Franchise Encroachment

When a franchisor invades a franchisee’s territory, either by placing new units unreasonably close to an existing unit, by placing temporary or seasonal outlets near the franchisee or by selling over the Internet into the franchisee’s territory, the franchisor may be encroaching on the franchisee’s territory.

Franchisor encroachment is getting more common as competition between franchise systems increases, geographic markets become saturated, and technology makes it easier for the franchisor to sell directly to the franchisee’s customers.

If my franchisor is encroaching, what are my rights?

Depending upon what your franchise agreement and Franchise Disclosure Document (or UFOC) say, and what the history of your dealings with your franchisor has been, you may have the right to stop the franchisor from encroaching on your territory or you may be able to recover damages for encroachment. Further, the written agreement does not always control; courts have held, repeatedly, that even though a franchisee may not have a “territory” or a grant of “exclusivity,” that the franchisee is entitled to protection against predatory encroachment that would injure the franchisee’s business.   

What Experience does Michael Garner have with Encroachment?

Michael was one of the first lawyers in the country to address the issue of encroachment and he has continued to be one of the leading members of the franchise bar on this issue.  He has stopped franchisors from encroaching on franchisee territories by obtaining injunctions or negotiating with the franchisor. See Case Studies for further examples.

How can we help?

If you believe that your franchisor has wrongfully encroached on your territory or your rights, or that your franchisor may be about to do so, then please contact us for a free consultation.

Frequently Asked Questions About Franchise Encroachment:

• Q. My franchisor has just started selling over the Internet in competition with me. What can I do?

  A. Internet encroachment is one of the more common forms of encroachment today.  Michael Garner pioneered the field of protecting franchisee rights on the Internet.  Depending on what your franchise agreement and the law say, you may be able to stop the franchisor from selling in your area or you may be able to share in the profits of its sale.

  Q. My franchise agreement says I only have the right to a “location.” Does that mean I don’t have protection against encroachment?

  A. A number of cases have been decided that protected franchisees’ rights to their markets even though their agreements specified that they were only entitled to a “location.”  Your rights will depend upon what the entire contract says, upon your state’s law and upon the particular circumstances of your situation.

  Q. Can my franchisor sell the same products under a different name in my territory?

  A. It depends, in part, upon what your agreement says. If your franchisor is selling into your territory so that it hurts you, it is likely that you have a claim against it.

  Q. I have a “Territory” in my agreement, but I sell to, and advertise in, a much bigger area. What kind of protection do I have?

  A. A number of cases have recognized that franchisees have rights that go beyond what the contract says. Particularly if the franchisor has told you, in the past, that it would not sell in this larger area, or if the franchisor’s sales are hurting you badly, you may be entitled to relief.

  Q. My franchisor is encroaching on my territory but not on the territory of other franchisees.  Does that violate the law?

  A. A number of states have laws against discrimination between franchisees and courts have, on other grounds, found violations of law where franchisors have treated some franchisees different from others.