Can a Craters & Freighters franchisee independently use alternative channels of distribution to make sales without prior written approval?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee acknowledges that the franchise granted hereunder is non-exclusive and that Franchisor and its Affiliates retain the exclusive right, among others to:
1.5.1 Own, franchise, or operate Craters & Freighters outlets at any location outside of the Territory, regardless of the proximity to the boundaries of the Territory; provided, however, Franchisor will not establish within the Territory another franchisee or company-owned outlet which may also use the Marks;
1.5.2 Use the Marks and System to sell any products or services similar to those which Franchisee will sell, through any alternate channels of distribution within or outside of the Territory, including to National Accounts (as defined below).
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, franchisees do not have the authority to use alternative channels of distribution without approval. The document states that Craters & Freighters retains the exclusive right to use its marks and system to sell similar products or services through any alternate channels of distribution, both within and outside the franchisee's territory, including sales to National Accounts.
This means that while a franchisee is granted a territory, Craters & Freighters reserves the right to sell through other channels, potentially competing with its own franchisees. The franchisee's agreement is non-exclusive, and Craters & Freighters can operate or franchise other outlets outside the franchisee's territory, as long as they do not establish another franchisee or company-owned outlet within the franchisee's territory that uses the Craters & Freighters marks.
For a prospective franchisee, this clause highlights a potential risk: Craters & Freighters could leverage alternative distribution channels to make sales in the same market as the franchisee. It is important for a potential franchisee to understand how Craters & Freighters defines and utilizes these alternative channels and how this might affect their business. Understanding the scope of "National Accounts" and the potential overlap with the franchisee's target market is also crucial.