Territorial exclusivity in franchising: what to check

An ‘exclusive territory’ may sound like enough to protect your investment, but its value depends on how it is defined in the contract. It does not always prevent the brand from selling online, serving major accounts or opening other types of outlet nearby. Before buying a franchise in Spain, check which activities are reserved for you, who is bound by the restrictions and how long the protection lasts.

1. Distinguish a sales promise from a contractual right

Territorial exclusivity is not an automatic right of the franchisee. It must be agreed and described precisely. Nor does it necessarily mean exclusive access to customers: you may be protected against new outlets opening without being entitled to all sales made within your territory.

In Spain, Article 62 of Law 7/1996 on Retail Trade and Royal Decree 201/2010 regulate specific aspects of franchising. The latter requires pre-contractual information to include the essential elements of the agreement, including any exclusivity arrangements.

This information must be provided in writing at least 20 working days before you sign any franchise contract or preliminary agreement, or make any payment to the franchisor. Use that time to compare the territorial offer with the draft contract, not just the sales presentation.

Royal Decree-Law 20/2018 abolished the national requirement to notify the Register of Franchisors and repealed the rules governing that register. A purported registration number therefore does not prove that your territory is protected.

If the salesperson promises that ‘no one else will be able to operate here’, ask them to spell this out in a contract clause and an annex. A verbal explanation is no substitute for clearly defined contractual boundaries.

2. Turn the territory into a verifiable boundary

Avoid terms such as ‘catchment area’, ‘central area’ or ‘the vicinity of the premises’ unless they are objectively defined. You should be able to check the protection on a map without relying on head office’s interpretation.

Ask for a dated annex identifying:

• The boundaries: streets, municipalities, postcodes or coordinates, with clear rules defining their limits.
• The protected activities: the products, services and business formats covered.
• The parties bound by the restrictions: the franchisor and, where applicable, its group companies or operators it authorises.
• Existing exceptions: outlets already open, locations already committed to and reserved customers.
• The duration: when protection begins and when it ends.

A radius around the premises also needs a measurement method: straight-line distance and road distance do not produce the same result. If postcodes are used, the agreement should address what happens if they change.

Also ask whether head office can set up temporary outlets, concessions within larger stores, mobile units or delivery hubs. Do not assume that the word ‘outlet’ covers all these formats.

Finally, compare the map with actual demand. A large territory may have few potential customers, while a small one may depend too heavily on a single shopping centre or employer.

3. Clarify online sales and shared customers

The main ambiguity often arises when the buyer is in your territory but the order comes through another channel. The contract should explain how the brand’s website, apps, delivery platforms and centralised sales operations are managed.

Put forward specific scenarios:

• A resident buys through the website and requests home delivery: who issues the invoice and who provides the service?
• Head office attracts a customer through national advertising: how is the lead allocated?
• A company with several sites places a contract for a location within your territory: is it treated as a reserved account?
• Another franchisee receives an unsolicited order from your territory: which rules apply?

Territorial exclusivity does not mean a blanket ban on sales by others. Restrictions must comply with Spain’s Competition Act, Law 15/2007, and, where applicable, EU rules, including Regulation (EU) 2022/720 on vertical agreements. Active and passive sales are treated differently, and the effective use of the internet cannot be prohibited across the board. Have a specialist lawyer review these restrictions.

4. Negotiate how exclusivity is retained and enforced

Some networks make protection conditional on minimum sales, additional outlet openings or further investment. Check how these targets are calculated, who verifies compliance and whether they can be changed unilaterally.

Ask for a written procedure for any reduction in territory: advance notice, objective grounds and, where appropriate, a period to remedy breaches. Also check whether exclusivity continues when the agreement is renewed, the outlet relocates with authorisation or the business is transferred.

The contract should set out how to report an infringement of your territorial rights, what supporting documents to provide and what remedies you can require. Do not assume that compensation is automatic or stop making payments on your own initiative without taking advice.

Practical conclusion: before committing any money, bring together three consistent elements: a signed map, rules for each sales channel and conditions for retaining exclusivity. If any of these is missing, you still do not know what territorial protection you are buying.