Here is the actual Territorial Rights section in the Krispy Kreme franchise agreement which has been reproduced in its whole.
Please note that Krispy Kreme has discontinued their franchising program in the United States and Canada. The sections in this agreement are for references purposes only.
Part 1, Section E: Territorial Rights
Provided you are in full compliance with this Agreement, neither we nor any of our affiliates will during the term of the Agreement own, operate or grant franchises for the operation of a KRISPY KREME STORE or sell any products identified by the Marks or made utilizing the recipes of the Products within the Territory described on Exhibit B (the "Territory") other than the franchise granted to you under this Agreement.
As long as you are in full compliance with this Agreement, any Development Agreement and all other agreements with us during the term of this Agreement, we will not solicit or make, and we will contractually prohibit other franchisees from soliciting or making, Deli Bakery Sales to any account or location to which you have made sales continuously over the prior 12-month period (subject to the provisions of Section 1.D. hereof). Accordingly, you shall not make any Deli Bakery Sales to any account or location to which another franchisee has made sales continuously over the prior 12-month period.
Exhibit B – Territory
The “Exhibits” section is found at the end of the Franchise Agreement, listing specific details as referenced in the Agreement.
The Territory referred to in Section 1.E. of the Franchise Agreement shall be as follows:
-- one-eighth (1/8) mile radius from the Site of the Store in Urban areas
-- one (1) mile radius from the Site of the STORE in Suburban areas
Comment: Territorial protection become paramount when operating a franchise. Not only are you protected from other “locations” opening within the defined geographic area, but the same products and/or services rendered by the franchisor cannot be sold – even by another franchisee, affiliate, or subsidiary company. Some franchises encourage doing business outside the normal channels of distribution, such as selling from their “outlet.” They may do online or wholesale business.
Therefore, a franchisee (or the franchisor) cannot solicit business of any kind within your territory. On the other hand, if a customer residing within your territory chooses by his/her own accord to do business with a competing franchise outside your territory, your territorial rights do not apply.
As per the Krispy Kreme Agreement, territorial protection isn’t great. Within a two mile radius in “Urban Areas,” for example, there could be up to 16 Krispy Kreme outlets opened by the franchisor. That doesn’t allow for much competitive advantage to the franchisee. Franchisors are not inclined to negotiate Territorial Rights because they will argue that their brand requires high-volume retail positioning to maximize demand.
