FRANCHISING IN NEW JERSEY
Registration or Filing Required?
No
Business Opportunity Laws?
Yes
New Jersey is not a franchise registration state. You must nevertheless ensure that your New Jersey franchise offering complies with the FTC Franchise Rule. New Jersey has enacted the New Jersey Franchise Practices Act which prohibits certain franchise agreement provisions and actions relating to the franchisor-franchisee relationship.
The New Jersey Franchise Practices Act (N.J. Stat. Ann. Sections 56:101, et al.) is a franchise relationship statute that governs relationships between franchisors and franchisees. Under the New Jersey Franchise Practices Act, franchisees must be aware of the additional rights that they are afforded and franchisors must carefully consider and comply with the additional obligations imposed on them. The New Jersey Franchise Practices Act, among other things, requires that, prior to terminating, canceling or failing to renew a franchise, franchisors are required to give franchisees at least 60 days advance notice of the termination, cancellation or non-renewal and the reasons for such action. Within 60 days of a franchisee’s request and notification of the franchisee’s intention to transfer or sell his or her franchise, the franchisor must respond within 60 days and must respond to and notify the franchisee as to whether or not the franchisor approves of such request and if the franchisor objects to such request the franchisor must describe the basis for its decision. A franchisors failure to respond within 60 days of a franchisee’s transfer request is automatically deemed an approval. It is also unlawful for a franchisor to require a franchisee to sign a general release as a condition for entering into a franchise agreement.
There are other prohibitions contained in the New Jersey Franchise Practices Act and these prohibitions relate to preventing franchisors from unreasonably interfering with the management of franchisee and imposing what the act refers to as “unreasonable standards of performance” on the franchisee. The New Jersey Franchise Practices Act is generally in place to provide more balance in the franchisor-franchisee relationship.