FTC Clarifies Franchise Rule’s “Exclusive Territory” Disclosure

On October 16, 2012, the Federal Trade Commission (the “FTC”) answered an additional “frequently asked question” regarding the 2007 amendments to its Franchise Rule. The frequently asked question is:

“May a franchisor state in Item 12 that it grants an ‘exclusive territory’ if it reserves the right to open franchised or company outlets in so-called ‘non-traditional venues’ like airports, arenas, hospitals, hotels, malls, military installations, national parks, schools, stadiums and theme parks?”

The FTC has responded that a franchise may not state in Item 12 that it grants “exclusive territory” if it reserves rights to open outlets selling the same goods or services under the same trademarks or service marks within a franchisee’s territory. The nature of the venue, according to the FTC, is not dispositive in this regard.

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