The Ultimate Franchise Opportunity

Franchising can be an attractive venture for builders and other entrepreneurs looking to expand their businesses.

One important aspect of franchising is the granting of exclusive territories.

This is crucial for ensuring a fair market for each franchisee to operate within and eliminating unnecessary conflict between business owners. However, franchisees must check their franchise agreement to understand the exact terms and conditions surrounding exclusive territory.

In this article, we’ll explore what an exclusive franchise territory is, how it works, and its importance in franchise agreements, specifically for Stroud Homes franchising.

What is an Exclusive Franchise Territory?

An exclusive territory refers to a specific geographic area where only the franchisee who has been granted the territory may operate, as specified by the Franchisor.

The Franchisor cannot place another business within the defined territory, ensuring a fair market for each franchisee to operate within. The idea of territorial exclusivity aims to eliminate unnecessary conflict between business owners, which can lead to downward spirals such as price wars, impacting the brand as a whole.

It’s important to note that an exclusive territory doesn’t give the franchisee the automatic right to open another franchise unit within the territory, nor exclusive rights to the customers within the territory.

A franchisor cannot prevent a franchisee in one territory from conducting business with customers located within the territory of another franchisee.

Do I get access to an exclusive territory with Stroud Homes?

Yes, Stroud Homes have researched the building statistics and demographics Australia-wide and have come up with territories that provide maximum opportunities for all home builders.

Stroud Homes can customise and finalise the location with the builder to ensure it suits their preference, and there are no other franchisees, including the franchisor, allowed to operate within that territory.

Types of Territory Protections in Franchising

Franchisors offer various territorial protections to maximise profits in their markets. Here are the three types of franchise territories:

Exclusive Franchising Territory Franchisees are the sole distributor of the franchisor’s products/services in the specified area.
Protected Franchising Territory Franchisees have a specified geographic area, but customers in that area can still purchase products/services from other channels.
Unprotected Franchising Territory Franchisees have no territorial protection.

Other factors to keep in mind include:

Franchise Marketing Territory: Franchise agreements often outline marketing territories where franchisees can actively promote their products/services.
Exceptions to the Territory Rule: If targets or profits aren’t met, the franchisor may assign the territory to another franchisee.

To determine the best franchisor, consider how territories are established and whether the current operators are satisfied with the setup.

Defining the Right Territory

To establish the most suitable franchise territories, a franchisor needs to conduct thorough market research and consider their stage of development.

Stroud Homes has taken these factors into account and analysed construction data and demographics across Australia to identify territories that offer optimal potential for all parties involved in the franchise system.

Understanding the Terms and Conditions

The grant of an exclusive territory generally restricts the franchisor from placing another franchise within a defined territory. However, the franchisee’s exact terms and conditions surrounding exclusive territory may vary from franchise agreement to franchise agreement, and it’s important to check the agreement thoroughly.

While the franchise agreement will not dictate where a franchisee can or cannot operate within their exclusive franchise territory, it constrains the franchisor from reselling that territory to anyone else while the franchisee holds it exclusively.

The franchisor may reserve the right to withdraw territory exclusivity or alter the boundaries of the territory if the franchisee fails to hit required performance targets or breaches their franchise agreement.

Additionally, local competition laws may affect exclusive territorial restrictions.

Want to learn more?

If you’re interested in learning more about the franchisee experience and finding out where Stroud Homes franchises are available, explore our website. To receive the full Franchisee Information Pack or to enquire about exclusive territories, contact Scott Clague at 0448 787 683 or enquire online.