• NEW “PLACE OF BUSINESS” DEFINITION AFFORDS WHOLESALE DISTRIBUTION BUSINESSES PROTECTIONS UNDER THE NEWJERSEY FRANCHISE PRACTICES ACT
  • July 12, 2010 | Author: Haekyoung Suh
  • Law Firm: Norris McLaughlin & Marcus, P.A. A Professional Corporation - Bridgewater Office
  •           NEW“PLACE OF BUSINESS” DEFINITION AFFORDS
         WHOLESALEDISTRIBUTION BUSINESSES PROTECTIONS
           UNDER THE NEW JERSEY FRANCHISE PRACTICES ACT

    On January 16, 2010, New Jersey Senate President Stephen Sweeney, serving as Acting
    Governor of the State of New Jersey, signed into law legislation revising the “place of= business” definition under the New Jersey Franchise Practices Act (“NJFPA”). Originally introduced in March 2008, this amendment extends the protection of the NJFPA to wholesale distribution franchisees.

    Franchisors have used the “place of business” requirement to deprive wholesale distribution
    companies, particularly those in the beverage industry, from the protections of the NJFPA. To
    qualify as a franchise, the franchisee must establish or maintain a place of business within the State of New Jersey. Before the recent amendment, a place of business was limited to “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 excluded offices, warehouses, places of storage, residences or vehicles.

     

    Copies of the entire New Jersey Franchise Practices Act and the new amendment are available upon request.

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    Franchise Law Alert was written by Haekyoung Suh, a Member of the Norris, McLaughlin & Marcus, P.A. and its Franchise Law Group. If you have any questions regarding the information in this alert or any other matter concerning the New Jersey Franchise Practices Act, please feel free to contact her or any other member of the Franchise Practices Group by telephone at 908-722-0700 or by email at [email protected]

     

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    Franchise Law Alert provides information to our clients and friends about current legal developments of general interest in the area of franchise law. The information contained in this Alert should not be construed as legal advice, and readers should not act upon such without professional counsel. Copyright © 2010 Norris McLaughlin & Marcus, P.A.

     

     

     

     

     

     

     

    Courts more narrowly construed the place of business definition in favor of franchisors than intended by the Legislature, thus creating an irreconcilable anomaly. If a distributor required its customers to buy goods at its place of business, it could obtain franchisee status. On the other hand, if a distributor delivered products to its customers and consummated sales at the customer’s store, courts ruled it did not meet the place of business requirement and denied the NJFPA’s protections. Beverage distributors often fell into this latter category. Wholesale beverage distributors were denied the protections of the NJFPA because they delivered products to retail stores and made their sales at customers’ stores, rather than at their own offices or warehouses. The NJFPA now protects beverage distributors and all other types of distribution businesses whose sales activities do not occur on their own property, but rather at their customers’ locations.

    The amendment to the NJFPA, effective as of January 16, 2010, includes an expanded place of business definition, which now 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. The protections of the NJFPA are no longer reserved for traditional retail businesses. This amendment to the place of business definition does not change the other statutory requirements necessary to qualify as a protected franchisee. To be protected by the NJFPA, a franchisee must still demonstrate (1) a written agreement with the franchisor, (2) a license to use the franchisor’s trade name, trade mark, service mark, or related characteristic, (3) a community of interest in marketing goods or services, (4) gross sales of products or services between the franchisor and franchisee that exceed $35,000 for 12 months prior to the institution of a lawsuit, and (5) more than 20% of the franchisee’s gross sales are intended to be or are derived from such franchise.