Miami, FL commercial litigation attorney Robert Zarco talks about how franchisees can protect their market territory against Encroachment and Cannibalization within the franchise system. He states that franchise cannibalization and encroachment present significant challenges for franchisees. When a franchisor seeks to saturate a market by opening additional stores near existing locations, sales often shift from established stores to the new ones, immediately impacting revenue.

To mitigate this risk, he advises franchisees to negotiate for a protected, exclusive territory around their location at the outset of the franchise relationship. Securing a written provision for an exclusive territory within the franchise agreement is critical. Without such a provision—and unless state law provides specific protection—franchisors typically retain the right to place competing units nearby. The absence of territorial protection can hinder sales growth and negatively affect the overall profitability of franchise operations.