Buying a NZ Franchise: Check Your Territory Rights

A franchise territory can look reassuring on a map without protecting the customers you expect to serve. Before buying into New Zealand’s franchising community, establish precisely where you may operate, who else may sell there and whether those arrangements can change. The important question is not simply whether you receive a territory, but what commercial rights come with it.

1. Establish what the territory actually grants

Start with the franchise agreement and any territory schedule or map. Ask your franchise lawyer to distinguish between a defined operating area and an exclusive right. A boundary may restrict where you can work without stopping the franchisor or other franchisees from competing inside it.

Check whether the agreement gives you:

• Exclusive rights: protection against specified competing activities within the area, subject to any exceptions.
• Non-exclusive rights: permission to operate locally without protection against other authorised operators.
• A site-based licence: permission to trade from particular premises, rather than rights over the surrounding customer catchment.

Do not assume that a label settles the issue. An “exclusive territory” may protect only one service, outlet format or sales channel.

The boundary should also be objectively identifiable. If it relies on postcodes, suburbs or a radius, ask how edge cases are resolved and which document prevails if the written description and map differ. For a mobile service franchise, establish whether the relevant location is the customer’s address, the job site or the place where the booking originates.

When buying an existing franchise, check the territory offered to you rather than assuming the seller’s arrangements will continue unchanged.

2. Identify sales that sit outside the protection

A geographical boundary does not necessarily capture every sale made to people living within it. Read the agreement for rights reserved to the franchisor, related businesses and other franchisees.

Ask specifically about online orders, delivery platforms, national accounts, corporate customers, temporary outlets and alternative trading formats. These are questions to investigate, not rights that every franchise automatically reserves.

Work through realistic examples with the franchisor:

• A customer in your territory orders through the brand’s central website. Who fulfils the order and receives payment?
• A national customer has several local branches. Can head office service them directly?
• A neighbouring franchisee receives an enquiry from your area. Must it be referred to you?
• A customer visits another outlet but requests delivery into your territory. Is that permitted?

Separate the right to advertise from the right to accept work. An agreement might restrict targeted advertising outside your area while allowing unsolicited customers to choose another operator.

Also ask who controls lead allocation and whether the allocation rules can change. Request an explanation of any referral payments, fulfilment charges or revenue-sharing arrangements. A territory is difficult to value if you cannot tell which local transactions will generate income for your business.

3. Test whether the protection can change

Read beyond the initial territory grant. Look for provisions allowing boundaries to be redrawn, additional outlets to open or exclusivity to be withdrawn.

Ask what triggers a change. It might depend on an agreed review, local population growth or failure to meet a contractual requirement. Establish whether the trigger is measurable, who makes the decision and what notice or opportunity to respond you receive.

For proposed neighbouring outlets, request the information the franchisor is willing to provide about planned locations and formats. Distinguish confirmed plans from possibilities: an absence of announced openings is not a contractual promise that none will occur.

Then consider the practical effect. Would a smaller service area increase travel time relative to billable work? Could a nearby outlet compete for the same walk-in customers? Would losing central leads leave you responsible for generating more business locally?

Ask your accountant to assess whether the purchase remains affordable under the competition and allocation arrangements the agreement actually permits. Do not pay for protection that exists only in your expectations.

4. Understand the New Zealand legal position

New Zealand has no franchise-specific legislation or compulsory franchise registration regime. There is no automatic statutory entitlement to an exclusive franchise territory. Your protection depends principally on the agreement, alongside applicable general law.

The Fair Trading Act 1986 prohibits misleading or deceptive conduct and unsubstantiated representations in trade. Statements about exclusivity, local competition or customer access therefore matter. The Contract and Commercial Law Act 2017 may also provide remedies for contractual misrepresentation or breach, depending on the circumstances. Neither statute turns an unclear territory into guaranteed market protection.

Membership of the Franchise Association of New Zealand (FANZ) is voluntary, but members must comply with its Code of Practice and Ethics. Its disclosure requirements do not replace a careful examination of territory clauses. Competition restrictions may also require advice under the Commerce Act 1986; do not assume every proposed customer or territorial restriction is lawful.

Practical takeaway: Before committing, obtain a clear boundary, identify every material exception and establish how the territory can change. Buy on the strength of enforceable rights, not the appearance of a protected patch on a map.