Assignment of territory doesn’t happen until after the franchisee has selected a site. They sign the franchise agreement with a broad site selection area, and once they find the real estate, they ask you to approve.
Our site selection guidelines say that you, as the franchisor, are approving it for brand standards, not success, so the franchisee still assumes the risk. When you approve the location, you determine their territory, based on what Item 12 of the FDD states. The franchisee will have a certain number of days to object, depending on how your agreement is written. Once their territory is assigned, that gets amended to the franchise agreement as an exhibit that does not need to be signed, simply filed. The specifics of the territory should then be updated within your records for tracking and monitoring of the franchisee and future franchise sales.