In recent years, franchisees have faced increasing concerns over encroachment from their franchisors. When not handled properly, franchise encroachment can virtually cripple a franchisee, making it nearly impossible to have the kind of success they hoped for when signing the franchise agreement.
If you are reading this post, you are probably a franchisee with concerns that your franchisor may be encroaching in violation of your franchise agreement, and you may be wondering what actions you can take to protect your interests.
What is encroachment, generally?
Generally, the encroachment is a concept that arises from real estate and property law. According to the Corporate Finance Institute (CFI), encroachment is “a real estate situation where property owners unlawfully enter, extend, or build onto their neighbor’s land. Structural encroachment differs from regular encroachment.”
The idea of encroachment is generally as the word suggests: It means someone is encroaching on your property rights.
What is encroachment in the context of franchise law?
In the context of franchise law, encroachment means that the franchisor is encroaching on your rights and as a franchisee. This encroachment is usually not illegal per se but is a violation of your franchise agreement.
Franchise encroachment often occurs in examples that include opening other franchise locations within your protected market area according to the contract.
But this problem extends past mere geographical boundaries. It could be argued that encroachment in this context could extend to include anything done by a franchisor in contrast to the contractual agreement that hinders the franchisee’s ability to earn a profit on the franchise.
Marketing campaigns that target out-of-market consumers, internet advertising, distribution decisions, similarly situated brand promotion that could hinder sales and other similar actions could all be considered encroachment.
What can you do if you suspect franchise encroachment?
The first step is to consider what not to do. Do not simply contact the franchisor and start complaining if you suspect encroachment. Although you might not like every decision the franchisor makes, your situation might not rise to the level of a legally actionable contractual violation.
You need the help of an experienced franchise lawyer who can look at the facts of your situation and determine whether you have a viable claim. And if you do have a claim, a good attorney can protect your interests throughout the process and make sure you are proceeding in a legal safe, intelligent manner.
Do not rush into a legal battle if you suspect encroachment, but get the help you need to protect your rights.