Michigan’s Data Center Moment: Navigating the Moratorium Maze

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Michigan is emerging as one of the most compelling jurisdictions for hyperscale and enterprise data center development. In addition to ideal land-use conditions, Michigan offers significant tax incentives, including an exemption from the 6 percent sales and use tax on certain data center equipment and construction materials. Michigan also provides regulatory options for power supply that are not available in other states.

As interest from sophisticated developers accelerates, however, a familiar pattern is taking hold across Michigan’s townships and municipalities: the preemptive development moratorium.

The Michigan Data Center Development Landscape

Dozens of Michigan municipalities, many of them well-positioned for data center siting due to infrastructure, land availability, and utility access, have enacted temporary moratoria on data center development.

While courts have recognized a municipality’s authority to adopt moratoria under certain circumstances, there is no express statutory authority for development moratoria in Michigan. However, moratoria are not new to developers in the state. Municipalities have used them to pause development while reviewing or amending zoning ordinances and to delay or discourage projects they oppose. In practice, a moratorium can function either as a shield or as a sword.

Moratoria vary widely in scope and defensibility. Some are narrowly tailored and supported by clear findings, while others are broad and more vulnerable to legal challenge. Most reflect a common reality: local zoning ordinances drafted decades ago did not contemplate modern data centers, particularly their scale, energy demands, and operational intensity.

Under the Michigan Zoning Enabling Act and related statutes, local governments retain authority over zoning approvals for data centers. The interaction among zoning authorities, municipal powers, and utility regulation creates both strategic and operational obstacles. The timing of site control, pre-application engagement with local officials, and the overall project posture can affect a development’s trajectory.

For developers unfamiliar with Michigan’s legal and regulatory framework, an early strategy is critical.

What Data Center Developers Should Know About Michigan Moratoria

A moratorium is not necessarily a dead end. Michigan law imposes substantive and procedural constraints on a municipality’s authority to enact or extend a development moratorium. The enforceability of any specific moratorium depends on its language, legislative findings, procedural history, and factual context. Generally, a valid moratorium should be tied to protecting public health, safety, and welfare.

Beyond zoning, Michigan data center projects implicate a complex web of permitting, environmental compliance, energy regulation, and economic development incentives. Key considerations may include:

  • Brownfield redevelopment incentives
  • Environmental permitting and compliance
  • Large-load interconnection and electric service agreements
  • Power Purchase Agreement (PPA)
  • Real estate acquisition and site control strategy
  • Payments in lieu of taxes (PILOTs)
  • State and local tax incentives

The path to energization is rarely linear. Developers who approach these workstreams sequentially, rather than in parallel, often face avoidable delays or disadvantages. A coordinated, Michigan-specific strategy can significantly reduce entitlement risks and timeline uncertainty.

Working with Varnum on Michigan Data Center Projects

Varnum advises data center developers, owners, and investors across the full lifecycle of Michigan projects. Our team works closely with municipalities, utilities, and state agencies across the state and brings integrated experience in:

  • Land use and zoning
  • Real estate transactions
  • Environmental permitting and compliance
  • Energy and utility regulation
  • Tax incentives and economic development programs
  • Public finance

We help clients structure early engagement to preserve optionality, evaluate moratorium risk, coordinate parallel workstreams, and move efficiently, from site selection to certificate of occupancy.

Michigan’s data center market is rapidly expanding. Developers positioned with a thoughtful legal and regulatory strategy will be better equipped to navigate risk and advance efficiently.

For guidance on Michigan data center development, zoning moratoria, or energy strategy, contact a member of Varnum’s Energy Practice Team.

The Rise of CIPA Website Tracking Claims

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Businesses nationwide are facing a sharp increase in claims under the California Invasion of Privacy Act (CIPA), a 1967 statute originally designed to address wiretapping and eavesdropping.  

Today, plaintiffs’ attorneys are using CIPA to challenge common website technologies, including cookies, analytics tools, session replay software, and chat features. Many companies are caught off guard when they receive a demand letter alleging unlawful website tracking, followed by the threat of litigation.

Thousands of CIPA website tracking claims have been asserted, and filings continue to rise.

What Is the California Invasion of Privacy Act?

CIPA was enacted to protect individuals from the unlawful interception or recording of private communications. While the law originally focused on telephone wiretapping, plaintiffs and some courts now interpret it to apply to digital communications and online activity.

Under these theories, certain website tracking tools may be characterized as unlawfully “intercepting” or “recording” user communications without adequate consent.

CIPA allows private lawsuits and provides for statutory damages of up to $5,000 per violation, even without proof of actual harm.

Why Are CIPA Website Tracking Lawsuits Increasing?

CIPA claims have surged as a relatively small group of plaintiffs’ firms and serial litigants target routine website practices that were not contemplated when the law was enacted.

These cases are appealing to the plaintiff because of:

  • Statutory damages of up to $5,000 per violation
  • The potential of class action certification
  • Inconsistent court rulings on how CIPA applies to online tracking

In 2025, California lawmakers considered Senate Bill 690 (SB 690), which would have limited CIPA’s application to certain common business uses of website technologies, but the bill ultimately did not pass. While similar legislation may be introduced in the future, any change may not take effect immediately or apply retroactively.

The absence of a statutory safe harbor continues to create uncertainty for businesses and may incentivize additional filings.

What Website Technologies Trigger CIPA Claims?

Recent CIPA website tracking lawsuits have targeted widely used tools, including:

  • Website cookies and tracking pixels
  • Analytics and marketing tools
  • Session replay or keystroke monitoring software
  • Chat widgets and contact forms

In many cases, the challenged tools are standard third-party services used for marketing, customer support, and website optimization.

How Do CIPA Claims Typically Begin?

Most CIPA disputes begin with a demand letter alleging unlawful interception of website communications. Some matters resolve before a lawsuit is filed; others proceed to formal litigation.

Business Risks and Compliance Considerations

Even defensible CIPA claims can be costly. Potential exposures include:

  • Statutory damages
  • Attorneys’ fees
  • Class action defense costs
  • Reputational risks

Because CIPA provides statutory damages without requiring proof of actual harm, businesses often must evaluate risk early and make strategic decisions under significant legal and financial uncertainty.

Businesses Facing CIPA Claims

Varnum regularly advises businesses responding to CIPA demand letters and defending website privacy litigation at both the pre-suit and litigation stages.

If your organization has received a CIPA demand letter or lawsuit, or has questions about website privacy litigation trends, contact your Varnum attorney or a member of Varnum’s Data Privacy or Litigation Practice teams.

What Employers Should Know and Do When an Employee Dies

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The death of an employee is, above all, a human loss. In the days that follow, employers are often called on to address final wages, payroll taxes, and employee benefits in a way that supports the employee’s family while remaining compliant with federal and state law. The most effective response combines empathy with a clear, documented process grounded in applicable statutes, plan documents, and regulatory requirements.  

Final Wages and Payroll Tax Reporting After an Employee’s Death

Remaining compensation generally belongs to the employee’s estate unless state law permits payment directly to a surviving spouse or other designated individual. Employers should obtain a certified death certificate and appropriate estate documentation before issuing payment and should collect a W-9 form from each payee.

Wages paid in the year of death are generally subject to FICA and FUTA but not federal income tax withholding and are reported on the decedent’s W-2 form. Payments made after the year of death are typically reported on a 1099 form to the recipient. Employers should cancel any pending direct deposits and handle uncashed checks in accordance with state wage payment and probate laws to avoid misdirected funds.

All outstanding compensation should be reviewed, including salary, accrued paid time off where required by law or policy, bonuses, commissions, and deferred compensation, to determine amounts owed and proper timing and tax reporting.

Benefits Administration: Health Insurance, Retirement Plans, and Life Insurance

Plan vendors and insurers should be notified promptly, and beneficiary designations should be located and reviewed. This step is critical for administering group health coverage, retirement benefits, and life insurance proceeds.

For group health plans, employers should coordinate coverage termination and issue required COBRA notices. Surviving spouses and dependents are commonly eligible for up to 36 months of COBRA coverage, though different rules may apply to employers with fewer than 20 employees.

Retirement plan distributions must comply with the governing plan documents, including rules on vesting, employer contributions, and payment timing. Distributions are generally reported on 1099 forms. For group life insurance, employers should assist beneficiaries and ensure the insurer receives all required documentation to process claims in accordance with policy terms.

Work-Related Deaths, Workers’ Compensation, and Privacy Obligations

If an employee’s death is work-related, employers must report the fatality to OSHA within eight hours and follow applicable workers’ compensation procedures. Survivor and burial benefits vary by state, so prompt coordination with the workers’ compensation carrier is essential.

Employers should also protect the confidentiality of the employee’s personal and protected health information. Communications should be centralized through designated HR or benefits personnel to minimize privacy and compliance risks.

Practical Steps and Common Pitfalls to Avoid

  • Verify legal authority before making any payments and ensure payroll, HR, and benefits teams are aligned on documentation requirements, including death certificates, letters of appointment, and W-9 forms. Legal requirements may vary by state.
  • Do not rely on existing direct deposit instructions. Financial institutions may restrict access after death, increasing the risk of misdirected funds.
  • Coordinate payment timing carefully. Wages paid in the year of death are generally reported on W-2 forms, while payments made later are typically reported on 1099 forms.
  • Rely on plan documents and plan administrators when addressing health, retirement, and life insurance benefits, and confirm that administrators are prepared to communicate with beneficiaries and process distributions.

A Compassionate and Compliant Response

Clear processes, careful documentation, and adherence to plan terms and applicable law help reduce risk while honoring the employee and supporting their family. Employers facing these issues may benefit from guidance tailored to their specific circumstances.

For assistance, contact a member of Varnum’s Employee Benefits and Executive Compensation practice team to help navigate these requirements and respond quickly, respectfully, and in compliance with the law.

H-1B Lottery 2027 Registration Opens March 4

U.S. Citizenship and Immigration Services (USCIS) announced the initial registration period for the fiscal year 2027 H-1B cap will open at noon EST on March 4, 2026, and run through noon EST on March 19, 2026. The USCIS registration fee remains $215. 

USCIS will select 85,000 petitions through a lottery process: 20,000 for the U.S. advanced degree category and 65,000 for the general category. Applicants selected in the lottery should be notified by March 31, 2026, and will have until June 30, 2026, to submit the H-1B petition.

New this year: Selection will be wage-weighted, with beneficiaries receiving one to four entries based on the Department of Labor wage level offered. A $100,000 fee applies to all applicants outside the U.S.

Varnum’s immigration attorneys have begun collecting information to prepare for the March registration period and to complete the wage-level analysis. Employers with employees on F-1 Optional Practical Training (OPT) or candidates requiring cap-subject H-1Bs should contact us to prepare for registration.

Legal Planning for Minor Children During Parental Absence in Michigan

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Parents may face situations that make it difficult or temporarily impossible to care for their minor children. These situations can arise unexpectedly and may last longer than anticipated. Having a clear plan in place helps ensure that children are cared for by trusted adults with the legal authority to act when parents cannot.

Michigan law offers several legal tools that allow parents to prepare for a temporary separation and designate who may step in and care for their children. Implementing these measures in advance can ensure continuity of care, reduce stress, and help avoid unnecessary court involvement.

Why Advance Planning for Minor Children Matters 

When a parent is unavailable, another adult’s ability to care for a child often depends on legal authority. Schools, medical providers, and other institutions typically require documentation before legally recognizing anyone other than a parent.

Without advance planning, caregivers may be forced to involve the court in an already difficult situation. Proactive legal planning gives trusted adults the authority they need to make medical, educational, and day-to-day decisions and helps ensure children experience as little disruption as possible.

Legal Tools Available Under Michigan Law 

Michigan law provides several options to address temporary parental absence. Each tool serves a different purpose, and in many cases, works best when used in combination. 

Temporary Delegation of Parental Authority in Michigan

One commonly used option is a temporary delegation of parental authority. This document authorizes a parent to designate another adult to make decisions regarding a child’s care, education, and medical treatment.

Under Michigan law, this delegation is time-limited and may not exceed 180 days, and can be revoked by the parent at any time. Because of its temporary nature, this tool is well-suited for addressing immediate or short-term needs when a parent expects to resume care and wishes to avoid court involvement.

Parental Nomination of a Guardian for a Minor Child

Parents may also nominate a guardian for a minor child in advance through a will or another written document signed by the parent and witnessed by at least two individuals.

A parental appointment of a guardian does not automatically grant authority. Under Michigan Law, it becomes effective only if specific statutory conditions are met, such as when both parents are deceased, legally incapacitated, or no longer have parental rights. When those conditions are met, the nominated guardian’s authority becomes effective upon the acceptance being filed with the appropriate probate court. 

Even when those conditions are not met, a guardian nomination remains an important planning tool. It clearly documents a parent’s wishes and must be given priority by the court if a guardianship proceeding becomes necessary.

Court-Appointed Guardianship in Michigan

If a parent’s absence exceeds the anticipated timeframe and they are unable to resume care, court involvement may be required to establish guardianship. Michigan courts may appoint a guardian when statutory circumstances exist, including when parental rights are terminated or suspended, when a child resides with someone who lacks authority, or when both parents are confined in a place of detention.

Courts may appoint either a full guardian or a limited guardian. A full guardian generally has the authority of a custodial parent but is not personally responsible for the child’s financial support. A limited guardianship, created with parental consent and a court-approved placement plan, is often used when the parent expects to resume care after a defined period.

Supporting Documents and Practical Preparation

In addition to formal legal instruments, parents should consider assembling practical documents to assist caregivers. These may include medical consent forms, releases of confidential or privacy information, HIPAA authorizations, school authorization documents, emergency contact information, and copies of identification, insurance cards, birth certificates, and passports.

Parents of U.S. citizen children may wish to proactively apply for passports. Parents of non-U.S. citizen children should ensure travel and immigration documents remain valid. Written guidance on medical needs, educational services, daily routines, and trusted contacts can further support continuity of care.

Parents may also consider storing copies of key documents and account information with a trusted contact and/or in secure, encrypted digital storage accessible without relying on the parent’s phone. This may include shared cloud storage or a password manager that stores login credentials and recovery information. Parents should also be mindful of two-factor authentication requirements and take steps to ensure continued access to important accounts, such as maintaining backup authentication codes or authorizing a secondary device. Some parents may also find it helpful to use tools such as multilingual apps that help create emergency plans and send alerts to designated contacts, including loved ones or attorneys. Having these materials readily available can help caregivers act promptly and reduce disruption for the child.

Final Considerations for Parents 

Advanced planning cannot eliminate every risk, but having a valid delegation of authority and a written guardian nomination in place can help promote continuity of care, reduce delays, and provide the court with clear guidance regarding the parent’s intent. These tools are temporary and revocable and do not permanently transfer parental rights.

Parents should also be aware that children aged 14 or older may have certain rights under Michigan law regarding guardianship decisions. 

Legal planning for minor children often involves overlapping considerations related to family law, estate planning, and, in some cases, immigration law. Attorneys in Varnum’s Family, Estate Planning, and Immigration Practice Teams regularly assist parents with these issues and provide tailored advice to individual circumstances.

How to Title Your Home: Trusts, Lady Bird Deeds, and Creditor Protection

Choosing how to title your real estate is more than paperwork, it’s about aligning ownership with your goals for creditor protection, probate avoidance, taxes, and family stewardship. Here is a practical framework under Michigan law to help you think through your options before speaking with an estate planning attorney.

Married Homeowners: Choosing the Right Title

  • Tenants by the Entireties (Creditor Protection)
    If one or both spouses faces higher creditor risk, such as professional liability, business exposure, or personal guarantees, holding the property as tenants by the entireties offers a strong protection against the creditors of just one spouse. This is particularly sensible if the property will likely be sold after the second spouse dies, rather than retained in the family, unless the family retains it and the property taxes “uncapping”.
  • Revocable Trusts (Probate Avoidance and Legacy Planning)
    If creditor risk is low, and your priority is avoiding probate while keeping the home in the family, transferring the property into a revocable trust can be the better option. Trust ownership enables continuity of management on incapacity, custom distribution terms with contingency plans, and smoother succession. Using a solid umbrella liability policy can further mitigate creditor concerns.
  • Lady Bird Deeds (Avoiding Probate and Preserving Control)
    If avoiding probate is the main goal, creditor risk is low, and the property is likely to be sold after death, a Lady Bird deed can efficiently transfer title outside probate while preserving lifetime control. Lady Bird deeds can also work well if the property will be retained by the family after death provided that the transfer will not result in the property taxes “uncapping.” This cost-effective option pairs well with an umbrella policy for added protection.

Single Homeowners: Revocable Trust Ownership

For unmarried clients, titling your home in your revocable living trust is often the cleanest path. It avoids the delays and public nature of probate and simplifies incapacity planning. If the trust beneficiaries named to receive the property upon death would result in an uncapping, transferring the property to the trust while the owner is living eliminates the risk that a Lady Bird deed could trigger higher property taxes at death. Trust ownership also allows tailored distribution provisions with contingency planning.

Choosing the Right Home Titling Strategy

Ultimately, title strategy should reflect your creditor profile, plans for the property after death, and priorities around privacy and administration.

Before changing the title of your home, consult with Varnum’s estate planning attorneys to ensure your plan protects your assets, your family, and your long-term goals.

Florida Community Association Law Update: Video Conference Meetings and Proposed Court Reforms

Florida Community Association Law Update: Video Meetings & Reforms

Recent changes to Florida condominium law and proposed legislation affecting homeowners’ associations introduce new compliance requirements and potential legal risks for community associations. House Bill 913, which amended Chapter 718, is now in effect, and House Bill 657 proposes additional structural reforms that associations should monitor closely.

House Bill 913: Video Conference Meetings Under Chapter 718

Authorization of Video Conference Meetings

House Bill 913 took effect July 1, 2025, amending Chapter 718 to expressly authorize condominium associations to be conducted by video conference. The law applies to board, committee, and unit-owner meetings and imposes new procedural and recordkeeping agreements.

The statute introduces a new defined term, “video conference,” meaning a real-time audio and video meeting conducted through commonly used platforms. Board and committee members participating by video conference count toward a quorum and may vote as if physically present. Associations must require the use of a speaker so that in-person attendees can hear remote participants.

Notice and In-Person Attendance Requirements

If a board meeting is conducted by video conference, the meeting notice must state that a video conference will be used and must include a hyperlink and a conference telephone number for unit owners who wish to attend remotely.

Despite the expanded use of video conferencing, an in-person location is still required for all meetings, including those with a video conference component.

Recording and Recordkeeping Obligations

Meetings conducted by video conference must be recorded and maintained as official records of the association. Unit-owner meetings, including annual meetings, may also be conducted by video conference. If an annual meeting is held by video conference, a quorum of the board of directors must be physically present at the noticed location, and the meeting must be recorded.

Associations required to maintain a website or mobile application must post the video recording or a hyperlink to the recording for all association, board, committee, and unit-owner meetings conducted by video conference during the preceding twelve months, in addition to approved minutes.

Practical and Legal Concerns

These requirements have raised privacy and participation concerns for many associations. Unit owners may be reluctant to speak or appear on camera when recordings are preserved as official records and made accessible online. Associations also face the risk that video clips may be taken out of context and shared on social media, potentially fueling disputes or misinformation.

Although Chapter 718 permits closed meetings with legal counsel for proposed or pending litigation, the statute does not expressly exempt those meetings from the recording requirement if conducted by video conference. As written, such meetings appear to be subject to mandatory recording, which creates tension with the attorney-client privilege and prompts concern among boards and counsel. Many associations are reevaluating meeting formats, notice language, and technological controls to manage compliance and legal risk.

House Bill 657: Proposed Reforms to Florida Community Association Dispute Resolution

Creation of Community Association Court Program

House Bill 657 proposes significant changes to Florida’s community-association framework, including the creation of a community association court program within the circuit courts. The program would have jurisdiction over homeowners associations, condominiums, and cooperatives and would be authorized to conduct trials, enforce arbitration awards, compel compliance with statutes, appoint receivers, impose civil penalties, and award attorneys’ fees and costs.

The proposed program would operate under statewide administrative standards and include annual reporting requirements.

Mandatory Governing Document Language

The bill would require associations formed on or after July 1, 2026, to include a statutory statement in their governing documents. Existing associations would be required to hold a member meeting by January 1, 2027, to vote on adding the statement, which would require approval by a majority of voting interests at a duly noticed meeting.

This provision would effectively mandate the inclusion of “Kaufman language,” subjecting governing documents to statutory changes, as amended from time to time.”

Termination of Homeowners Associations

House Bill 657 also establishes a detailed, court-supervised process for terminating homeowners associations. The process includes minimum voting thresholds, trustee and recording requirements, judicial oversight through the community association court program, and penalties for noncompliance and directors.

If enacted, the legislation would take effect July 1, 2026.

Key Concerns for Associations

House Bill 657 raises concerns about contractual autonomy and dispute-resolution costs. Requiring associations to incorporate “Kaufman language” limits the ability to preserve governing documents against future statutory amendments. In addition, curtailing the pursuit of mediation, historically an efficient and cost-effective alternative to litigation, in favor of court-based resolution may increase costs and extend the time needed to resolve disputes.

Varnum’s Condominium and Homeowners Association attorneys continue to closely monitor these developments as the Florida Legislature enters the 2026 legislative season. For questions, contact your Varnum attorney.

Exclusive vs. Protected Franchise Territories

Exclusive vs. Protected Franchise Territories

Varnum Viewpoints

  • Protected territories are now the industry norm. Franchisors increasingly favor protected territories because they balance franchisee protection with flexibility for brand growth and market adaptation.

  • “Protected” does not mean exclusive. While protected territories prevent same-brand units from opening nearby, franchisors often retain rights to sell online, operate alternative brands, serve national accounts, and use non-traditional locations.

  • Territory rights require careful review and negotiation. The scope of territorial protections varies by system and is detailed in Item 12 of the FDD and the franchise agreement, making due diligence critical before signing.

In franchising, territorial rights play a central role in shaping the relationship between franchisors and franchisees. These rights determine where franchisees can operate, the level of competition they face, and how a brand can grow. While territorial structures vary widely, most systems rely on exclusive or protected territories, with a trend toward less exclusive ones. Understanding the differences between these two models is essential for evaluating franchise opportunities and negotiating territory rights.

Overview: Exclusive vs. Protected Territories

Franchisors throughout the industry offer both exclusive and protected areas. While each aims to minimize competition and provide a viable market for the franchisee, exclusive territories offer the greatest protection. Exclusive territories can limit a franchisor’s ability to expand the brand’s presence and adapt to changing market conditions. For this reason, franchisors have grown to prefer granting protected territories over exclusive territories.

Under a protected franchise territory, the franchisor agrees not to establish any additional franchised or company-owned units of the same brand in that territory. This shields the franchisee from direct intra-brand competition, but does not guarantee full exclusivity. Franchisors or other franchisees may still engage in certain competitive activities within the protected area. Common examples include:

  • Online and e-commerce sales;
  • Wholesale distribution to third-party retailers (e.g., supermarkets or convenience stores);
  • Operation of alternative brands or private labels within the same industry;
  • Non-traditional outlets or locations (e.g., airports, grocery stores, bookstores, universities, or hospitals), even when located within a franchisee’s territory, and
  • National accounts (e. g., certain customers that are big enough to merit the franchisor’s attention and reserve the right for the franchisor to manage the relationship).

Protected territories provide a competitive middle ground, offering franchisees some protection while giving franchisors greater flexibility to expand the brand and adapt to market changes. As a result, protected territories have become more common than exclusive territories. 

Territory rights, including whether a franchisee receives an exclusive or protected territory, are outlined in Item 12 of the legally required Franchise Disclosure Document (FDD) and further detailed in the franchise agreement.

Key Differences Between Exclusive and Protected Territories

Exclusive Territories

An exclusive territory provides franchisees the sole right to operate within a defined geographic area. Typically, neither the franchisor nor other franchisees may establish a competing business in that territory, providing the franchisee with the highest level of protection against intra-brand competition.
Exclusive territories have become less common because they limit a franchisor’s ability to expand and respond to market demands. Franchisees may have more success negotiating exclusivity when committing to significant monetary investments or substantial multi-unit development within a given territory. In the absence of these circumstances, franchisees may negotiate options or rights of first refusal to expand into adjacent territories.

Protected Territories

Protected territories ensure that no other same-brand franchised or company-owned unit will be placed within the defined area. However, they do not prohibit competitive activity. For example, Franchisors often reserve the right to:

    • Sell products or services online;
    • Distribute products wholesale to retailers;
    • Operate alternate brands;
    • Open units in non-traditional venues, such as airports or universities; and
    • Manage larger national accounts directly.

    Not all protected territories are structured the same. Franchise systems may vary significantly in the protections offered, making a careful review essential for prospective franchisees.

    Franchisor’s Competitive Activities Within Territories

    Regardless of whether a territory is exclusive or protected, franchisors may retain certain competitive rights. Common examples include:

    • Online sales: Direct-to-consumer e-commerce operations;
    • Wholesale distribution: Sales through supermarkets, convenience stores, or other retailers;
    • Alternative brands and private labels: Multiple brands under the same franchisor operating in overlapping areas;
    • Non-traditional outlets: Locations, such as airports, grocery stores, bookstores, universities, or hospitals; and
    • National accounts: Large clients handled at the franchisor level, with certain work assigned to franchisees as needed.

    Territory structures are a critical element of any franchise relationship and can significantly affect both the franchisee’s competitive environment and the franchisor’s ability to grow and expand. Exclusive territories offer strong protection but limit brand expansion, while protected territories strike a balance between franchisee security and franchisor flexibility. With the industry’s continued shift toward protected territories, prospective franchisees should carefully review Item 12 of the FDD and understand the rights and limitations of their territory before entering into any agreement.

    For more information on how this affects your business, contact your Varnum franchise attorney.

    Frequently Asked Questions About Franchise Territories

    What is the main difference between exclusive and protected territories?

    Exclusive territories prevent both the franchisor and other franchisees from operating within the territory. Protected territories prevent same-brand units but allow other forms of competition.

    Often, yes. Many franchisors reserve the right to conduct online sales, even within a protected territory.

    Sometimes, but such is generally limited. Franchisees making significant investments or pursuing multi-unit development may have more negotiating leverage.

    Territory rights appear in Item 12 of the FDD and are further detailed in the franchise agreement.