Entrepreneurs venturing into the business world have two distinct paths: For some, opting for a franchise proves to be more convenient. It allows them to operate under an already established brand with a proven business model and support.
However, no matter how smooth the road of franchising may seem, obstacles can still arise. For example, a franchisor may intentionally disrupt a franchisee’s established relationships with suppliers and customers. This is known as tortious interference of business. It is an illegal practice that can affect a franchisee’s operations and success.
When can tortious interference happen?
Tortious interference can manifest in various forms. These actions infringe upon the franchisee’s contractual rights and can lead to financial losses. Here are common examples to watch out for:
- The franchisor may have the power to convince a franchisee’s key employees to breach their noncompete agreements.
- There may be times when a franchisor may impose new, onerous requirements or conditions on the franchisee that were not part of the original franchise agreement.
- The franchisor may fail to provide the agreed-upon support and resources. This can hinder the franchisee’s ability to meet the standards set by the franchise agreement.
- If a franchisor opens new outlets or grants franchises in close proximity to an existing franchisee’s territory, competition may arise. This can divert customers away from the original franchisee.
- It is possible for the franchisor to block the franchisee’s attempts to expand the business. They may stop them from opening new locations or product lines.
It is important to note that proving tortious interference can be complex. The franchisee may need to establish intentional actions from the franchisor to cause harm to their business relationship. Legal remedies for tortious interference may include injunctive relief, compensatory damages, and, in some cases, punitive damages.
If you believe your franchise is a victim of tortious interference, seeking legal advice may help protect your rights and interests. Reach out to us for a free consultation.