How is the 'Designated Territory' for a Lees Famous Recipe franchise determined?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
n of such restaurants, all of which are designed to enhance the reputation and goodwill with the public of establishments operated in accordance with the System.
- SS. "Technology Fee" has the meaning given to it in Section 4(F) of this Agreement.
- TT. "Transfer Fee" has the meaning given to it in Section 14(C)(6) of this Agreement.
- UU. "Website" has the meaning given to it in Section 9(Q) of this Agreement.
2. GRANT OF FRANCHISE
- A. Grant of Franchise, Authorized Location and Designated Territory. Subject to the provisions contained in this Agreement, we grant you a license (the "Franchise") to own and operate a Lee's Famous Recipe Restaurant at a site we approve (the "Authorized Location") and to use the Marks and other aspects of the System in operating the Restaurant. The location of the Restaurant and your Designated Territory are identified in Exhibit A, or alternatively, the parties will complete and sign Exhibit B, in which the parties agree on a geographic area where the location of the Restaurant will be established, subject to our written consent, within three (3) months after the date of this Agreement. We will have the right to terminate this Agreement if you fail to obtain an Authorized Location within the required time period. You do not receive any territorial rights upon designation of the geographic area in Exhibit B, and we and our affiliates have the right to operate and franchise other Lee's Famous Recipe Restaurants within that designated area. Once we consent to a location for the Restaurant within the geographic area established in Exhibit B, however, the parties will sign Exhibit A and identify the Designated Territory.
- B. Nature of Your Designated Territory. During the term of this Agreement, if you are in compliance with the terms of this Agreement and all other franchise agreements (if any) between us and you, we will not directly operate or franchise other persons to operate any other Lee's Famous Recipe Restaurant within the Designated Territory. The Franchise granted to you under this Agreement is personal in nature, may not be used at any location other than at the Authorized Location, and does not include the right to sell any Products or services identified by the Marks at any location other than at the Authorized Location. This Agreement does not include the right to sell any Products or services identified by the Marks through any other channels of distribution, including the Internet (or any other existing or future form of electronic commerce). You will not open any other Lee's Famous Recipe Restaurant, whether within or outside the Designated Territory, unless we permit you to do so under a separate franchise agreement. You will not have the right to subfranchise or sublicense any of your rights under this Agreement. You will not use the Restaurant for any purposes other than the operation of a Lee's Famous Recipe Restaurant. You also understand and agree that the Designated Territory does not include Non-Traditional Venues, and we reserve all franchise and development rights respecting any Non-Traditional Venues located within the geographic boundaries of the Designated Territory. You acknowledge that you do not have any other territorial rights within the Designated Territory. You may not solicit prospective customers outside of the Designated Territory, unless (a) these prospective customers do not reside within the territory granted to
another franchisee or other Lee's Famous Recipe Restaurant location, and (b) you obtain our prior written consent. You acknowledge and agree that we retain all rights to all unassigned territories located outside of your Designated Territory, including those rights described in Section 2(E) below. We may elect to develop or sell any unassigned territory located outside of your Designated Territory at any time without prior notice or accommodation to you.
- C. Catering and Delivery Services. Unless otherwise permitted by us, you must only offer and sell Products and services previously authorized by us, and only from the Restaurant, only in accordance with the requirements of this Agreement and the procedures set forth in the Operations Manual, and only to retail customers for consumption on the Restaurant's premises or for personal, carry out consumption.
Source: Item 22 — CONTRACTS (FDD pages 69–70)
What This Means (2025 FDD)
According to the 2025 Lees Famous Recipe Franchise Disclosure Document, the process for determining a franchisee's designated territory involves several steps and considerations. Initially, a general marketing area, referred to as the "Site Selection Area," is outlined in Exhibit B of the franchise agreement. However, the franchisee does not receive any exclusive territorial rights at this stage, and Lees Famous Recipe retains the right to operate or franchise other restaurants within that area.
Once Lees Famous Recipe approves a specific location for the restaurant within the Site Selection Area, the parties then sign Exhibit A, which officially identifies the Designated Territory. This Designated Territory grants the franchisee a degree of protection, as Lees Famous Recipe agrees not to directly operate or franchise other Lees Famous Recipe restaurants within that territory, provided the franchisee remains in compliance with the franchise agreement. However, this protection is limited, as the franchise is specific to the Authorized Location and does not permit sales through other channels, such as the internet, or at other locations without a separate franchise agreement.
It's important to note that Lees Famous Recipe retains significant rights within and outside the Designated Territory. They can operate or franchise restaurants at Non-Traditional Venues (such as airports, malls, and college campuses) both within and outside the Designated Territory. They also reserve the right to sell products and services under different trademarks through various channels of distribution, including the internet, grocery stores, and other retail outlets. Furthermore, Lees Famous Recipe can acquire or be acquired by other businesses, even if those businesses are located within the franchisee's Designated Territory. Prospective franchisees should be aware of these limitations and consider how they might impact their business operations and potential market.
In summary, while a Lees Famous Recipe franchisee is granted a Designated Territory, this territory comes with several exceptions and limitations. The franchisor retains considerable rights to operate and franchise other outlets through different channels and venues, which could potentially impact the franchisee's business. Therefore, a clear understanding of these terms is crucial for any prospective franchisee.