Encroachment
What it means
Encroachment is the erosion of a franchisee's expected custom by activity that competes for the same customers. It can be physical, such as a new outlet opening close to your boundary, or channel-based, such as the franchisor selling the same goods or services online, through delivery apps, or via corporate and national accounts that reach into your area.
Australia has no specific statutory ban on encroachment; it is governed by the franchise agreement and the disclosure obligations in the Franchising Code of Conduct 2025. The Code requires the disclosure document to state whether your territory is exclusive and whether the franchisor or others can supply the same goods or services in it, including online. Whatever the franchisor has reserved the right to do generally will not count as a breach.
Because protection is contractual, the key questions are what rights the franchisor has kept and what, if anything, you can do about it. Some agreements offer compensation, first rights, or consultation if boundaries are split or new sites are opened nearby, while others reserve broad rights to compete with no remedy at all.
In practice
Before signing, map every way the franchisor could reach your customers without breaching the agreement, including online sales, delivery platforms, alternative brands, corporate accounts, and the right to appoint nearby franchisees or split your territory. Price the risk of each into your forecasts.
Ask directly whether the agreement offers any protection or remedy if encroachment occurs, and get the answer in writing. Since the Code only mandates disclosure, not protection, negotiating specific safeguards before you commit is usually your only real leverage.
A real example
A courier franchisee finds the franchisor has signed a national contract with a retailer whose parcels in the franchisee's postcodes are routed through a central hub rather than to them. Because the agreement reserved national accounts to the franchisor and disclosed this, it is not a breach, but the franchisee successfully negotiates a per-parcel fee for volume delivered within their area.
Encroachment — FAQs
Is encroachment illegal in Australia?
No. There is no specific law banning it. Encroachment is governed by your franchise agreement and the Code's disclosure rules, so reserved rights are generally permitted.
Does online selling by the franchisor count as encroachment?
It can, if it takes sales from your area. Many agreements reserve online channels, and the disclosure document must state whether the franchisor can supply into your territory online.
Can I get compensation if I am encroached upon?
Only if your agreement provides for it. Some contracts offer compensation, consultation, or first rights, while others reserve broad competing rights with no remedy.
How do I protect against encroachment before signing?
Identify every channel through which the franchisor could reach your customers, seek exclusivity or specific remedies in the agreement, and have a franchise lawyer review the reserved rights.
See the full franchise glossary, the Fee Index or our buyer guides.