Is Deer Solution obligated to provide compensation to franchisees if they exercise their Reserved Rights?
Deer_Solution Franchise · 2025 FDDAnswer from 2025 FDD Document
We and our affiliates reserve to ourselves the exclusive right on any and all terms and conditions that we deem advisable and, without any compensation or consideration to you (Franchise Agreement, Article 2.D.), to engage in the following activities (our "Reserved Rights"): (a) operate and grant to others the right to develop and operate Deer Solution Businesses using the System and Licensed Marks outside your Operating Territory, as we deem appropriate and irrespective of the proximity to your Operating Territory; (b) acquire, merge with or otherwise affiliate with one or more businesses of any kind, including businesses that offer and sell products and services that are the same as, or similar to, your Deer Solution Business, and after such acquisition, merger or affiliation to own and operate and to franchise, or license others to own and operate and to continue to own and operate such businesses of any kind, even if such businesses offer and sell products and services that are the same as or similar to a the Franchised Business (but not utilizing the Licensed Marks) within your Operating Territory; (c) be acquired by or merge with or otherwise affiliate with one or more businesses of any kind, including businesses that offer and sell products and services that are the same as or similar to the Franchised Business, even if such business or businesses presently or, in the future, own and operate and franchise or license others to own and operate businesses that offer and sell products and services that are the same as or similar to your Deer Solution Business (but not utilizing the Licensed Marks) within your Operating Territory; (d) use the Licensed Marks and System to distribute the Approved Services and Products offered and sold by the Franchised Business or products and services similar to the Approved Services and Products offered and sold by the Franchised Business in alternative channels of distribution including the internet, catalog sales, telemarketing, or other direct marketing sales (referred to as "Alternative Channels of Distribution") within or outside your Operating Territory; (e) use the Licensed Marks and System to distribute the Approved Services and Products offered and sold by the Franchised Business or services and products similar to the Approved Services and Products offered and sold by the Franchised Business in captive market sites including, but not limited to, nontraditional locations such as malls, transportation centers and limited access venues, within or outside your Operating Territory (referred to as "Closed Markets"); (f) use the Licensed Marks and System to offer, sell, and provide the Approved Services and Products offered and sold by the Franchised Business or products and services similar to the Approved Services and Products offered and sold by the Franchised Business on behalf of customers of local, regional, and/or national corporate accounts (referred to as "Corporate Accounts") within or outside your Operating Territory; and (g) use the Licensed Marks and System and to license others to use the Licensed Marks and System, to engage in all other activities not expressly prohibited by the Franchise Agreement.
Source: Item 12 — TERRITORY (FDD pages 35–37)
What This Means (2025 FDD)
According to Deer Solution's 2025 Franchise Disclosure Document, Deer Solution retains specific rights, termed "Reserved Rights," without any obligation to compensate franchisees. These Reserved Rights enable Deer Solution and its affiliates to engage in various activities, including operating or franchising Deer Solution businesses outside a franchisee's territory, irrespective of proximity. They can also affiliate with other businesses, even those offering similar services within a franchisee's territory, provided they don't use Deer Solution's licensed marks.
Deer Solution also reserves the right to use alternative distribution channels like the internet or direct marketing to sell approved services and products, or similar ones, both within and outside a franchisee's operating territory. They can operate in captive market sites such as malls and transportation centers and serve corporate accounts, again without compensating the franchisee. Essentially, Deer Solution retains broad latitude to operate and expand its brand through various channels and partnerships, even if those activities might compete with or impact a franchisee's business.
This lack of compensation for Reserved Rights is a significant point for potential franchisees. While franchisees are granted an operating territory, Deer Solution's ability to operate outside of it without compensation could lead to potential revenue loss for the franchisee. It is important to note that Deer Solution is not restricted from soliciting or accepting orders from customers inside a franchisee's territory and does not pay any compensation for doing so.
Prospective franchisees should carefully consider the implications of these Reserved Rights and the absence of compensation. It would be prudent to discuss with Deer Solution the potential impact of these rights on a franchisee's revenue and market share, as well as strategies for mitigating any potential negative effects. Understanding how Deer Solution intends to exercise these rights in practice is crucial for making an informed investment decision.