific provisions in the exclusivity of the applicable agreement is another relevant topic in these agreements. Exclusive rights to a territory are generally granted to franchisees and development agents. In the meantime, under-franchiseds generally only have a protection radius when other franchisees may not operate franchised units.

2021-04-13T05:28:02+00:00