Franchise territorial exclusivity: what to check

A brand offering you an ‘exclusive territory’ does not mean that every sale made there belongs to you. Before joining a franchise network, you need to know which territory is protected, against whom and with what exceptions. Checking these details helps you establish whether the commercial protection you expect matches what the contract actually offers.

1. Distinguish contractual protection from legal rights

In Spain, territorial exclusivity does not arise automatically when you buy a franchise: it depends on what has been agreed. Nor should permission to open at a particular address be confused with a commitment by the franchisor not to open other outlets nearby.

Article 62 of Law 7/1996 on Retail Trade and Royal Decree 201/2010 regulate aspects of franchising. Article 3 of this Royal Decree requires written, truthful and non-misleading information to be provided at least twenty working days before you sign a franchise agreement or preliminary agreement, or make any payment to the franchisor.

The essential details that must be disclosed include exclusivity arrangements. So, if the commercial proposal includes a protected territory, ask for its scope to be explained in the pre-contractual information and defined in the contract. The duty to provide information is not a duty to grant exclusivity.

Territorial restrictions must also comply with competition law. Do not assume that an outright ban on selling outside a territory is valid: active sales, unsolicited customer enquiries and e-commerce are subject to legal rules that require specialist review.

2. Set out the territory in a verifiable contract annex

Expressions such as ‘the town centre’, ‘your municipality’ or ‘the catchment area’ can lead to disputes. Ask for a territorial annex that lets you identify the boundaries without relying on verbal explanations.

This annex should specify:

• The boundaries: streets, municipalities, postcodes or coordinates, accompanied by a map consistent with the written description.
• The protected activity: the products, services and business formats covered by exclusivity.
• The franchisor’s commitments: whether they cover both company-owned outlets and new franchises.
• The exceptions: shopping centres, stations, airports, temporary stands or other reserved locations.
• Future changes: what happens if the postcodes or administrative boundaries used to define the territory change.

Also ask about existing outlets and planned openings already committed to within or close to the territory’s boundaries. Request that any known exceptions be clearly identified, rather than hidden behind generic wording such as ‘previously granted rights’.

Check that the map and the clauses are consistent. If the map protects the whole municipality but a clause allows outlets to open at certain sites, you need to understand that distinction before assessing the financial value of exclusivity.

3. Clarify what happens with online sales and other channels

A territory may be protected against new shops while still receiving sales through the brand’s website, delivery apps or agreements with major customers. This is not necessarily a breach of contract: it depends on the scope agreed.

Raise specific scenarios rather than simply asking whether exclusivity applies:

• A customer in your territory buys through the central website: who issues the invoice and who provides the service?
• An order is collected from or returned to your outlet: what work must you do, and how are you compensated?
• Head office signs an agreement with a company in your territory: do you have a role in fulfilling it?
• Another outlet receives an unsolicited enquiry from a customer in your territory: which rules apply?

Distinguish between protection against new openings, the allocation of sales leads and payment for handling other outlets’ or channels’ transactions. These are separate issues and should be documented separately.

If orders or leads are allocated between outlets, ask for verifiable criteria and a procedure for correcting errors. Avoid basing your forecasts on digital sales unless it has been agreed that they will be allocated to your business.

4. Check when exclusivity can be reduced or lost

Some exclusivity arrangements depend on turnover targets, additional openings or coverage of the territory. Check how these requirements are measured, over what period and who supplies the data.

Negotiate clear and proportionate consequences. Losing protection in part of your territory is not the same as allowing a new shop to open next door to yours. Ask for written notice and a period to remedy any failure where appropriate; do not assume these apply automatically.

Also check whether the franchisor can change the boundaries unilaterally and whether exclusivity lasts for the full contract term. If you must open more outlets to retain it, include that investment in your initial assessment.

Practical conclusion: before signing, obtain a map, a list of exceptions and clear rules for each sales channel. Only then can you assess the protection you are buying.