What is the encroachment fee for Pearce Bespoke sales to Non-Exclusive Customers?

According to Pearce Bespoke's 2025 Franchise Disclosure Document, franchisees may face situations where they sell to customers outside of their designated territory, referred to as "Non-Exclusive Customers." Pearce Bespoke permits sales to Non-Exclusive Customers only if the franchisee was solicited by the customer or had a prior verifiable relationship with them.

However, even when these conditions are met, Pearce Bespoke requires the franchisee to pay an encroachment fee. This fee is calculated as twenty percent (20%) of the gross sales attributed to these Non-Exclusive Customers. This means that for every dollar of sales made to customers outside the franchisee's territory, twenty cents must be remitted to Pearce Bespoke or the incumbent franchise owner.

This encroachment fee serves as compensation to Pearce Bespoke or the franchisee who might otherwise have had the opportunity to serve that customer within their territory. It is important for prospective franchisees to factor this cost into their financial projections, as it can significantly impact the profitability of sales made outside of their primary territory.

This policy is not uncommon in franchising, as franchisors often seek to balance the need for franchisees to grow their businesses with the desire to protect the territories of other franchisees. The specific percentage can vary across different franchise systems, but the underlying principle of compensating for encroachment is a fairly standard practice.