Guess what? According to a recent court ruling, if your franchise agreement doesn't specifically grant you an exclusive territory, then suing the franchisor for encroachment if it develops units near yours is pointless.
A March ruling by the Eleventh Circuit U.S. Court of Appeals blew 1991's famous Scheck v. Burger King Corp. decision to oblivion by dismissing Burger King franchisee C.R. Weaver's encroachment lawsuit. A triumph for franchisees, Scheck decided that even if a franchise contract explicitly states the franchisee has no exclusive territory, the franchisor doesn't have the right to build units within a range harmful to the franchisee's sales.
Now, however, if a franchise owner has no contractual right to exclusive territory, the franchisor has no duty to cease or limit licensing franchise units in an area close to the franchisee's establishment.
"If you're interested in having some development rights or exclusive territory, you have to negotiate and receive that at the time you sign the agreement," says Howard Wolfson, Burger King attorney and partner in New York City law firm Whitman Breed Abbott & Morgan LLP.
Our advice: Always have your lawyer look over any contracts you intend to sign--and sign them with your eyes wide open.
Without A Debt
The mysteries of franchise financing explained
By Michelle Prather
A banker is a person who is willing to make a loan if you present sufficient evidence to show you don't need it." --Herbert V. Prochnow, former president of First National Bank of Chicago
You've got to love a book that begins each chapter with witticisms that span the ages--especially when it's about franchise financing. But that's just the kind of morale boost you'll get with each new topic covered by former real estate mogul and Century 21 franchisee Roger C. Rule in No Money Down Financing for Franchising (The Oasis Press/PSI Research).
This three-part cornucopia of resources for the financially challenged thoroughly explains each step of a franchisee's quest for money, from assessing personal credit to making lenders leap at your ever-important business plan.
Rather than make the reader sift through 240 pages of dense, hard-to-swallow text, Rule has devised a textbook-style format for visual learners. Everything from the franchise business plan to financial pro forma charts is clearly mapped out, with no point too elementary: Even the type of printer and stationery to use for your business plan is addressed.
The appendices section aptly ends this truly comprehensive offering. At your fingertips are debt financing sources, regional SBA offices, Small Business Development Centers, state economic development offices, leasing companies, franchisors that provide financial assistance and other financial allies.
Whitman Breed Abbott & Morgan LLP, (212) 351-2530, firstname.lastname@example.org