If you're a small retail business owner, you're likely already painfully aware of the ripple effects your business's revenue can suffer due to factors outside your control -- everything from weeks of inclement weather to nearby road construction, to your neighbor's refusal to keep loiterers out of the area. However, these situations can seem like minor annoyances when you discover that one of your main competitors is planning to open a business just across the street. Is there anything you can do to prevent this type of retail competition? Read on to learn more about your rights and options in this situation.
When do you have legal recourse against a competitor opening a business near yours?
In some cases, your own lease agreement may provide you with protection from a competing business. For example, if you lease space in a suburban strip mall or other central shopping area managed by a single company, you likely have some guarantee against direct competition from other mall tenants. Because these managing companies depend on having all (or most) of their retail units rented at any given time, it's not in their best interest to rent space to two businesses who are in direct competition with each other. For those whose businesses are governed by franchise agreements, there may also be some protection against having an identical franchise pop up in the immediate vicinity.
However, if competition isn't clearly prohibited by the legal documents you've already signed, your ability to stop construction or collect liquidated damages may be more limited. Many businesses have found success by ensuring their territory overlaps with that of competing businesses, and this type of transaction is exactly what is contemplated by the free market economy. Fortunately, there are still some steps you can take to ensure that a little competition won't put you out of business.
What should you do if you're concerned about a competitor's ability to encroach on your location?
If your lease or franchise agreement clearly prohibits this competition, but your competitor appears to be proceeding unabated, you'll want to contact your landlord or franchise's parent company in writing. The document you send to them should clearly and succinctly state the governing language of your lease, franchise agreement, or other contract, as well as the actions taken by this entity that you believe are in violation of these contractual obligations. You may want to seek legal advice before going this route to ensure your rights are fully protected and all communications are fully documented.
For situations in which you have no legal right to stop construction (or operation) of the competing business, there are some tactics that can help ensure your business's continued success. First, you may want to go the friendly route by welcoming this business owner to the neighborhood. You may find that your businesses each serve compatible but unique needs and could arrange your inventory or sales cycles to ensure that you both equally benefit from the close proximity to each other.
If you suspect attempting friendliness will get you nowhere, you'll instead need to concentrate on the things your business can do better. By researching the competitor's prices and services, you'll have the information needed to undercut certain prices or begin to offer products or services not available at the other location. You'll also want to get a trusted friend or colleague to give you some honest feedback on your business's display and presence. When you spend nearly all your free time at your business, you can lose the ability to look at it through fresh eyes -- and by improving displays or decluttering, you may be able to make your business more attractive to new customers.
For more information about any recourse you might be able to take, work with an experienced lawyer from a firm like FactorLaw.