If the franchisor is allowing stores too close to a particular franchisee’s location, what might you do is your question. In our experience, we’ve had a fair number of encroachment cases over the years, and one thing you can do as a franchisee is before you buy your next one, see Michael Dady or his colleges and ask him to take a look at your franchise agreement to see what the terms are, which is important for you to know as a prospect, a franchisee, but secondly, what you might do to change it.

And so if you have a franchise agreement offered to you as a prospective franchisee that says you have no territory protection. We have the right to open a store up across the street from you. Some court arbitrators will say, look, that’s what you signed up for, so you have no right to complain. I’m sorry you are getting hurt, but the writing says you can do it. Even if the writing says that, we have some arguments to make on your behalf but it would be much better if we’d seen you before you signed that agreement, and we would have negotiated some territory protection.

So with encroachment, we need to see what the franchise agreement says, and if you’ve got good territory protection that is a very iron clad way to stop encroachment within that area. Even if you don’t, however, there are principles of law that say franchisors may not act in a way that deprives the franchisees to the expected fruits of the relationship. And by that, franchisees have a right to expect the franchisors are gonna work with them to promote their profitability, not do the opposite. There is a famous case out of California where, in fact, the franchisor was dating a franchisee, and she said I don’t want to date you anymore, and the franchisor said I’ll fix you. I’m gonna open a company store a couple of blocks away.

He did, and in that case, the writing was bad for her, and she nevertheless prevailed because he didn’t have a good motive in opening that store. He had a bad motive and that was established and she actually suffered the loss of her business because of this. And so a second thing I would say about encroachment is this. If the encroachment is so bad that it drives a franchisee’s business from black ink to red ink and puts them out of business, that is the same thing as if that franchisor sent that franchisee a notice saying you’re terminated just leaving the date a little bit unclear.

And to the extent the writing or a state statute or a common law principle prohibits termination of a franchise absent good cause, we can argue that that encroachment may amount to de facto termination without good cause, and that’s a second way that we can recover for franchisees, and we have.