Does Chem-Dry grant exclusive territories to franchisees?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
e Franchise Agreement. (See Section 3.B. of the Franchise Agreement)
ITEM 12 TERRITORY
You must operate your Chem-Dry Business within the non-exclusive Franchised Area that we assign and approve. You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we or an Affiliate own, or from other channels of distribution or competitive brands that we or an Affiliate control.
The number of franchises which can operate as Chem-Dry Businesses in a Franchised Area is determined by dividing the current population of the area by 60,000. The nearest whole number to the quotient (referred to as "Maximum Number") is the number of franchises that CDI may grant in the area for operating and conducting a Chem-Dry business. The sum of franchises granted in the Franchised Area cannot exceed the Maximum Number. We, another franchisee or a third party designated by CDI may service national accounts in your Franchised Area if you elect not to service a national account or if a national account elects not to do business with you. The Franchised Area will be determined by CDI based on population, population density, geographical terrain and market potential. CDI reserves the right to refuse to sell all of the franchises available for an Assigned Area to single franchisee or an affiliated group. Typically, the minimum size of a Franchised Area is a geographic area having a population of at least 60,000 but in some rural, less-populated areas the Franchised Area might have a population as small as about 5,000. Based on population changes, the Maximum Number may increase or decrease and may not remain constant; however, the Maximum Number only affects CDI's ability to grant franchises and no franchise will be terminated solely as a result of a decrease in the Maximum Number.
You must operate and conduct your Business from a single location within the Franchised Area from which you may operate as many crews, teams, sales forces and vans as you desire. You may relocate your business anywhere you choose within your Franchised Area if you provide us with at least 10 days' prior written notice. Your Business office must be able to receive and store shipments.
You have no options, rights of first refusal or similar rights to acquire additional franchises. You may purchase additional franchises within the Franchised Area, although you are not granted a right of first refusal to do so. If you wish to purchase an additional franchise, you must be in compliance with your current Franchised Area, have achieved what we determine to be the full market potential of the current Franchised Area, and have sufficient vans, equipment and crew to perform the Approved Services you have undertaken within the Franchised Area. If you have purchased all of the franchises allocated to a given franchised area, the continuation of your Franchised Area is not dependent upon the achievement of a certain sales volume, market penetration or other contingency. However, if the area grows sufficiently in population to accommodate one or more additional franchises because the Maximum Number has increased, your sales volume and market penetration may be taken into consideration in deciding whether to permit you to purchase such additional franchise(s) and maintain the exclusivity of the Franchised Area.
You may not advertise, solicit, accept, or perform the Approved Services outside of the Franchised Area. If you accept or perform a job outside of your Franchised Area, CDI has the right to fine you
$5,000 per violation or terminate the Franchise Agreement. You may use other channels of distribution, such as the Internet, catalog sales, telemarketing or other direct marketing, to solicit sales only in your Franchised Area, and you may not provide Approved Services to any customer located outside of your Franchised Area. You may not offer services other than Approved Services to any customer regardless of the customer's location. All marketing, including Internet marketing, must be in compliance with the Chem-Dry Advertising Rules & Guidelines or may be subject to a fine of $2,000 per violation. We and our Affiliates may use other channels of distribution, such as the Internet, catalog sales, telemarketing, and other direct marketing, to solicit and make sales to cust
Source: Item 12 — TERRITORY (FDD pages 45–47)
What This Means (2024 FDD)
According to Chem-Dry's 2024 Franchise Disclosure Document, Chem-Dry does not grant exclusive territories to its franchisees. Instead, franchisees operate within a non-exclusive Franchised Area that Chem-Dry assigns and approves. This means a franchisee may face competition from other Chem-Dry franchisees, outlets owned by Chem-Dry or its affiliates, or other channels of distribution and competitive brands controlled by Chem-Dry or its affiliates.
The document specifies how the number of Chem-Dry franchises in a Franchised Area is determined. Chem-Dry divides the population of the area by 60,000 to arrive at a "Maximum Number," which represents the maximum number of franchises Chem-Dry may grant in that area. The Franchised Area is determined by Chem-Dry based on factors such as population, population density, geographical terrain, and market potential. Typically, the minimum population size for a Franchised Area is 60,000, but it can be as low as 5,000 in rural areas. The Maximum Number of franchises allowed can change based on population changes, but this will not result in the termination of any existing franchises.
Chem-Dry franchisees must operate their business from a single location within their Franchised Area, but they can operate as many crews, teams, sales forces, and vans as they desire. Franchisees can relocate their business within their Franchised Area with 10 days' prior written notice to Chem-Dry. Franchisees do not have rights to acquire additional franchises but may purchase them within their Franchised Area if they are in compliance with their current agreement, have achieved full market potential, and have sufficient resources. Franchisees are prohibited from advertising, soliciting, or performing services outside of their Franchised Area, and violations can result in a fine of $5,000 or termination of the Franchise Agreement. Chem-Dry and its affiliates can solicit and make sales to customers within a franchisee's area without compensating the franchisee.