Under the Deka Lash Area Development Agreement, what right does the developer obtain?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
If you enter into an Area Development Agreement, you will obtain the right to own and operate multiple Franchised Businesses in a Development Area according to a mandatory Development Schedule. The size of the Development Area will depend upon the number of Franchised Businesses you are required to open. Provided you comply with the terms of the Area Development Agreement, and any Franchise Agreements signed for Franchised Businesses within the Development Area, we grant to you an exclusive territory in which we will not locate another Deka Lash Studio operating under the Marks or marks similar to the Marks, whether franchised or affiliate-owned, in your Development Area.
Note, that while we will not license anyone the right to open or operate, any Franchised Business that is physically located within the Development Area, that does not mean you can open or operate a Franchised Business anywhere within that Development Area. If a franchisee secures a location near your development area, and their associated protective radius (generally 1.5 miles) overlaps into your Development Area, you will not be able to locate a studio within the protected radius that overlaps your Development Area. We will let you know of any existing studios that have protective radius overlapping into your Development Area prior to execution of this agreement, but we make no warranties that a franchisee will not subsequently choose a location that creates a protective radius that overlaps into the Development Area.
We do not grant you options, rights of first refusal, or similar rights to acquire additional franchises under the Area Development Agreement.
Each Franchised Business must be opened according to the Development Schedule described in the Area Development Agreement, which will specify the number of Franchised Businesses to be open and the time frames within which they must be open.
Area Development Territorial Exclusivity. Your territorial exclusivity is not dependent upon meeting the development schedule, achievement of a certain sales volume, market penetration or any other contingency. However, you can lose all rights to the undeveloped portion of a development area for failure to meet a development schedule.
Source: Item 12 — TERRITORY (FDD pages 40–44)
What This Means (2024 FDD)
According to Deka Lash's 2024 Franchise Disclosure Document, an Area Development Agreement grants the developer the right to own and operate multiple Deka Lash Franchised Businesses within a specific Development Area, following a mandatory Development Schedule. The size of the Development Area is determined by the number of Franchised Businesses the developer is required to open.
The agreement provides an exclusive territory within the Development Area, preventing Deka Lash from establishing another studio operating under similar marks, whether franchised or affiliate-owned. However, this exclusivity is subject to certain limitations. The developer cannot operate a Franchised Business anywhere within the Development Area, as existing studios may have protective radii (typically 1.5 miles) that overlap into the Development Area, restricting the placement of new studios. Deka Lash will inform the developer of any existing overlapping protective radii before the agreement is executed but does not guarantee that future franchisees won't choose locations that create overlapping radii.
The Area Development Agreement does not grant options, rights of first refusal, or similar rights to acquire additional franchises. The developer's territorial exclusivity is not contingent upon meeting sales volumes or market penetration but can be lost if the Development Schedule is not met. Failure to comply with the Franchise Agreement, Development Agreement, or demonstrate a good faith effort in securing and opening the next scheduled studio can result in immediate termination of the territory and remaining development rights.