Buying a franchise: checking territorial exclusivity

The promise that “the territory will be yours” can be a deciding factor when choosing a franchise. But it does not, on its own, explain who may open nearby, which customers you can approach or which activities are excluded. In franchising, territorial protection needs to be defined clearly in the contract. Before committing any money, check not just the map but exactly what the franchisor promises within those boundaries.

1. Distinguish the location from the exclusive territory

Approval of a trading address is not the same as a grant of exclusivity. A contract may allow you to operate from a particular property without preventing the network from opening a second outlet a short distance away.

Likewise, a “priority right” does not mean the territory is protected against new outlets. It may simply give you the first opportunity to take on an additional outlet, subject to conditions and within a specified period. If you do not take up that opportunity, the rights may be granted to someone else.

Ask for each of the following to be clarified separately:

• Your outlet’s approved location.
• The geographical area covered by any protection.
• The franchisor’s commitment not to open its own outlet.
• Its commitment not to grant equivalent rights to another franchisee.
• Any different treatment of affiliated companies or other brands within the same group.

Exclusivity must set out specific commitments, not simply appear as a label. Do not assume it automatically covers every way in which the network might operate in the area.

2. Make boundaries and exceptions verifiable

A reference to a “wider area” leaves room for disagreement. Ask for a schedule containing a map and a clear description, making sure the two match. Streets, administrative boundaries or other fixed reference points can be used, provided there are no gaps or overlaps.

If protection is defined by a radius, clarify the point from which it is measured and the measurement method. Straight-line distance and distance by road will not necessarily produce the same result. Also specify what happens if the outlet’s address or an administrative boundary changes.

Next, examine the exceptions. The contract may, for example, permit outlets in shopping centres, temporary premises or services supplied to large corporate clients. There is no reason to assume that these exceptions apply everywhere: you need to read your own agreement.

Also ask for a written record of existing outlets and details of any locations already agreed that affect the territory. An exception for “pre-existing rights” is difficult to assess if you do not know what those rights are.

3. Check the Greek and EU legal framework

Greece has no dedicated law providing a comprehensive framework for franchising, nor a specific mandatory pre-contractual disclosure document for franchise agreements. This does not mean there are no duties to provide information, or that any restriction can be imposed freely.

The general rules of the Greek Civil Code apply. Articles 197 and 198 concern good faith in negotiations and liability for loss culpably caused at that stage. Articles 200 and 288 are relevant, among others, to the interpretation and performance of the contract, while Article 281 prohibits the abusive exercise of a right. These provisions do not automatically create an exclusive territory.

Territorial restrictions are also assessed under Law 3959/2011 on the protection of free competition and, where applicable, Article 101 of the Treaty on the Functioning of the European Union. Regulation (EU) 2022/720, which provides a block exemption for certain vertical agreements subject to specific conditions, is an important part of this framework.

The distinction between active sales, such as targeted approaches to customers in another territory, and passive sales, such as responding to an unsolicited customer enquiry, is crucial. Territorial exclusivity does not permit a blanket ban on all sales by another franchisee to residents of your territory. Seek a specialist legal review rather than an unenforceable promise of complete insulation from competition.

4. Establish how protection will work in practice

Check how long exclusivity lasts: does it cover the full contract term, or does it expire earlier? If it depends on conditions being met, ask for an objective way to assess compliance and a clear notification procedure before any loss of protection.

Also agree how you will be informed of any planned new outlet near the boundaries, and what procedure will apply if you believe your protection has been breached. Written notice, response deadlines and contractual consequences need to be worked through with legal advice, not improvised after a dispute arises.

Finally, ask your accountant to assess the impact on the business’s viability if an outlet covered by a permitted exception opens nearby. Contractual protection is no guarantee of customers or profitability.

Practical takeaway: before signing, secure a clear map, a complete list of exceptions and legally reviewed commitments from the franchisor. You are buying specific rights, not a vague promise that you will face no competition.