03
Nov
2021

Restaurant Territory And How To Deal With Disputes

Franchising is booming and will continue to be. Everyone needs to have and control their own destiny. This has made people yearn to invest in a franchise business.

While this is a profitable business, it comes with its own risks. One risky area is the issue of territory borders.

Dealing with restaurant disputes requires both the franchisor and the franchisees to maintain the working relationship where possible.

Proving a protected or exclusive territory has always been a tough decision among the franchisors. While franchisees look for protected territory, franchisors are always reluctant on these decisions. The reason is because of the length of time a contract is deemed to be active, such as 5-20 years.

Territorial Rights

As with most of the franchise business legal issues, one best way to avoid disputes over territories is to have a franchise agreement clearly stating the rights granted in an exclusive territory or terms of the territory where applicable.

If there is a protected territory, such has to be communicated to the franchisee. This is information that should be stated clearly in the franchise agreement. To understand exclusivity and protected territories in a restaurant franchise, it would be better to contact a restaurant franchise attorney to guide you. Such can review your contract.

Where there is confusion on any matter, a franchisee may feel a sense of inequality or believe that they have less opportunity to enjoy their territory than others. This may lead to disputes.

Restaurant territorial can be defined in different ways:

  • Exclusive territory agreements where the franchise has no rights to sell additional franchises in certain geographical areas.
  • A protected territorial may be defined by postal or zip codes or census data etc.

Non-exclusive doesn’t mean that a franchisor will not trade other franchises in the geographical area.

Where there is no term ‘exclusive’ in a franchise agreement, such agreement doesn’t permit the franchisor to compete unethically with a franchisee given a reasonable area. Many franchisors specify that the grant is conditional only if the franchisee remains compliant with the rules stated in the franchise agreement.

Some franchise agreements will also specify that the franchisor has the right to reduce the protected territory scope, especially when there are changes in what the franchisor used to determine that such protected territory can support another franchisee.

Not every franchise system allows for franchisee territorial protection. However, some offer certain exclusive rights. And if not clearly stated in the franchise agreement, an issue may arise.

That is why it is always advisable to have a franchise lawyer review your contract. A contact will give information on your franchiser’s grant; this could be the right to manage another site. But it may not be clear on what is not granted, such as the right to stop another franchisee from operating a site near you.

How To Handle Restaurant Disputes

Disputes are toxic to any business. Where there are disputes, both parties must have a way to resolve them. Knowing how to handle such disputes can save the business relationship.

Where there are issues, it pays to communicate. This can solve a problem before it’s become a battle to court.

Where the problem cannot be resolved through communications, mediation comes into play. This is what the franchisor and the franchisee should attempt to use as a way to handle their disputes. However, as a franchisee, you should make sure to understand your rights before taking any legal actions.

You need to review your franchise agreement and understand the terms on which you are to base your arguments. A franchise lawyer can help you find clarification. If you have a restaurant dispute, you can:

  • Talk to your franchisor about the issue. You can decide how to handle the issue. It’s good to be honest about what you feel. You may find such a dispute is resolved through an open conversation.
  • If attempts to agree are not fruitful, refer the matter to a mediator.You may agree on the mediator to appoint for your case. Where this seems impossible, any party can request for a mediator selection from the Office of the Franchising Mediation Adviser (OFMA)
  • If both of you seem to have different perspectives on the issue, this may be the time to seek help from a franchise lawyer. The lawyer can tell whether there is a breach of contract and what can be done. Your lawyer may advise on The decision from the arbitrator becomes legally binding and can be enforced.

Many issues may bring up disagreements in a franchise business. If your franchisor breached the contract, you might request a franchise lawyer to advice on how to deal with the dispute and show how the franchisor has altered the written contract. This will help show whether you have a valid claim on your restaurant’s territorial rights.

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