Does the Aw Franchise Agreement prohibit Aw from opening other Papa Ray's Pizza Restaurants within the franchisee's protected area?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
e widest and best possible distribution of products and services from your Papa Ray's Pizza Restaurant within the Protected Territory, for the full term of this Agreement.
- 2.3 Protected Area. As long as this Agreement is in force and effect and you are not in default under any of the terms of this Agreement, we will not establish another Papa Ray's Pizza Restaurant franchise or operate itself or through an affiliate any other Papa Ray's Pizza Restaurant within the protected area described in Exhibit 1 ("Protected Area"). The Protected Area granted to you will be a certain mile radius from the Premises identified in Exhibit 1. The minimum radius that you will be granted is three (3) miles from the Premises. The criteria for determining the boundaries of the Protected Area include the population density, demographics, the amount of existing competition in the market, major and/or restricting topographical features which clearly define contiguous areas, and/or other factors we deem relevant to the operation of a Papa Ray's Pizza Restaurant. As a result of these considerations, the size of Protected Areas granted to franchisees may vary. Notwithstanding the foregoing, in the event the location of the Premises is within a limited use facility, your Protected Area shall be limited to the limited use facility (as defined below) in which your Papa Ray's Pizza Restaurant is located.
- 2.4 Our Reservation of Rights. We have the right to grant outside of the Protected Area such other Papa Ray's Pizza Restaurant businesses and franchises as we, in our sole and exclusive discretion, deem appropriate. We and any affiliates reserve the right, both within and outside of the Protected Area to:
- (a) grant a Papa Ray's Pizza Restaurant franchise or operate ourselves or through an affiliate a Papa Ray's Pizza Restaurant located within a limited use facility. A limited use facility includes those located within airports, railroad stations or other transportation facilities; stadiums, racetracks or other sport facilities; enclosed shopping centers; casinos; theaters, auditoriums, amusement parks or other entertainment facilities; military bases; and college campuses; and similar types of captive locations;
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, under the terms of the franchise agreement, Aw will not establish another Papa Ray's Pizza Restaurant franchise or operate itself or through an affiliate any other Papa Ray's Pizza Restaurant within the franchisee's protected area as long as the Franchise Agreement is in effect and the franchisee is not in default. However, Aw retains specific rights, including the right to grant Papa Ray's Pizza Restaurant franchises or operate restaurants within limited use facilities such as airports, transportation facilities, stadiums, shopping centers, casinos, military bases, and college campuses, even within a franchisee's protected area. Aw also reserves the right to distribute products and services through alternative channels like supermarkets, retail facilities, the internet, and mail order systems, both within and outside the protected area.
The Protected Area granted to the franchisee will be a certain mile radius from the Premises identified in Exhibit 1, with a minimum radius of three (3) miles. The determination of the Protected Area's boundaries considers factors such as population density, demographics, existing competition, and topographical features. As a result of these considerations, the size of Protected Areas granted to franchisees may vary.
These stipulations mean that while Aw grants franchisees a protected area, this protection has limitations. Aw can still operate or franchise other Papa Ray's Pizza Restaurants in non-traditional venues within the protected area, and can also utilize alternative distribution channels to sell similar products. This is a fairly common practice in franchising, where franchisors seek to maximize market penetration through diverse channels while providing some territorial exclusivity to franchisees.
A prospective Aw franchisee should carefully evaluate the potential impact of these exceptions on their business. Understanding the specific location and potential for competition from alternative channels or limited use facilities is crucial. It would be prudent to discuss with Aw the criteria they use for determining the size and scope of protected areas, and to assess the likelihood of additional distribution channels being implemented in the franchisee's specific market area.