How does the Alloy protected area described in Item 12 relate to the potential competition from other franchisees mentioned in the same item?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
ating or reverse engineering the Alloy App in any manner.
ITEM 12 TERRITORY
Franchise Agreement
The Franchise Agreement grants you the right to operate your Franchised Business only at the location we approve ("Authorized Location"). You will not receive an exclusive territory. You may face competition from other franchisees, from outlets we own, or from other channels of distribution or competitive brands that we control. However, we will grant you a protected area, which will be described in an exhibit to your Franchise Agreement ("Designated Area"). If your Designated Area is located in a suburban area, your Designated Area will include a population of at least 30,000 people, which for most suburban areas will cover a radius of approximately 2 miles from the Authorized Location (taking into account any geographic factors like rivers or other similar natural boundaries). We reserve the right to create a more limited Designated Area for Facilities located in densely populated areas but your Designated Area will have a population of at least 30,000 people. Your Designated Area may be described in terms of street boundaries or may be drawn on a map to be attached to your Franchise Agreement. We (and any affiliates) will not establish, nor allow another franchise owner to establish, another Franchised Business located within your Designated Area, although in certain instances there may be overlap of Designated Area boundaries of two franchisees. We do not anticipate permitting franchisees to establish
Facilities at captive market locations, such as a shopping mall, office building, or similar location. There are no circumstances under which we can modify the boundaries of your Designated Area during the term of your Franchise Agreement.
You must achieve a minimum level of Gross Sales annually to retain your territorial rights, as follows (there is no Minimum Annual Gross Sales for the period of time between signing your Franchise Agreement and the date you open):
| | Year of Operation (beginning when you | Minimum Annual Gross Sales | |---|---|---| | | open for business | | | Year 1 | | $240,000 | | Year 2 and each subsequent year of operation | | $300,000 | | through the initial term of your Franchise | | | | Agreement | | | We reserve the right, based on an individual franchisee's circumstances, to reduce or modify the minimum annual Gross Sales that a franchisee must achieve, although we will not increase the minimum annual Gross Sales without your consent. If we do this, we are not required to grant you a similar modification.
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, Item 12 outlines the territory rights granted to franchisees and how these rights relate to potential competition. For a standard Franchise Agreement, Alloy grants a protected area, referred to as a "Designated Area," around the approved location. This Designated Area provides a degree of territorial protection, as Alloy and its affiliates will not establish or allow another franchisee to establish another Alloy business within this area. For suburban locations, the Designated Area will include a population of at least 30,000 people, typically covering a radius of approximately 2 miles from the Authorized Location. However, Alloy reserves the right to create a more limited Designated Area for Facilities located in densely populated areas but your Designated Area will have a population of at least 30,000 people. The boundaries of the Designated Area are defined in an exhibit to the Franchise Agreement and may be described in terms of street boundaries or drawn on a map.
Despite the Designated Area, franchisees may still face competition from various sources. The FDD states that franchisees may face competition from other franchisees, from outlets Alloy owns, or from other channels of distribution or competitive brands that Alloy controls. This means that while Alloy will not place another Alloy franchise within your Designated Area, they can still operate or allow others to operate competing businesses nearby. Additionally, the document specifies that in certain instances there may be overlap of Designated Area boundaries of two franchisees.
For franchisees entering into an Area Development Agreement, the territory is referred to as a "Development Territory." While franchisees receive certain protected rights to develop multiple Alloy Facilities within their Development Territory, the FDD explicitly states that this territory is not exclusive. This means that even with a Development Territory, franchisees may face competition from other franchisees, from outlets Alloy owns, or from other channels of distribution or competitive brands that Alloy controls. The size of the Development Territory depends on the number of Facilities the franchisee commits to develop and may be described using zip codes, street or county boundaries, or depicted on a map. Alloy will not establish or license others to establish a Facility within the Development Territory as long as the franchisee meets the Minimum Performance Schedule and complies with the agreements.
In summary, while Alloy offers some territorial protection through Designated Areas or Development Territories, these areas are not exclusive, and franchisees should anticipate facing competition from various sources, including other franchisees, company-owned outlets, and alternative distribution channels. Prospective franchisees should carefully consider the potential for competition in their chosen area and factor this into their business planning.