The franchisor opened a location near yours
It is one of the most common complaints franchisees have. Your sales drop, your delivery zone overlaps with the new store, and the brand you paid to join is now competing with you.
Whether you have a claim depends almost entirely on what your documents say about territory. This page explains what to look for and why the answer is often not the one franchisees expect.
Start with one question: were you given a territory?
Most modern franchise agreements grant no exclusive territory, and many say so directly. The federal disclosure rules require the franchisor to tell you. If no exclusive territory is granted, the disclosure document you received before signing had to state, in words the rule prescribes, that you will not receive an exclusive territory and may face competition from other franchisees, from outlets the franchisor owns, and from other channels the franchisor controls.
If that sentence appears in your disclosure document, the franchisor told you in advance that this could happen. That does not end the analysis, but it does change where the analysis starts.
Why "they acted in bad faith" is usually not enough in Florida
Florida law implies a duty of good faith into every contract. What it does not do is let that duty rewrite what the contract says.
The controlling case is Burger King Corp. v. Weaver, 169 F.3d 1310 (11th Cir. 1999). Applying Florida law, the court held there is no standalone claim for breach of the duty of good faith, and that the duty cannot be used against the express terms of the agreement. Its reasoning was direct: if the franchisee has no right to an exclusive territory, the franchisor has no matching duty to limit where it licenses.
Florida courts have applied that framework against franchisees more than once, including in cases where the franchisee documented a steep sales decline after new locations opened nearby.
We tell people this at the first meeting rather than after they have paid for a complaint.
Where a real claim can still be made
The duty of good faith attaches to express terms. So the work is to find the express term. In our experience these are the places it turns up.
A defined territory, radius restriction or protected area. Check the agreement itself, any rider, and any development or area agreement. If a protected area is defined anywhere, opening inside it is a breach of contract.
A disclosure document that does not match what happened. The franchisor had to disclose the rights it reserved, including whether it sells into your area through the internet or other channels, and whether it operates a similar business under a different brand name. If the document said one thing and the franchisor did another, you are looking at a misrepresentation claim rather than a good faith claim, and that is a much stronger position.
What you were told during the sale. Florida has a statute, section 817.416 of the Florida Statutes, that makes it unlawful when selling a franchise to intentionally misrepresent or conceal efforts to sell more franchises than the market area can reasonably sustain. It was written for this exact problem. A franchisee who proves a violation can recover the money invested in the franchise, and the court may award attorney's fees. Be aware that the integration clause in your agreement will be raised against any claim based on things that were said rather than written.
An obligation the franchisor made impossible. If your agreement holds you to a sales minimum or a development schedule, and the franchisor's own conduct put it out of reach, the analysis changes shape.
Five things to do now
Gather the documents. The franchise agreement, every amendment and rider, any development or area agreement, and the disclosure document you received before signing, along with the date you received it.
Read the territory article against the disclosure document. You are looking for any language that grants, limits or describes a protected area.
Document the impact now, not later. Weekly sales before and after the new location opened, transaction counts, delivery zone overlap, staff and customer movement. Proving that the new location caused your losses is the hard half of one of these cases, and records made at the time are worth far more than a reconstruction two years on.
Do not stop paying royalties. This is the single most expensive mistake franchisees make. Withholding payment turns a weak claim into a clear default and hands the franchisor a termination and a trademark case. That is exactly what happened to the franchisees in Weaver.
Check the clock. In Florida, a breach of a written contract generally carries a five year limitations period and statutory and fraud claims generally carry four years. If your agreement tries to shorten those periods, note that Florida law voids a contract provision that fixes a shorter period than the statute allows.
What a realistic outcome looks like
Most encroachment problems resolve commercially rather than in a courtroom. A royalty abatement, an impact adjustment, a right of first refusal on the next site in your area, a territory amendment, or a transfer on better terms than you would otherwise get.
Those outcomes come faster and cost less when the documents have been analysed properly first and the franchisor knows it. Where the documents do support a claim, we litigate it, in court or in whatever forum your agreement requires.
Talk to an attorney before you decide anything
Every franchise agreement is different, and small differences in the territory language change the answer completely. A short conversation with a lawyer who has read your actual documents is worth more than any general guidance, including this page.
Consultations on franchise matters are free. Bring the franchise agreement and the disclosure document if you have them, and a short timeline of what happened.
Request a free consultation or call 305.615.1617.
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This page is general information about Florida and federal franchise law. It is not legal advice, it does not create an attorney-client relationship, and it cannot account for the terms of your particular agreement. Read more about our franchise practice.