Encroachment is the term for the practice of a franchisor selling franchises to other franchisees too close to the units of an existing franchisee. It occurs when another franchise opens only blocks from your location or when your franchisor begins selling items online that directly compete with your in-store business.
If encroachment has affected your franchised business, it may be possible to take legal action. Lawyers representing encroached-upon franchisees generally bring an action against the franchisor under the terms of the franchise agreement if there is a provision intended to provide territorial rights. If no such provision exists, they will often allege a breach by the franchisor of the covenant of good faith and fair dealing implied in the franchise agreement.
At the New York law offices of Einbinder & Dunn, LLP, we often employ these strategies when we represent franchisees in litigation against franchisors. Our attorneys use years of experience to skillfully guide our clients through litigation, helping them resolve encroachment matters quickly and effectively.
We may be able to help you obtain damages for breach of the franchise agreement for your losses as a result of a franchisor's actions. Equitable relief is also possible in some situations. A court may be able to order an injunction, prohibiting the franchisor from direct competition.
Preventing Competition by a Franchisor
While business leaders often think of encroachment in terms of physical location — a store opening next to a store in violation of the franchise agreement — encroachment by a franchisor happens in other ways as well.
Competition may occur when a franchisor arranges for the sale of franchise goods in a non-branded outlet. An ice cream franchise, for example, might sell its products to a supermarket, causing competition for its franchisees in the neighborhood that the franchisee did not anticipate. With the advent of the Internet and "e-tail," competition also occurs when franchisors sell franchised products online.
One or the other or both of these might be alleged by the franchisee to be a breach by the franchisor of an implied covenant of good faith and fair dealing, although each situation is unique. Your lawyer must review your franchise agreement carefully to determine whether the franchisor does not, in fact, have the right to sell franchise products in either manner.
At Einbinder & Dunn, LLP, we can take legal action to protect your interests. To get started, please contact us by filling out our contact form. You can also call 866-490-4909 or 212-391-9500 to speak with our attorneys and experienced support staff.
