A2491

An Act concerning the Franchise Practices Act and amending P.L.1971, c.356.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 2 of P.L.1971, c.356 (C.56:10-2) is amended to read as follows:

2. The Legislature finds and declares that distribution and sales through franchise arrangements in the State of New Jersey vitally affects the general economy of the State, the public interest and the public welfare. It is therefore necessary in the public interest to define the relationship and responsibilities of franchisors and franchisees in connection with franchise arrangements and to protect franchisees from unreasonable termination by franchisors that may result from a disparity of bargaining power between national and regional franchisors and small franchisees. The Legislature finds that these protections are necessary to protect not only retail businesses, but also wholesale distribution franchisees that, through their efforts, enhance the reputation and goodwill of franchisors in this State. Further, the Legislature declares that the courts have in some cases more narrowly construed the Franchise Practices Act than was intended by the Legislature.

(cf: P.L.1971, c.356, s.2)

2. Section 3 of P.L.1971, c.356 (C.56:10-3) is amended to read as follows:

3. As used in this act:

a. "Franchise" means a written arrangement for a definite or indefinite period, in which a person grants to another person a license to use a trade name, trade mark, service mark, or related characteristics, and in which there is a community of interest in the marketing of goods or services at wholesale, retail, by lease, agreement, or otherwise.

b. "Person" means a natural person, corporation, partnership, trust, or other entity and, in case of an entity, it shall include any other entity which has a majority interest in such entity or effectively controls such other entity as well as the individual officers, directors, and other persons in active control of the activities of each such entity.

c. "Franchisor" means a person who grants a franchise to another person.

d. "Franchisee" means a person to whom a franchise is offered or granted.

e. "Sale, transfer or assignment" means any disposition of a franchise or any interest therein, with or without consideration, to include but not limited to bequest, inheritance, gift, exchange, lease or license.

f. "Place of business" means a fixed geographical location at which the franchisee displays for sale [and] or at which or from which the franchisee sells the franchisor's goods or offers for sale and sells the franchisor's services. Place of business shall not mean [an office, a warehouse,] a place of storage, a residence or a vehicle, but shall mean an office or a warehouse from which franchisee personnel visit or call upon customers or from which the franchisor's goods are delivered to customers.

(cf: P.L.1971, c.356, s.3)

3. This act shall take effect immediately

STATEMENT

This bill would revise the definition of a “place of business” under this State’s Franchise Practices Act (FPA) to include an office or a warehouse from which franchisee personnel visit or call upon customers or from which the franchisor’s goods are delivered to customers.

The FPA defines the relationship and responsibilities of franchisors and franchisees in franchise arrangements and provides certain protections to franchisees. A contract between two parties constitutes a franchise agreement if five conditions are met: 1) the franchisor must grant the franchisee license to use a trade name, trade mark, service mark, or related characteristic; 2) there must be a community of interest in the marketing of goods and services; 3) the franchisee must establish or maintain a place of business in the State; 4) the gross sales of products or services between the franchisor and franchisee must be more than $35,000 in the prior year; and 5) more than 20 percent of the franchisees sales are intended to be or derived from the franchise.

The FPA defines a “place of business” as 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 definition specifically excludes an office, a warehouse, a place of storage, a residence, or a vehicle.

This bill would provide further protections to franchisees by expanding the definition of a “place of business.” Under the bill, a place of business would include a location where a franchisee displays for sale or at which or from which the franchisee sells the franchisors goods. Place of business under the bill specifically includes an office or warehouse from which franchisee personnel visit or call upon customers or from which the franchisor’s goods are delivered to customers.