Item 12 is the section of the Franchise Disclosure Document that describes the franchisee’s territory rights. It explains whether the franchisee receives an exclusive territory, a protected territory or no territory at all. Item 12 must also explain how the franchisor defines territories, whether the franchisor reserves certain rights and the circumstances under which a territory may be modified, reduced or lost.
Item 12 is one of the most important disclosures for franchise buyers because it outlines the procedure for defining the geographic area in which they can operate and whether the franchisor may create internal competition.
Territory structure directly affects the growth potential of a franchise unit. Buyers rely on Item 12 to understand:
how much market area they receive
whether they have protection from other franchisees
whether the franchisor can operate in their territory
how territories are drawn and how consistent they are
whether performance requirements affect territory rights
Clear territory disclosures reduce disputes and help franchisees evaluate market opportunity.
The FTC Franchise Rule requires franchisors to clearly explain:
whether the franchise is for a specific location
whether the franchisee receives a territory
whether the territory is exclusive, protected or non exclusive
the geographic method used to define the territory
whether the franchisor can open company owned units
whether the franchisor can use alternate channels of distribution
whether territory rights depend on performance
whether a territory can be changed
Franchisors must also describe any rights reserved for national accounts, e commerce or non traditional venues.
Item 12 supports many functions:
franchise sales presentations
validation discussions
mapping and territory planning
multi unit development strategies
compliance reviews in registration states
competitive analysis across markets
Territory details in Item 12 are often aligned with maps created in GIS software or territory mapping platforms.
Franchisors may describe territories using:
ZIP Code groups
census tracts
drive time areas
radius boundaries
city or county lines
custom geographic shapes
Modern systems often prefer census tracts because they offer better demographic accuracy.
Franchise Territory
Exclusive Territory
Protected Territory
Radius Map
Drive Time Map
Item 19
Franchise Disclosure Document (FDD)
Franchise Territory Mapping
Demographic Analysis
Reporting
Understanding Item 12 of the Franchise Rule: Territories Explained
Territory Mapping & Item 19: Why Size Does Matter in Franchise Disclosure
Last updated: November 26, 2025
