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Turf Wars

A landmark court ruling could have new implications in franchise relationships.

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This story appears in the November 1996 issue of Entrepreneur. Subscribe »

For years (though it seems like forever) encroachment has reigned as franchisees' single most important concern. And yet a recent court ruling may have finally prompted the industry to come up with a definitive solution and at last put an end to the scuffles.

The ruling by the 9th U.S. Circuit Court of Appeals found that Mexican-restaurant chain Naugles Inc. breached the good faith and fair dealing clause in its franchise agreement when it opened a restaurant 1.4 miles away from a Long Beach, California, location owned by franchisee Vylene Enterprises Inc., which eventually went out of business.

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