Does an Auntie Annes franchisee receive an exclusive territory under the Franchise Agreement?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.
No Protected Territory for All Shops other than Co-Branded Shops in Streetside Locations
This Section applies to all Shops other than Co-Branded Shops in Streetside Locations.
The Franchise Agreement licenses you to manufacture and sell Approved Products at retail only from the specific Shop location that we accepted. We do not grant you any exclusive territory or other territorial rights under these agreements other than the right to sell Approved Products at retail from the Shop.
Limited Protected Territorial Rights for Co-Branded Shops in Streetside Locations
This Section applies only to Co-Branded Shops in Streetside Locations.
If you operate a Co-Branded Shop in a Streetside Location, while you will not receive an exclusive territory, you will receive a territory with limited protected rights (an "Area of Protection") as described in this Item. This means that, during the term of the Franchise Agreement, we will not establish or operate, nor license any other person to establish or operate, another Co-Branded Shop at a Streetside Location within the Area of Protection. For the avoidance of doubt, we may operate, or license others to operate, single-branded Shops or Shops that do not include the exact combination of brands as the Co-Branded Shop (such as a Shop that is co-branded with a brand other than the second brand in the Co-Branded Shop or that is multi-branded with such second brand and one or more other brands).
We may negotiate your Area of Protection with you. The size and scope of the Area of Protection will be in the Franchise Agreement and will be determined on a case-by-case basis. The Area of Protection will not exceed a one-block radius for a Shop in an urban location (the downtown area of the 100 largest U.S. cities as measured by population as of the effective date of the Franchise Agreement) or a one-mile radius for a Shop in any non-urban location. There is no minimum Area of Protection for a Shop. The factors that we consider in determining the size of an Area of Protection include current and projected market demand, demographics and population based on our research and experience, median household income, presence of other businesses, location
of competitors, traffic patterns, access and visibility, location of other Shops, our future development plans and other market conditions.
If the Accepted Location is not known when you sign the Franchise Agreement, we will designate the Area of Protection once we authorize a location for the Shop and the Accepted Location and Area of Protection will be documented when we accept the location. If the Accepted Location is known when you sign the Franchise Agreement, the Franchise Agreement will specify the Accepted Location for your Shop and the Area of Protection.
Source: Item 12 — TERRITORY (FDD pages 77–80)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, franchisees generally do not receive an exclusive territory. The FDD states that franchisees may face competition from other franchisees, outlets owned by Auntie Annes, other distribution channels, or competitive brands controlled by Auntie Annes. This means that another Auntie Annes franchise or a company-owned store could open nearby, potentially impacting a franchisee's business.
However, there is an exception for Co-Branded Shops in Streetside Locations. These franchisees may receive a territory with limited protected rights, referred to as an "Area of Protection." During the term of the Franchise Agreement, Auntie Annes will not establish or license another Co-Branded Shop at a Streetside Location within this Area of Protection. It is important to note that Auntie Annes may still operate or license single-branded shops or shops with different co-branding arrangements within the Area of Protection. The Area of Protection's size is determined on a case-by-case basis and will be specified in the Franchise Agreement. It will not exceed a one-block radius in urban locations or a one-mile radius in non-urban locations, and there is no minimum Area of Protection.
Auntie Annes retains several rights, including the right to establish or license franchises and/or company-owned businesses offering similar products under the Proprietary Marks or any other marks anywhere, including near a franchisee's location if an Area of Protection is not granted. They can also sell Approved Products through alternative channels of distribution, such as supermarkets, e-commerce, and ghost kitchens, regardless of any Area of Protection. These rights allow Auntie Annes to expand its brand presence and explore different market opportunities without being restricted by franchisee territories, except for the limited protection offered to Co-Branded Shops in Streetside Locations.
If a franchisee defaults under the Franchise Agreement and fails to cure the default, Auntie Annes has the right to reduce or eliminate the Area of Protection, in addition to other remedies. The opportunity to participate in the SRU (Secondary Retail Unit) Program, which allows for the operation of a secondary selling point apart from the Shop, is offered at Auntie Annes's sole discretion and does not modify the location granted by the Franchise Agreement. Prospective franchisees should carefully consider these factors and discuss the potential for competition and the terms of any Area of Protection with Auntie Annes before investing in a franchise.