Buying a franchise: what an exclusive territory covers

The promise that “you will have exclusivity in the area” sounds reassuring when you are considering buying a franchise in Greece. On its own, though, it does not explain who can sell, through which channels or to which customers. Within a franchise network, the real value of territorial protection lies in the specific terms of the agreement. Here is how to turn a general assurance into a clear, workable right.

1. Start with the map, not the label

“Exclusive territory” does not mean the same thing in every agreement. It may simply mean that the franchisor will not grant another franchisee the right to open a second outlet there. Alternatively, it may also prevent the franchisor from operating its own outlet. These two versions offer different levels of protection.

Ask for an appendix containing a map and a precise description of the boundaries. References to the “town centre”, “wider area” or “neighbouring municipalities” leave room for disagreement. If the territory is defined by a radius, clarify the starting point and whether the distance is measured in a straight line or along the road network.

Record separately:

• Whether new company-owned outlets and outlets operated by other franchisees are prohibited.
• Whether smaller outlets, seasonal outlets and concessions within other businesses are covered.
• Whether shopping centres, airports or specific major customers are excluded.
• Whether the protection covers all categories of products and services included in the agreement.

Exclusivity does not guarantee customers or revenue. It does not prevent competing brands from opening next door, nor does it ensure that local residents will shop at your outlet.

2. Distinguish physical outlets from online sales

Protection against a second outlet does not automatically mean protection against sales through the franchisor’s central online shop. Similarly, a delivery area may differ from the territory in which another franchisee is prohibited from opening an outlet.

Ask for the order process to be set out: who receives the order, who issues the receipt or invoice, who fulfils it and who bears the cost of returns, platform fees or discounts. Also clarify whether you will be paid for handling collections or returns for purchases made through the central sales channel.

Consider this hypothetical example: a customer in your territory orders through the central website, but another outlet fulfils the order. The agreement should make it clear whether this is permitted, how the revenue is allocated and who handles after-sales service.

Do not settle for a description of current practice. Ask who can change the order allocation rules and whether this requires advance notice, objective criteria or agreement between the parties.

3. Understand the legal limits of territorial protection

Greece has no specific law providing a comprehensive framework for franchise agreements, nor a dedicated mandatory pre-contractual disclosure regime comparable to those in some other countries. The general provisions of the Greek Civil Code apply, among others: Articles 197–198 on pre-contractual conduct and liability, Article 288 on performance in good faith, and Article 281 prohibiting the abusive exercise of rights.

The European Code of Ethics for Franchising provides for substantive written pre-contractual disclosure within a reasonable period. It is a self-regulatory instrument, not a Greek law of general application.

Greek Law 3959/2011 on competition and, where trade between EU Member States is affected, Article 101 of the Treaty on the Functioning of the European Union (TFEU) are particularly relevant to territorial restrictions. Regulation (EU) 2022/720 sets out the conditions under which certain vertical agreements qualify for an exemption; it does not make every exclusivity clause lawful.

The distinction between actively targeting customers in another territory and passive sales, such as responding to an unsolicited order, is crucial. Restrictions on passive sales are generally not permitted, subject to specific exceptions. A general online presence does not automatically amount to active targeting. Seek specialist legal advice: complete geographical isolation is not a legally safe contractual solution.

4. Check when exclusivity can change or be lost

Some agreements make territorial protection conditional on sales targets, opening an additional outlet or meeting operating standards. What matters is not just the target itself, but how it is measured and what happens if you fall short.

Ask for a clearly defined assessment period, a specification of which sales count and a written warning procedure. Check whether you are given time to remedy any shortfall before your rights are restricted. Clarify how supply problems or changes to online order allocation beyond your control will be treated.

Pay particular attention to clauses allowing the territory to be redrawn unilaterally. A general reference to “network development needs” does not help you assess the protection you are buying. Negotiate specific criteria, a notification procedure and the consequences of any material change.

5. Test the agreement against real-world scenarios

Before making your final choice, ask for a written response agreed by both parties to three scenarios: a new outlet close to the boundary, an online order from a resident of your territory, and a delivery made by a neighbouring franchisee. The answers must be consistent with the agreement and its appendices, not merely with a sales presentation.

Also agree where complaints should be submitted, what evidence will be considered and how disputes will be addressed. Your solicitor can review the potential claims available if the agreement is breached, but do not assume that you will automatically be entitled to compensation.

Practical takeaway: buy clearly defined rights, not the word “exclusivity”. A map, rules for each sales channel and a predictable process for changes form the basis of a meaningful territorial agreement.