Franchise question

[rJ_]

What are the extra obstacles when starting a business when there are already other franchises in the same city but you think the city can handle more?

Obviously your new (lets say) Mcdonald's will take some business from the nearest other Mcdonald's. So how is that owner compensated?

Is there a general rule, or is it franchise by franchise and does anyone know how much they differ?

Thanks

rJ_

[-Skeme-]

If they're privately owned, why would they have to compensate another owner? Wouldn't the owner of a seperate franchise from the same company be considered competition?

[rJ_]

Is there something that stops me from opening up a Mcdonald's across the block from an existing one? Your statement makes it seem that there is nothing stopping this. If thats the case then my question is answered. I just always assumed there were rules about this.

rJ_

[Caddy_4_Life]

[ QUOTE ]
Is there something that stops me from opening up a Mcdonald's across the block from an existing one? Your statement makes it seem that there is nothing stopping this. If thats the case then my question is answered. I just always assumed there were rules about this.

rJ_

[/ QUOTE ]

Yes there are rules against it. It's totally up to the corporation. What they'll often do is guarantee a franchise a certain area or zone. Thats why you never see Mc Donalds side by side.

You'll notice with certain franchises those areas are closer than others. Example Tim Hortons can be found within 15 blocks of each other in major Canadian cities while Mc Donalds can be found probably within 40 blocks from each other.

Supply and demand.

-Caddy

[ItalianFX]

In my college town there are 2 McDonald's, 2 Pizza Huts, 2 Subways, and 3 Sheetz's.

I don't know why, but I guess they all get their fair share.

[-Skeme-]

[ QUOTE ]
Is there something that stops me from opening up a Mcdonald's across the block from an existing one? Your statement makes it seem that there is nothing stopping this. If thats the case then my question is answered. I just always assumed there were rules about this.

[/ QUOTE ]

Yes, there are rules in place to prevent this, to my knowledge. I believe the business sets these rules and has to give the OK to open a new resturant/business. I think someone said that Subway allows a new store very close to an existing one, thus making it a bad choice for a franchise investment.

I still believe my other statement holds true, though. A franchis near another preexisting franchise are rivals and have no requirement to reimburse one another for stolen customers.

[LImitPlayer]

[ QUOTE ]
You'll notice with certain franchises those areas are closer than others. Example Tim Hortons can be found within 15 blocks of each other in major Canadian cities while Mc Donalds can be found probably within 40 blocks from each other.


[/ QUOTE ]

Where I live there are several Tim Hortons within 2-3 blocks of each other across the city.

I can think of 2 locations North and West side where there are Tim hortons directly across the street from each other

[James Boston]

Franchisers are required to file reports with franchisees regarding competition and what not, but the regulations vary from state to state. Some states offer franchise protection for certain industries. Most companies will provide the franchisee with some sort of guarantee/territory. It varies enough that you would want to do alot of research within the industry you want to get involved in. I will say that I've known first-hand of franchisees having to take legal action against parent companies who were in the process of setting up competition inside what would be considered an unreasonably close trading area.