Some franchising companies will use the method of selling master franchisees in specific regions to expand their brand-name and grow their companies. Each time a master franchisees sold a new marketing area in region of influence will be established, where the master franchises will in turn sell other franchises.The marketing area will need to be clearly defined and delineated on a map and a description of what the marketing area will consist of must also be clearly stated in the franchising agreements. It is for this reason that below I have listed a clause which I put into our franchise agreements for our master franchises which discusses the marketing area for master franchise operations;.1.2 Marketing Area.
Franchisee is hereby granted a nonexclusive Marketing Area defined by geographic boundaries as determined by Franchisor in its sole discretion after giving considerations to relevant demographic information, including the number of vehicles, population and demographics, the actual boundaries of which are set forth on Exhibit 1 attached to this Agreement. Franchisee may not conduct any advertising that is circulated outside the Marketing Area or otherwise solicit customer accounts that are located outside the Marketing Area without the prior written consent of Franchisor. Franchisee may not solicit customers within the Marketing Area with respect to Services that would be provided to such customers both within and outside the Marketing Area (such customer being referred to as a "National or International Account") without the prior written consent of Franchisor.In the event Franchisee enters into an agreement to provide Services to a National or International Account, Franchisee's agreement in respect thereof must provide that Services for locations other than in the Marketing Area must be subcontracted to other Car Wash Guys Franchisees in their licensed marketing areas ("Other Franchisees"), if any.
Franchisor, in its discretion, may establish other Franchisees who may advertise and solicit customer accounts within the Marketing Area and who may be in competition with Franchisee. In addition, Franchisor retains the right to solicit and sell National or International Accounts within the Marketing Area, including but not limited to solicitation and sales via direct marketing campaigns, telemarketing, and by use of the Internet and other on-line computer networks.Franchisee may not, directly or indirectly, sell, offer to sell, or provide any of the Services to any person or legal entity that is under contract with, is a current customer of, or was invoiced within the previous six (6) months ("Customer Accounts") by, another Car Wash Guys Franchisee who has been granted a marketing area that overlaps (in part or whole) with the Marketing Area described in this Section 1.2 and Exhibit 1 of this Agreement ("Overlapping Franchisee"). The provisions of this paragraph shall apply only to Customer Accounts in which the customer is located in both Franchisee's Marketing Area and in a Overlapping Franchisee's marketing area ("Overlapping Territory"), and are intended to be broadly interpreted to prevent Franchisee from directly or indirectly interfering with any of the customer relationships that have been established by an Overlapping Franchisee in Overlapping Territory.The provisions of this paragraph shall not apply if Franchisee obtains written permission, granted by the President, Vice President or Continent Franchisor Director (CFD) of the Franchisor, to engage in conduct that otherwise is prohibited in this paragraph.
If Franchisee violates any of the provisions of this paragraph, Franchisee shall pay to the Overlapping Franchisee(s) forty-three point five percent (43.5%) of the revenue derived from the Customer Accounts that caused Franchisee to violate this paragraph. Such revenue must be paid to the Overlapping Franchisee(s) with ten (10) calendar days of receiving such revenue, for so long as Franchisee receives revenue from those Customer Accounts. This paragraph shall be effective only if an Overlapping Franchisee is subject to the same or similar provisions of this paragraph.--------- ---------- -----------.
As you can see we overtime developed a formula to insure that are brand-name was fully exploited into the marketplace and marketing area of each master franchise. You'll need to get with a business consultant and an experienced franchise attorney to insure that you draw up the very best possible clauses to explain what your definition in your franchise company will be for marketing areas. Consider this in 2006.
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By: Lance Winslow
