Does Bombs Away restrict a franchisee's access to customers?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
erate a Bombs Away business in the Territory for the entire term of this Agreement.
2.2 Protected Territory.
- (a) Limitation. Franchisee shall not solicit or market to potential customers outside of the Territory, except for solicitations or marketing which are primarily targeted inside the Territory and which incidentally reach potential customers outside of the Territory.
- (b) Service. Franchisee shall not serve customers outside of the Territory without Bombs Away Franchising's prior written permission. Bombs Away Franchising may withdraw permission at any time. If Franchisee serves a customer outside of the Territory without Bombs Away Franchising's prior written permission, Bombs Away Franchising may impose a fee equal to the greater of (i) $500 or (ii) 75% of the amount paid by such customer to Franchisee. This fee is a reasonable estimate of Bombs Away Franchising's internal cost of personnel time attributable to addressing Franchisee's breach of this Section, and it is not a penalty or estimate of all damages arising from Franchisee's breach. This fee is in addition to all of Bombs Away Franchising's other rights and remedies.
- (c) Exclusivity. Bombs Away Franchising shall not establish, nor license the establishment of, another business within the Territory or which serves customers located in the Territory selling the same or similar goods or services under the same or similar trademarks or service marks as a Bombs Away business. However, Bombs Away Franchising retains the right to:
- (i) serve (or authorize other franchisees to serve) customers in the Territory if Franchisee is in default, or if Franchisee is incapable of meeting customer demand in the Territory (in Bombs Away Franchising's reasonable opinion);
- (ii) serve (or authorize other franchisees to serve) a particular customer in the Territory if Franchisee fails to properly serve such customer, or if Bombs Away Franchising reasonably believes that Franchisee will not properly serve such customer;
- (iii) establish and license others to establish and operate Bombs Away businesses outside the Territory;
- (iv) operate and license others to operate businesses anywhere that do not operate under the Bombs Away brand name; and
- (v) sell and license others to sell Bombs Away produ
Source: Item 16 — RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL (FDD pages 27–28)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, franchisees face certain restrictions regarding customer access, primarily related to territory and customer service. Bombs Away franchisees are generally restricted from soliciting or marketing to potential customers outside of their designated territory. While solicitations that are primarily targeted within the territory but incidentally reach outside customers are permitted, actively targeting external customers is not. Serving customers outside the territory requires prior written permission from Bombs Away, which can be withdrawn at any time. Serving out-of-territory customers without permission can result in a fee equal to the greater of $500 or 75% of the amount paid by the customer.
Bombs Away retains significant control over customer relationships, even within a franchisee's territory. Bombs Away can serve customers directly (or authorize other franchisees to do so) within a franchisee's territory if the franchisee is in default or deemed incapable of meeting customer demand. Bombs Away can also take over serving a specific customer if the franchisee fails to serve them properly or is believed to be unable to do so. Additionally, Bombs Away can sell products and services to customers in the franchisee's territory through other channels of distribution, such as the internet, provided these offerings are different from those provided by the franchisee's outlet.
These restrictions and rights retained by Bombs Away could impact a franchisee's potential revenue and customer base. The financial penalties for serving customers outside the territory without permission could be substantial. The franchisor's ability to directly serve customers within the territory under certain conditions could also reduce the franchisee's market share. Prospective franchisees should carefully consider these limitations and how they might affect their business operations and profitability. It is important to discuss these points with Bombs Away to gain a clearer understanding of how these policies are applied in practice and what recourse a franchisee has if they disagree with Bombs Away's decisions.