But I've Got A Contract!
Think you're entitled to an exclusive territory? Think again.
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.
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"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.
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