Entrepreneurs and investors who buy into franchises do so for several reasons. They can receive hands-on training and assistance with marketing, which can help those new to business ownership.
One of the most obvious benefits is how a franchise has a developed brand and market presence. It would take a new startup years to reach that same point in most cases. Not only can franchise owners benefit from almost immediate access to a dedicated customer base, but they also typically have protection from local competition.
Most franchise agreements include restrictions related to territory. Violations of that agreement are among the leading causes of franchise-related business lawsuits.
Growing brands may violate their franchise agreements
Companies receiving a significant amount of interest from prospective entrepreneurs may violate their agreements with existing franchisees. If someone else nearby inquires about a franchise opportunity, the company may allow them to open their own location.
Particularly if they redevelop an existing building, they may end up acquiring property that is technically inside someone’s existing territory. Depending on the circumstances, the existing franchisee experiencing a territory violation may have grounds to take legal action against the franchisor or the new franchisee who infringed on their territory rights.
A careful review of business locations and the existing contract can make a big difference for those who believe that a territory violation has occurred. Sometimes, a business that seems to infringe on another franchisee’s territory is a tenth of a mile outside of their protected territory. Other times, territorial protections may expire after a certain amount of time.
Protecting one’s regional brand monopoly can make a massive difference regarding the return on the investment when buying into a franchise.