What obligations does a Craters & Freighters franchisee have regarding servicing unsold adjacent territories?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor may grant Franchisee the right, in Franchisor's sole determination, to promote and advertise the Franchised Business to customers, or to service customers, in an unsold territory adjacent to the Territory ("Adjacent Territory").
Franchisee acknowledges and agrees that it is obligated to pay Royalty Fees to Franchisor, in accordance with Section 3.2 of this Agreement, on all Adjusted Gross Sales (as hereafter defined) from customers residing or operating within the Territory and any Adjacent Territory.
Franchisee acknowledges and agrees that neither the ability to service nor the grant of Franchisor's permission to service customers residing or operating in any Adjacent Territory affords Franchisee any right, title, or interest in or to such Adjacent Territory whatsoever, including the ability to do further business in the Adjacent Territory after it is granted to a third party (including any right to acquire such Adjacent Territory or any right of first refusal as to such Adjacent Territory).
If the right to operate in the Adjacent Territory is subsequently granted by Franchisor to another Craters & Freighters franchisee through the sale of a franchise, Franchisee agrees to, upon receipt of written notice from Franchisor, cease all promotional and advertising efforts within the Adjacent Territory, return to Franchisor all customer data and prospect information related to the Adjacent Territory, and cease providing products and services to customers in the Adjacent Territory.
Franchisee will use its best efforts to comply with Franchisor's requirements set forth herein, but Franchisor and Franchisee acknowledge and agree that customers residing or operating within the Adjacent Territory are entitled the freedom to choose any Craters & Freighters outlet which they believe will best serve them and their needs, and that they may seek service from Franchisee.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, a franchisee may be granted the right to promote, advertise, and service customers in an unsold territory adjacent to their own, referred to as an "Adjacent Territory," at the sole discretion of Craters & Freighters. If a franchisee is granted the right to service an Adjacent Territory, they are obligated to pay Craters & Freighters royalty fees on all adjusted gross sales from customers residing or operating within both their Territory and the Adjacent Territory, in accordance with Section 3.2 of the agreement.
However, the ability to service an Adjacent Territory does not grant the franchisee any rights, title, or interest in that territory. This includes any right to conduct further business in the Adjacent Territory once it is granted to a third party, or any right to acquire the Adjacent Territory or have first refusal rights. If Craters & Freighters subsequently grants the right to operate in the Adjacent Territory to another franchisee, the original franchisee must cease all promotional and advertising efforts within the Adjacent Territory upon written notice from Craters & Freighters.
Additionally, the franchisee must return all customer data and prospect information related to the Adjacent Territory to Craters & Freighters and stop providing products and services to customers in that territory. While the franchisee is expected to comply with these requirements, customers in the Adjacent Territory retain the freedom to choose any Craters & Freighters outlet for their needs, including seeking service from the original franchisee. This arrangement allows Craters & Freighters to maintain flexibility in assigning territories while ensuring that customer needs are met.