Franchise Glossary
Encroachment
When a franchisor places a new franchise unit or company-owned location too close to an existing franchisee's territory.
Encroachment occurs when a new outlet opens near enough to divert customers from an existing franchisee. This is one of the most contentious issues in franchising. Whether encroachment is permitted depends on the territory protections outlined in the franchise agreement and Item 12 of the FDD. Some agreements grant exclusive territories, while others offer only protected territories or no territorial rights at all. Review territory protections carefully before signing.
Related Terms