What rights does Crawlspace Medic reserve within or outside a franchisee's territory?
Crawlspace_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
single location within a territory that is designated in Attachment 2 attached hereto and incorporated herein (the "Territory").
3. TERRITORY
- 3.1 Territory. This Agreement grants Franchisee the right to operate the Franchised Business at a single location within the Territory. Franchisor agrees that Franchisor will not, and Franchisor will not permit any other of our franchisees, to operate a franchised Crawlspace Medic location in the Territory using the same Marks as licensed to Franchisee in this Agreement so long as Franchisee is not in default under this Agreement or this Agreement has not expired or been terminated. Except as otherwise specified in this Agreement, Franchisor reserves the right to open, operate or franchise Crawlspace Medic franchises around, bordering and adjacent to the Territory. Franchisee will be selling its products and services from a location within the territory, and will provide services to customers within that territory. Franchisee is prohibited from selling and soliciting customers through alternative distribution channels as more fully specified herein.
- 3.2 Reservation of Rights. Franchisee understands and agrees that all rights to any businesses, other than as specified in this Agreement, are fully reserved to Franchisor within or outside of the Territory. By way of example only, Franchisor reserves the rights to offer (i) other products or services not offered under the Marks, (ii) other crawlspace or basement care and repair concepts under the Marks or other trademarks, including licensing Franchisor's designs for use in other formats and (iii) products or services through any channel in the Territory other than a dedicated Crawlspace Medic location, such as the Internet ("Alternate Distribution Channels"). Franchisee will receive no compensation for Franchisor's sales through Alternate Distribution Channels made within the Territory. Franchisor also reserves the right to acquire, be acquired by or merge with another company. Franchisee agrees that such implementation of Franchisor's rights pursuant to this Section 3.2 is deemed not to impair or injure Franchisee's rights pursuant to Section 2 hereof.
- 3.3 Minimum Performance Requirements. In order to maintain the Territory, franchisee understands and agrees that they must maintain the following Minimum Performance Requirements for Revenue Per Year of Agreement:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Minimum | $225,000 | $350,000 | $600,000 | $750,000 | $900,000 |
| Performance | |||||
| Requirement |
Revenue for the Minimum Performance Requirement must come from within the Franchisee's protected territory. If franchisee fails to meet the Minimum Revenue Quota, it is considered a default of the Franchise Agreement and the Franchisor has the right to reduce the size of the Territory or terminate your franchise agreement.
- **4.
Source: Item 22 — CONTRACTS (FDD page 42)
What This Means (2024 FDD)
According to Crawlspace Medic's 2024 Franchise Disclosure Document, the franchisor retains significant rights both within and outside a franchisee's designated territory. While a franchisee is granted the right to operate their Crawlspace Medic business at a single location within their territory, Crawlspace Medic explicitly reserves the right to open, operate, or franchise other Crawlspace Medic locations around, bordering, and adjacent to the franchisee's territory. This means that while a franchisee has some territorial protection, it is not absolute, and Crawlspace Medic can expand nearby.
Crawlspace Medic also reserves the right to offer other products or services not offered under the Crawlspace Medic marks, other crawlspace or basement care and repair concepts under the marks or other trademarks, and products or services through any channel other than a dedicated Crawlspace Medic location, such as the Internet, which are referred to as "Alternate Distribution Channels." The franchisee will not receive any compensation for Crawlspace Medic's sales through these alternate channels, even if the sales are made within the franchisee's territory. This is a common practice in franchising, allowing franchisors to explore new revenue streams without directly benefiting the franchisee.
Furthermore, Crawlspace Medic reserves the right to acquire, be acquired by, or merge with another company. The implementation of these rights by Crawlspace Medic is not deemed to impair or injure the franchisee's rights under the agreement. Crawlspace Medic also has the right to purchase, merge, acquire, or affiliate with an existing competitive or noncompetitive franchise network, chain, or any other business, regardless of the location of that chain's or business' facilities, and to operate, franchise, or license those businesses and/or facilities operating under the Crawlspace Medic marks or any other marks following Crawlspace Medic's purchase, merger, acquisition, or affiliation, regardless of the location of the facilities. However, Crawlspace Medic represents that it will not convert any such acquired facilities that are operating within the Territory to a Crawlspace Medic franchise during the Term of this Agreement.
These reservations of rights provide Crawlspace Medic with considerable flexibility to adapt to market changes, explore new business opportunities, and expand its brand presence. However, prospective franchisees should carefully consider these reservations and understand that Crawlspace Medic's strategic decisions could potentially impact their business, especially through competition from other channels or adjacent territories. Franchisees should seek clarification on how Crawlspace Medic intends to exercise these rights and how they might affect their individual franchise operations.