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Florida Franchise Law and Encroachment Disputes

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As a franchisee, the last thing you want is to be forced to compete with your own brand. For example, two Burger King locations would not do well if they were across the street from one and other. That location would likely not support both businesses. In order to be successful a franchise needs space to thrive. The vast majority of franchise agreements take this issue into consideration and grant the franchisee exclusive rights to particular territory. This means that the franchisor must refrain from allowing any other locations to encroach on the protected territory in question. Of course, designating exclusive market territory can be a complex process. In fact, many disputes arise over alleged encroachment into exclusive territory. Further, in the modern world, encroachment can actually occur in many different ways. If your company is currently involved in a franchise encroachment dispute, please contact an experienced West Palm Beach franchise law attorney today to discuss your legal options.

Encroachment Comes in Many Different Forms

In theory, it seems easy enough to avoid an encroachment disputes. After all, the parties can simply include a map within the franchise agreement that outlines the franchisee’s protected territory. However, this is not adequate to solve all encroachment disputes. Many encroachment disputes occur in new, more complex, ways. The following is a list of four different types of franchise encroachment disputes that might become an issue for you company:

  1. Virtual encroachment: Increasingly, business is conducted over the internet. This has led to certain scenarios where franchisors have encroached on exclusive market territory without actually allowing another location to open up in that market space. It is generally advisable to consider e-commerce when drafting and signing a franchise agreement.
  2. Temporary locations: Sometimes mini-franchise locations pop-up for temporary events. This might occur at a college campus, military base or a local event. Depending on the terms of a franchise agreement, a temporary location may be impermissibly encroaching on established territory.
  3. Alternative distribution channels: Another issue that must be considered is alternative distribution channels. For example, consider a franchise business that sells a retail product at a certain location. What happens if the franchisor also allows that product to be sold in a nearby department stores or supermarkets? It could be encroachment on the franchisee’s territory.
  4. Sister brands: Finally, in some limited cases, another related brand could be responsible for encroachment. This most often occurs when a company owns two different brands that sell the same or similar products. For example, if a large conglomerate owned and franchised two coffee brands, franchise agreements may need to be written which protect franchisees from encroachment from either of those two brands.

Ultimately, all sides of a franchise agreement are bound by implied covenant of good faith and fair dealing. This means that franchisors must treat franchisees honestly and fairly when it comes to issues of territory encroachment. If your franchise has not been treated fairly, you should consider legal action.

Contact Our West Palm Beach Office Today

At Pike & Lustig, LLP, our business litigation attorneys have extensive experience handling Florida franchise law cases. If you a franchisor or a franchisee involved in an encroachment dispute, please do not hesitate to contact our office today to set up your free case evaluation. We represent businesses throughout South Florida, including in Wellington and Fort Lauderdale.

Resource:

https://www.law.cornell.edu/wex/implied_covenant_of_good_faith_and_fair_dealing

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