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Dealing with franchisor encroachment

On Behalf of | May 11, 2022 | Franchise Law |

In some cases, a franchise agreement designates an area or region where the franchised business is supposed to operate. It is meant to guarantee the franchisee their market share for its growth and success.

When another franchised business encroaches on your territory, it could spell disaster for you. The loss of customers will dent your revenues, and you may have no other option but to close shop.

What can you do about it?

The first thing you need to ascertain is that encroachment has taken place. Usually, the agreement you signed with the franchisor will clear the air on this.

Not all territories are protected or exclusive to a franchisor. If your territory is unprotected, there is not much that you can do about another franchisee creeping into your territory. However, if your territory is exclusive yet another franchisee is setting shop, you may have a case.

If you establish encroachment, you need to urgently raise the matter with the franchisor. The terms and conditions of the franchise contract may first require you to exhaust internal procedures in dealing with franchisor encroachment before seeking other legal solutions such as injunctions.

You need to act fast

Timing is of the essence. You should take action as soon as you discover franchisor encroachment. Waiting for the encroaching business to set up shop and begin operations could affect your claim to the territory.

Protecting your business interests

The law can get complicated, especially if there are gray areas in the franchise contract. In addition, you will likely be going against big established franchises with more resources and influence. Therefore, it may be necessary to seek help on what you should do to protect your business interests.

It all depends on how you handle your encroachment claim and the steps you take to protect your business.