2018-01-10 00:00:00 Franchising English Protect your mobile or service franchise by learning about the laws of exclusive territories in Canada. https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/01/Man-in-vehicle-researches-exclusive-territory-for-mobile-service-franchise.jpg What You Should Know About Exclusive Territory for Mobile and Service Franchises

What You Should Know About Exclusive Territory for Mobile and Service Franchises

2 min read

A mobile or service franchise is a company that travels to your home or business and provides a service, such as a mobile groomer or a car detailing company. Mobile and service franchise companies tend to operate in an exclusive territory, meaning they don’t sell similar products and services and don’t let other franchisees sell products and services under the company name in a defined area. Although these companies may have competition from others that sell similar products, a defined territory helps reduce their competition and boost their chance of success.

Benefits of Mobile Franchises

When choosing between a franchise or startup, mobile and service franchises are popular for many reasons:

  • They usually require a low initial investment.
  • Generally, they require little equipment or stock.
  • They can be operated from a home office to reduce overhead costs.
  • They offer greater flexibility.
  • Like all franchises, company support and training are provided.
  • The number of vehicles can be adjusted according to customer demand.

Defining Exclusive Territories

When you purchase a mobile or service franchise, a franchisor must provide you a disclosure statement that outlines the exclusive territory of the business. Exclusive territories prevent an area from becoming oversaturated with a specific brand so the company franchises aren’t in direct competition with one another.

Exclusive territories can be defined by postal codes, cities, towns, or even provinces. When deciding on a territory, the franchise company takes into account the closest existing franchise and the population of the area. Statistics Canada also provides demographic studies on income, spending, and rural trends to help companies decide the best place to open a new franchise. Some franchise agreements let the franchisee negotiate the exclusive territory to allow for expansion, while most protect the franchisor and allow for modifications to the franchise agreement when market conditions change.

Understanding Rights

Some territories are defined by population numbers. In this case, if the population of an area increases, the franchisor has the right to add a competing franchise close to an exclusive territory. Before signing a contract, understand what the franchisor plans to do to protect your customer base number. One option is for the franchisor to offer you first rights to take over the new territory before it’s offered to someone else.

Attracting Business Outside the Territory

Often a business may attract customers from outside the defined territory. Solutions to this issue include sharing the profits between both franchise territories or letting businesses receive customers within a certain mile radius of the given territory. The franchise agreement should provide clear-cut guidelines on how to deal with customers within and just outside the territory, including customers who move to another location but want to continue business with their existing provider.

Mobile and service-based franchises with exclusive territories minimize risk for a new business owner by reducing competition. When negotiating a franchise agreement, make sure you understand the potential changes in territories to protect your rights as a business owner.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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