If a Chem-Dry franchisee has purchased all available franchises in their area, is the continuation of their Franchised Area dependent upon achieving a certain market penetration?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
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.
Source: Item 12 — TERRITORY (FDD pages 45–47)
What This Means (2024 FDD)
According to Chem-Dry's 2024 Franchise Disclosure Document, if a franchisee has purchased all available Chem-Dry franchises allocated to a specific franchised area, the continuation of that franchised area is not dependent on achieving a certain sales volume, market penetration, or other contingency. This means that Chem-Dry will not terminate the franchise agreement simply because the franchisee's sales or market share is not at a particular level, provided they have bought all available franchises in the area.
However, this changes if the area's population grows enough to accommodate additional Chem-Dry franchises, increasing the Maximum Number of franchises allowed. In this case, Chem-Dry may consider the franchisee's sales volume and market penetration when deciding whether to allow them to purchase the additional franchise(s) and maintain the exclusivity of their franchised area. This implies that while current performance isn't a factor for maintaining the existing territory when all franchises are purchased, it becomes a factor if the franchisee wants to expand as the area grows.
This policy creates both opportunities and potential risks for Chem-Dry franchisees. On one hand, it provides stability for franchisees who have fully invested in their territory. On the other hand, it introduces an element of competition if the area grows, as the franchisee's performance will be evaluated against other potential franchisees if additional franchises become available. Therefore, franchisees should focus on maximizing their market penetration to secure future expansion opportunities.