As a franchisee with a protected territory, you expect your franchisor to respect your territorial rights. After all, your franchisor granted them to you in the first place (unless you live in one of the limited numbers of states that provide statutory territorial protections to franchisees). But, what if it doesn’t? What if your franchisor encroaches on your protected territory? Franchise attorney Jeffrey M. Goldstein explains.
Are You Sure Your Franchisor is Encroaching?
If you have concerns about franchise encroachment, the first question you need to address is: Are you sure your franchisor is encroaching? In most cases, the answer to this question will lie in your franchise agreement.
Territory provisions in franchise agreements typically have two main parts. First, they describe the franchisee’s territorial rights. Second, they list all of the exceptions that allow the franchisor to compete in the franchisee’s territory.
A careful review of your franchise agreement’s territory provision should tell you if your franchisor is encroaching. If your territory is truly exclusive and your franchisor is building out a company-owned location within your territory’s borders, then you likely have an encroachment claim. On the other hand, if you have a brick-and-mortar business and your franchisor is selling products online, then your franchisor may be well within its rights based on an “alternate channels of distribution” exception in your agreement.
Of course, while some cases are fairly clear-cut, others are not. Many franchise agreements’ territory provisions are too vague to provide a definitive answer. If it isn’t clear whether your franchisor is encroaching, then you will need to hire a franchise attorney to assess your legal rights.
What To Do if Your Franchisor is Encroaching
Let’s say your franchisor is encroaching on your protected or exclusive territory. What should you do?
At this point, you likely should not address the issue directly with your franchisor. The odds are that this won’t get you anywhere. Instead, you should hire a franchise attorney to deal with your franchisor for you. An experienced franchise attorney will know how to handle your situation strategically and will be able to make sure that you don’t do anything that could jeopardize your rights.
In encroachment cases, it is important to take legal action promptly—whether that means filing a lawsuit or pursuing mandatory mediation or arbitration. If you wait, and if your franchisor or a new franchisee continues to invest in a competing location in your territory, this could give rise to an argument that you should have acted sooner. To avoid unnecessary issues, and to protect your territorial rights, you should discuss your situation with a franchise attorney right away.
Request a Free Consultation with Franchise Attorney Jeffrey M. Goldstein
Are you dealing with a territorial encroachment issue as a franchisee? If so, franchise attorney Jeffrey M. Goldstein can help. To schedule a free and confidential consultation with Mr. Goldstein as soon as possible, please call 202-293-3947 or tell us how we can reach you online today.
