Besides termination, what is the other circumstance under which Engel & Volkers can modify a franchisee's Protected Area?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Except for our right to terminate your Franchise Agreement under certain circumstances or to reduce your Protected Area if you have multiple locations in your Protected Area as described above, there are no other circumstances under which we can modify your Protected Area.
We may grant you the right to open and operate one or more limited purpose locations ("Limited Purpose Location(s)"), which will generally be located in your Protected Area and which will be subject to your continued complaince with the terms of your franchise agrement and certain standards as set forth in the System Documentation, as amended from time to time. Limited Purpose Locations are typically either locations for overflow administrative staff, or for sales advisors to use in connection with specific development projects. You must request our approval to operate a Limited Purpose Loction in writing in advance and provide sufficient information, as specified by us from time to time in the System Documentation, to support your request. Within 30 days after receiving such a request, we will, at our discretion, approve or deny your request. You will not receive any additional territorial rights with our aproval of a Limited Purpose Location. You may not operate a Limited Purpose Location without our aproval and unless we sign an Limited Purpose Sales Location Addendum or Limited Purpose Administrative Location Addendum with you for each Limited Purpose Location. You should not sign a lease or incur any other expenses or liabilities before an Limited Purpose Location Addendum for the proposed location is executed. A Limited Purpose Location is not and does not replace an Approved Location (as defined in the Franchise Agreement) and you will have no right of first refusal, option or similar rights to acquire additional franchises or for additional Limited Purpose Locations.
During the term of your Franchise Agreement, we will not permit another location (other than for additional franchised locations you and we agree to, or Limited Purpose Locations that we permit you to open) in your Protected Area and we will not open an Engel & Völkers Residential Real Estate Brokerage of our own dealing in residential properties using the ENGEL & VÖLKERS Trademark within your Protected Area. Generally, your rights in your Protected Area are not dependent upon achievement of a certain sales volume, market penetration or any other contingency. However, if you request and we grant you to open and operate more than one location in your Protected Area and you do not find or operate those additional locations as agreed upon in the Franchise Agreement, we reserve the right to reduce your Protected Area to reflect an appropriate Protected Area for the location or locations that are operational.
Source: Item 12 — TERRITORY (FDD pages 54–56)
What This Means (2025 FDD)
According to Engel & Volkers's 2025 Franchise Disclosure Document, besides the right to terminate the Franchise Agreement under certain circumstances, Engel & Volkers can reduce a franchisee's Protected Area if the franchisee has multiple locations within that area. This reduction occurs if the franchisee does not find or operate those additional locations as agreed upon in the Franchise Agreement. In such cases, Engel & Volkers reserves the right to adjust the Protected Area to appropriately reflect the area serviced by the operational location or locations.
This provision is important for prospective franchisees to understand, especially if they plan to expand within their Protected Area by opening multiple locations. The initial grant of a Protected Area may be contingent on the franchisee's ability to effectively manage and operate multiple locations as per the agreement. Failure to meet these operational requirements can lead to a reduction in the originally granted territory, impacting the franchisee's potential market reach and revenue.
Engel & Volkers's approach to territorial protection includes granting exclusivity for Engel & Volkers Residential Real Estate Brokerages within a defined area, typically based on US postal zip codes. However, this exclusivity does not prevent Engel & Volkers, its affiliates, or other franchisees from soliciting clients, marketing services, or concluding real estate transactions within the Protected Area. This means that while another Engel & Volkers Residential Real Estate Brokerage cannot be opened in the Protected Area, there is still potential for competition from within the Engel & Volkers network.
Prospective franchisees should carefully consider the implications of this clause and discuss with Engel & Volkers the specific criteria and expectations for operating multiple locations within a Protected Area. Understanding these requirements is crucial for making informed decisions about expansion and managing territorial rights effectively.