Relevant market refers to the specific geographic area and group of consumers or businesses that a franchise location serves or competes within. It defines where and to whom a franchisee may market and sell products or services. In franchising, identifying the relevant market is crucial for territory rights and competitive analysis.
Relevant market in franchising is the defined area and demographic where a franchisee is authorized to operate and compete. It includes both geographic boundaries—such as a city, zip code, or designated radius—and the type of customers or clients targeted. Understanding the relevant market is essential for franchisors when designing territories, preventing internal competition, and supporting franchisee success. Often, the Franchise Agreement will describe or reference the relevant market when outlining protected territories, marketing obligations, or performance standards. Properly identifying the relevant market ensures that franchisees know where they can promote their offerings and against whom they are primarily competing, helping to maintain brand clarity and territorial fairness.
Additional Definition: A way of identifying a market area according to its geography. In franchising, the term usually identifies the area in which a particular business entity has control.
Learn more about franchising in The Educated Franchise - 3rd Edition
The concept of the relevant market comes from antitrust law, where it is used to define the competitive landscape for evaluating business practices. As franchising developed, the idea was adopted to clarify territorial rights and prevent disputes between franchisors and franchisees. During the 1980s and 1990s, as franchises expanded into more densely populated and competitive areas, defining the relevant market became critical to franchise system design. Today, nearly all serious franchise systems take the time to carefully define relevant markets either in their Franchise Disclosure Documents, Franchise Agreements, or supporting manuals to ensure that growth is strategic and fair to existing franchisees.
Relevant market is a foundational concept in franchising that defines where and to whom a franchisee can sell goods or services. By establishing clear geographic and customer parameters, franchisors protect franchisee investments and ensure healthy system growth. A clearly outlined relevant market benefits both franchisors and franchisees by setting expectations, promoting fairness, and avoiding unnecessary competition within the brand.
