Franchise territories and exclusivity in Venezuela

Granting a franchise does not automatically mean giving someone exclusive rights to an entire city. When franchising an existing business in Venezuela, you should specify where each outlet may operate and what protection it will receive against other outlets of the same brand. A poorly defined territory can put the original business at odds with its new franchisees and undermine trust across the franchise network.

1. Distinguish between premises, territory and exclusivity

These are related but separate decisions. The authorised premises are the property from which the outlet will operate. The territory defines the geographical area covered by the agreement. Exclusivity, if granted, specifies which activities the franchisor undertakes not to carry out within that area.

Before offering a territory, answer these questions in writing:

• Will the franchisor be allowed to open another company-owned outlet there?
• Will it be allowed to authorise a second franchise under the same brand?
• Will the protection cover all formats or only one?
• Will it extend to online sales and home deliveries?
• Are there existing outlets, customers or agreements that need to be excluded?

Avoid terms such as ‘protected territory’ without explaining their scope. For example, preventing new physical shops from opening is not the same as reserving all purchases made by residents of that territory for the franchisee. Nor does it necessarily give the franchisee priority to open a second outlet.

If you wish to offer a preferential right to open future outlets, set it out separately: how the opportunity will be notified, how long the franchisee will have to respond and what conditions they will need to meet.

2. Define a territory you can justify

Do not allocate entire municipalities simply because they are easy to identify. Before making a commitment, examine where your existing business’s customers come from, travel times, physical barriers, concentrations of commercial activity and the number of customers a single outlet can serve.

These factors can help you develop a territorial proposal, but they do not guarantee sales. A large area may contain little accessible demand, while a small one may include several commercial centres with different customer patterns.

Prepare a territorial annex containing a clearly legible map and a written description. Use verifiable reference points: streets, avenues, municipal boundaries or coordinates where appropriate. Specify how any discrepancy between the map and the description will be resolved, and retain the version signed by both parties.

Include an inventory of existing operations affecting the area: the original shop, temporary outlets, corporate sales or distribution agreements. If these are to remain outside the exclusivity arrangement, identify them before signing the agreement rather than revealing them as a surprise after the outlet opens.

Finally, check that no territory offered overlaps with rights already granted. Keep a central register of allocated territories and their exceptions.

3. Address online sales and delivery

A map is not enough when customers buy through a website, an app or a delivery service. It is worth separating three questions: who receives the order, who prepares it and who receives the revenue.

Create a simple matrix covering each channel:

• In-store sales: determine how to handle customers who come from another territory.
• Centralised online orders: define the allocation criteria, such as delivery address, operational capacity or stock availability.
• Home delivery: distinguish the practical delivery radius from the contractual territory.
• Corporate accounts: clarify who negotiates, invoices and fulfils orders covering several territories.

You should also plan for stock shortages, temporary closures and orders that an outlet cannot fulfil. An exceptional delivery made by another outlet should not implicitly alter the agreed boundaries.

Document how such exceptions will be recorded and how the relevant revenue will be shared. The rules must be understandable to the people handling orders, not just those signing contracts.

4. Incorporate the rules into the contract and review their legal limits

Venezuela has no comprehensive law specifically governing franchising. This does not mean that franchising is unregulated: the Commercial Code and Civil Code underpin commercial relationships and contractual obligations, while the Industrial Property Law is relevant to trademark licensing.

Territorial restrictions must also be assessed under the Antimonopoly Law. Do not assume that every exclusivity arrangement or commercial restriction will be valid simply because it appears in a signed agreement. Its scope and effects require case-by-case legal review.

The contract should set out the territory, exceptions, channels covered and duration of the protection. If protection depends on performance conditions, establish verifiable indicators, assessment procedures and clear consequences. Avoid reserving an open-ended right to reduce the territory unilaterally.

Putting this into practice: before offering your first territory, prepare a map, a list of exceptions and a channel matrix. Have all three documents reviewed alongside the contract: the territory you promise must match the one you can actually honour.