Under the Act, a franchisor may not terminate, cancel or fail to renew the contract of a franchisee absent ‘good cause’ which is ‘limited to failure by the franchisee to substantially comply with those requirements imposed upon him by the franchise.’.
The law also prohibits franchisors from engaging in other unfair business practices. The Act applies to franchisees that have (1) a fixed place of business, (2) gross sales of products or services between the franchisor and franchisee exceeding $35,000 for the twelve months preceding the institution of a suit brought pursuant to the Act, and (3) more than 20% of its gross sales are intended to be or are derived from such franchise N.J.S.A. 56:10-4(a).
Prior to the amendment, a franchisee was entitled to the protection of the Act only if, among other things, it maintained a place of business that was ‘a fixed geographical location at which the franchisee displays for sale and sells the franchisor’s goods or offers for sale and sells the franchisor’s services.’ The Act also explicitly stated that with respect to all franchisees, a ‘[p]lace of business shall not mean an office, a warehouse, a place of storage, a residence or a vehicle.’ N.J.S.A. 56:10-3(f).
The amendment expanded the definition of ‘place of business’ to include franchisees that do not have a fixed place of business ‘if they sell products to persons other than consumers.’ Assembly Bill No. 2491(Chapter No. 235).
The amendment expands the Act’s application, but the expansion only applies to franchisees that sell principally to businesses, rather than to consumers.
Carl Zwisler, IDI franchising Country Expert for U.S.A.
Katherine L. Wallman, associate in the Washington, DC office of Gray Plant Mooty.
The text of the law, together with the relevant legislation concerning franchising in U.S.A., can also be found in the Legislation Section of the IDI website