If an Engel & Volkers franchisee is in default, can the Franchisor reduce the Protected Area?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Real Estate Brokerage or such lease expires or is otherwise terminated;
- 20.4.4 commits a breach of Section 23.2 (Ownership in Franchisee's Company);
- 20.4.5 or the Estate fails to comply with Section 22.4 (Assignment Upon Death or Disability);
- 20.4.6 or any of its affiliates is in default under any other franchise agreement or other agreement with Franchisor or one of its affiliates, which is not curable, or, if such default is curable and a notice to cure has been provided to Franchisee or its applicable affiliate, Franchisee or its applicable affiliate has not cured such default within the applicable cure period.
- 20.5 Optional Remedy**:** If Franchisee fails to timely pay any amounts due to Franchisor or one of its affiliates, or if Franchisee is in material breach of any obligation under this Agreement, Franchisor may, in addition to or in lieu of its remedy under Section 20.4 or otherwise provided in this Agreement: (i) withhold Franchisee's access to the Integrated Product Suite described in Section 7 and any other services or goods, such as the GG Magazine, that Franchisor or its affiliates are obligated to provide hereunder until such time as Franchisee's payments are current;
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, Engel & Volkers has the option to reduce a franchisee's protected area if the franchisee is in default. Specifically, if a franchisee fails to pay amounts due to Engel & Volkers or is in material breach of any obligation under the Franchise Agreement, Engel & Volkers may rescind negotiated terms, including reducing the franchisee's Protected Area. This is in addition to, or instead of, other remedies available to Engel & Volkers. Examples of material breaches include failing to make timely payments or submit required reports.
This provision gives Engel & Volkers significant leverage over franchisees. If a franchisee violates the agreement, Engel & Volkers can diminish the value of the franchise by reducing the protected territory, potentially impacting the franchisee's revenue and market share. The franchisee should, therefore, pay close attention to the conditions that constitute a material breach and ensure compliance with all contractual obligations.
It is important to note that Engel & Volkers' right to reduce the Protected Area is an optional remedy, meaning they may choose to exercise it or pursue other remedies for the default. This flexibility allows Engel & Volkers to tailor its response to the specific circumstances of the default and its overall business strategy. The franchisee's 'Exclusivity' within the protected area is contingent on not being in default under the terms of the agreement.