Does Chop5 Salad Kitchen provide territorial protections during the term of the Franchise Agreement?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
and resume operations at the new site.
Description of Territory (Franchise Agreement)
Your territory will consist of the geographic area within a ½-mile radius from your Restaurant. Upon renewal, we reserve the right to modify the boundaries of your territory in accordance with our then-current territory guidelines and criteria.
Description of Development Territory (ADA)
If you acquire area development rights, we will identify the boundaries of your development territory in Part C of ATTACHMENT "A" to your ADA. A development territory typically consists of a geographic area that coincides with the boundaries of a municipality, such as a city, county or state. There is no specific minimum or maximum size for a development territory. In determining the size of your development territory, we primarily consider the number of Restaurants you commit to develop.
You must sign a separate Franchise Agreement for each Restaurant you develop. All Restaurants you develop must be located within your development territory. We must approve the site for each Restaurant you develop under our then-current site selection criteria. We send you a complete execution copy of the ADA that includes your development territory, development fee and development schedule at least 7 days before you sign it.
Territorial Protections and Limitations
During the term of your Franchise Agreement we will not develop or operate, or license a third party to develop or operate, a Restaurant using our Marks that is physically located within your territory except as otherwise permitted below with respect to Captive Venues and Acquisitions (each defined below).
During the term of your ADA (if applicable) we will not develop or operate, or license a third party to develop or operate, a Restaurant using our Marks that is physically located within your development territory during the term of the ADA other than: (a) any Restaurant that is located within your development territory as of the date you sign the ADA (either open, under construction or for which a Franchise Agreement has been signed); and (b) as otherwise permitted below with respect to Captive Venues and Acquisitions.
We reserve the right to develop and operate, and license third parties to develop and operate, Restaurants that
are located in Captive Venues, including Captive Venues located within your territory and development territory, if applicable. A "Captive Venue" means a non-traditional outlet for a Restaurant that is located within, or is a part of, another establishment or facility that consumers may visit for a purpose unrelated to the Restaurant. Examples of Captive Venues include Restaurants that are located within:
- hotels or casinos
- college campuses or universities
- airports, train stations, bus stations or cruise terminals
- stadiums or sporting arenas
- shopping malls
- military bases
- concert venues
- amusement parks
We also reserve the right to acquire, or be acquired by, another business or chain that may sell competitive or identical goods or services, and those businesses may be converted into Restaurants operating under the Marks regardless of their location (an "Acquisition"). Any such acquired or converted businesses may be located within your territory and development territory, if applicable.
Alternative Channels of Distribution
We reserve the right to sell, and license others to sell, competitive or identical goods and services (either under the Marks or different trademarks) through Alternative Channels of Distribution, including within your territory and development territory, if applicable. An "Alternative Channel of Distribution" means any channel of distribution other than retail sales made to customers while present at a Restaurant. Examples of Alternative Channels of Distribution include:
- sales through direct marketing, such as over the Internet or through catalogs or telemarketing
- sales through retail stores that do not operate under the Marks, such as grocery stores or convenience stores
- sales made at wholesale
- sales through catering or delivery service
- sales through kiosks or mobile trailers
You are not entitled to any compensation for sales that take place through Alternative Channels of Distribution.
Restrictions on Your Sales and Marketing Activities
You can market and advertise outside of your territory and development territory, if applicable, as long as: (a) you comply with all policies and procedures in the Manual governing extra-territorial marketing; and (b) you do not engage in targeted marketing directed into any territory or development territory assigned to us, our affiliate or another franchisee (unless the marketing is conducted as part of an advertising cooperative that includes the affected territory). Marketing that is distributed, circulated or received both within your territory and within another territory is not considered "targeted marketing" if: (a) you use reasonable efforts to limit the circulation or distribution of the advertising to areas within your territory; and (b) the majority of the recipients of the advertising are located within your territory and there is only incidental circulation or distribution within a territory assigned to us, our affiliate or another franchisee. The meaning of "targeted marketing" that is "directed into a territory" may be further defined in the Manual, but examples include direct mail sent to addresses within a given territory, digital advertising sent to devices with IP addresses registered within a given territory and conducting promotional events within a given territory.
Your Restaurant must offer catering and delivery service. You may not market or sell using any other
Alternative Channels of Distribution (such as the Internet, catalog sales, telemarketing or other direct marketing) either within or outside of your territory or development territory, if applicable. Your marketing activities are also subject to the additional restrictions described in Item 11 under the Section entitled "Websites, Social Media and Digital Advertising". You must comply with any minimum advertised pricing policy that we establish from time to time. There are no other restrictions on your right to solicit customers, whether from inside or outside of your territory or development territory, if applicable.
Source: Item 12 — TERRITORY (FDD pages 36–38)
What This Means (2024 FDD)
According to Chop5 Salad Kitchen's 2024 Franchise Disclosure Document, franchisees receive a limited territory of a ½-mile radius around their restaurant. During the Franchise Agreement term, Chop5 Salad Kitchen will not operate or license another restaurant using their marks within that ½-mile radius, with some exceptions. These exceptions include locations in Captive Venues (such as hotels, airports, shopping malls, etc.) and businesses acquired by Chop5 Salad Kitchen, even if they are within the franchisee's territory. Upon renewal of the franchise agreement, Chop5 Salad Kitchen reserves the right to modify the boundaries of the territory based on their then-current guidelines.
Chop5 Salad Kitchen also retains the right to sell goods and services through Alternative Channels of Distribution, such as internet sales, retail stores, catering, and kiosks, even within a franchisee's territory. Franchisees are not entitled to any compensation for sales made through these alternative channels. This means that while a franchisee has some territorial protection against traditional restaurants, Chop5 Salad Kitchen can still operate or license other businesses that might compete within that same area through different channels.
For franchisees who sign an Area Development Agreement (ADA), Chop5 Salad Kitchen will not operate or license a third party to operate a restaurant using their marks within the development territory during the ADA term. This protection does not apply to restaurants already in the territory when the ADA is signed or to Captive Venues and Acquisitions. However, if a Chop5 Salad Kitchen franchisee with an ADA fails to meet the development schedule by not opening the required number of restaurants in the specified time, Chop5 Salad Kitchen may terminate the ADA, and the franchisee will lose the territorial protections associated with their development territory.
Franchisees can market and advertise outside their territory as long as they comply with Chop5 Salad Kitchen's policies and do not engage in targeted marketing directed into another franchisee's territory. The document specifies that examples of targeted marketing include direct mail, digital advertising to specific IP addresses, and promotional events within another territory. However, general marketing that incidentally reaches other territories is permitted if reasonable efforts are made to limit circulation and the majority of recipients are within the franchisee's territory.