Does Floors To Go grant exclusive territories to franchisees?

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ITEM 12. TERRITORY

A. Your Territory

You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. Specifically, you may face competition from other FTG Showrooms that we or our affiliates franchise or own and that operate at traditional sites outside your territory. Also, you may face competition from other outlets that we franchise or own, or from other channels of distribution or competitive brands we control, including, but not limited to, competition from the FTG Shop At Home program.

As part of the FTG System, FTG will grant territorial rights to you which are officially identified in Schedule "A" of the Membership Agreement. FTG will not open any companyowned Floors To Go Showrooms or permit other franchised Floors To Go Showrooms to be located within your territory. Your territory will be determined based on the factors that we deem relevant, which might include population, traffic flow, presence of businesses, location of competitors (including other showrooms), demographics, and other market conditions. You agree to conduct your business at the location designated in Schedule "A" of the Membership Agreement and in no other location. Schedule "A" to the Membership Agreement will include the location of your principal place of business (the approved Showroom location) and a description of your territory. If your territory is defined as a radius, it will be measured from your approved Showroom. Otherwise, the boundaries of a territory are typically designated by streets or by the political boundaries of cities as they exist on the date the Membership Agreement is signed.

FTG, under Section 1.2 of the Membership Agreement, specifically agrees that it will not open or license any other person or entity to open a Showroom using FTG's trade name or service marks within your territory designated in Schedule "A" to the Membership Agreement.

On renewal or relocation of a franchise, the territory may be modified. Depending on the then-current demographics of the territory, and on our then-current standards for territories, if the territory is larger than our then-current standard territory, we may require you or the transferee to accept a renewal territory or a transfer territory smaller than your then-current territory.

You have no options, rights of first refusal, or similar rights to acquire additional franchises. If after the execution of your initial Membership Agreement you wish to open additional showrooms using the FTG System, and even if the proposed showrooms are within your territory, you must enter into a separate Membership Agreement for each such showroom.

You are not permitted to use our corporate name or trade names or the Floors To Go Marks, or any colorable imitations of those Floors To Go Marks, for identifying, referencing, linking or otherwise connecting to any Internet Web Site or Domain Name other than those Internet Web Sites and Domain Names as are presently, or may be subsequently, owned by or registered to us. You are not permitted to use or assist others, in any manner, with using

Floors To Go Marks or our corporate name, trade names, trade symbols, logos, emblems, slogans or designs, in whole or in part, to offer or sell any floor covering or window treatment products on or through any Internet Web Site or Domain Name.

Continuation of your franchise or territorial rights is not directly dependent upon achievement of certain sales volume, market penetration or other contingency. However, you must purchase, for each of your Showrooms, a minimum of $350,000 or 80% of your total floor covering and window treatment purchases, whichever is greater, through the FTG System during the calendar year following the opening of each such Showroom. Only those floor covering and window treatment products that FTG designates as part of the FTG System qualify towards the minimum purchase requirements. Failure to achieve the volume purchase requirements set forth in Subsection 7.1(a) of the Membership Agreement does give FTG the right to terminate your Membership Agreement (see Subsection 13.2(b)(4) of the Membership Agreement).

We do not restrict you from soliciting or accepting orders from outside your territory, but you do not have the right to use other channels of distribution to make sales outside your territory.

Under the Membership Agreement, you will have the right to move your Showroom to another location, provided that (i) you give us ninety (90) days' prior written notice of the proposed relocation, (ii) the new location is within your existing territory, (iii) the new location otherwise complies with the terms of the Membership Agreement, and (iv) you agree to a revision of your existing territory, as determined by us in our sole discretion. The relocation must be approved in writing by FTG. You will be required to continue paying the monthly Service Fee and Advertising Fee during the time between termination of operations at the original Showroom location and commencement of operations at the new Showroom location.

Provided that you are in full compliance with the Membership Agreement, we and our affiliates will not operate or grant a franchise for the operation of another FTG Showroom at a location within your territory during the term of this Membership Agreement, except under the circumstances set forth below. Otherwise, we and our affiliates retain all rights not expressly granted to you under the Membership Agreement (with respect to, among other things, FTG Showrooms, the Marks, the sale of similar or dissimilar products and services, and any other activities we deem appropriate whenever and wherever we desire), including, but not limited to, the right in our sole discretion:

• 1. to operate, and to grant others the right to operate, FTG Showrooms located anywhere outside your territory;
• 1. to develop, use, and license the rights to any tradenames, trademarks, service marks, trade symbols, emblems, signs, slogans, insignia, or copyrights that we have not licensed to you under the Membership Agreement;

Source: Item 12 — TERRITORY (FDD pages 27–30)