Does the Craters & Freighters franchise agreement grant an exclusive or non-exclusive license?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
rants to franchisees the right to operate a Franchised Business and requires them to use certain trade names, trademarks, and service marks ("Marks").
1. GRANT OF FRANCHISE.
- 1.1 Grant. Subject to the terms and conditions of this Agreement, Franchisor grants to Franchisee a non-exclusive license to operate a Franchised Business at the Premises (as such term is defined below) using the System and the Marks for the Initial Term of this Agreement. Franchisee may not operate the Franchised Business at any site other than the Premises without Franchisor's prior written consent. Franchisee must use the Marks and System only in accordance with the terms and conditions of this Agreement.
- 1.2 Territory. During the Initial Term and any Successor Term (as such terms are defined below), neither Franchisor nor its Affiliates will own, operate or franchise a fixed location for the operation of any other Franchised Business within Franchisee's territory ("Territory") as set forth in Attachment A to this Agreement. For purposes of this Agreement, "Affiliate" means any person or entity that controls, is controlled by, or is in common control with, Franchisor or Franchisee.
- 1.3 Operation of Franchised Business Limited to Territory. Franchisee agrees to devote its best efforts to identifying, attracting, and serving customers who reside or operate within the Territory. Therefore, except as otherwise permitted herein or as approved in advance and in writing by Franchisor, Franchisee will solicit business only in the Territory for the purpose of obtaining customers who reside or operate within the Territory, and Franchisee will not knowingly solicit business outside of the Territory. However, Franchisee is not required to verify that customers to the Franchised Business reside or conduct business within the Territory.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, the franchise agreement grants a non-exclusive license to operate a Craters & Freighters franchised business. Specifically, Craters & Freighters retains the right to own, franchise, or operate other Craters & Freighters outlets outside of the franchisee's territory. However, Craters & Freighters will not establish another franchisee or company-owned outlet within the franchisee's territory that also uses the Craters & Freighters marks. Craters & Freighters also retains the right to use the marks and system to sell similar products or services through any alternate channels of distribution within or outside the territory, including to National Accounts.
This non-exclusive arrangement means that while Craters & Freighters will not place another franchise within the franchisee's defined territory, they can still operate or franchise outlets outside of it, regardless of proximity. Furthermore, Craters & Freighters can sell similar services through other distribution channels, potentially competing with the franchisee.
This arrangement is fairly common in franchising, allowing the franchisor flexibility in expanding the brand through various channels. However, prospective Craters & Freighters franchisees should carefully consider the potential impact of this non-exclusivity on their business, particularly regarding competition from other channels and outlets outside their territory. Understanding the specific boundaries of the territory and the potential for competition from other channels is crucial for assessing the opportunity.