Buying a franchise: checking territorial exclusivity

An ‘exclusive’ territory guarantees neither freedom from competition nor a minimum turnover. Before joining a franchise network in France, you need to understand exactly what the brand reserves for you, what it retains for itself and what it may allow others to do. Checking this will help you choose a location and arrange finance without overestimating the protection the agreement provides.

1. Distinguish a reserved territory from a guaranteed customer base

Territorial exclusivity is not an automatic right under a franchise agreement. Its scope depends on the franchisor’s written commitments. A sales promise that ‘the town is yours’ is too vague to base your investment decision on.

Start by identifying the type of protection offered:

• Exclusive rights over outlet locations: the brand undertakes not to open, or authorise, certain other outlets within the defined area.
• Exclusive operating rights: the agreement reserves the right to carry out an activity under the brand within a territory, with a scope that needs careful scrutiny.
• Priority rights: you may be approached before a new location is allocated, but this does not necessarily give you a right of veto.

These labels alone are not enough: only the wording of the clauses establishes the actual obligations. Check whether the protection covers the franchisor’s company-owned outlets, other franchisees, temporary outlets and specialist formats.

Then ask for a map to be attached to the agreement, with clearly identifiable boundaries based on streets, municipalities or postcodes. A boundary described simply as ‘the town centre’ can lead to disputes. Also ask how a shopping centre straddling the agreed boundary would be treated.

2. Cross-check the disclosure document against the draft agreement

In France, pre-contractual disclosure is governed in particular by Article L. 330-3 of the French Commercial Code, introduced by the legislation commonly known as the Doubin Law, and Article R. 330-1. These rules apply where a party makes a trade name, trade mark or brand available and requires an exclusive or near-exclusive commitment in carrying on the business.

Under these rules, the pre-contractual disclosure document, known as the DIP (document d’information précontractuelle), and the draft agreement must be supplied at least twenty days before the agreement is signed or any required advance payment is made, including a payment to reserve a territory. This period is not a general right to withdraw after signing.

The DIP must state, among other things, the scope of any exclusive rights. It must also outline general and local market conditions and prospects for development. This information is no substitute for your own assessment of the proposed location and does not guarantee profitability.

Always compare three things: the sales pitch, the DIP and the schedules to the agreement. If the salesperson promises an entire municipality but the agreement reserves several locations for the franchisor, seek written clarification before making any commitment. The European Code of Ethics for Franchising is a professional benchmark; it does not replace the law or a precisely worded territorial clause.

3. Examine online sales and exceptions

Competition under the same brand does not come solely from a neighbouring shop. Online orders, delivery platforms and contracts with major customers can affect the commercial value of your territory.

Ask practical questions and ensure that the answers which matter to your decision are included in the contractual documents:

• Who handles an order placed on the brand’s website by a customer living in your territory?
• Who receives the payment, bears the delivery costs and provides after-sales service?
• Are you entitled to payment for an order collected from your premises?
• Does the franchisor retain sales to businesses or national accounts?
• Can another outlet deliver within your territory?

Do not demand an outright ban on all sales from outside the territory without legal advice. Competition law, including EU Regulation 2022/720 on vertical agreements, governs territorial restrictions. In particular, it distinguishes active sales, which target customers, from passive sales made in response to unsolicited requests. The restrictions permitted depend on the distribution arrangements; online sales cannot all be treated as prohibited active selling.

Have the clause reviewed by a lawyer with relevant expertise rather than relying on the words ‘total exclusivity’ alone.

4. Assess the commercial value of the protection

A large territory is not necessarily a good one. Study access, customer traffic, employment centres, competitors and journey times. Speak to franchisees operating in comparable territories to understand how the arrangements work in practice and where their limits lie.

With your accountant, test a cautious financial scenario that takes account of the sales channels retained by the brand. Also check whether exclusivity depends on turnover targets, an obligation to open additional outlets or specific deadlines. Identify the circumstances in which the territory could be reduced and any opportunities to remedy a failure before a penalty is imposed.

Finally, compare the protection period with the term of the franchise agreement, the lease and the financing. Temporary exclusivity should not be valued as a lasting advantage.

Key takeaway: before signing, obtain a map forming part of the agreement, a list of exceptions and the rules for allocating online sales. Then base your financial projections on that actual protection, not on a promised customer base.