People Buy Franchises in NJ for a Lot of Reasons
Second careers, job dissatisfaction, entrepreneurship, creating a family business for their spouse or their children.
Do you have an interest in a NJ franchise?
Whatever your reason for being interested in a franchise, at Hanlon Niemann & Wright, we are here to help and guide you in NJ franchise law.
An effective NJ Franchise Law Attorney will think beyond the four corners of the public offering statement and franchise agreement and discuss with you things like market demand, geographical and internet competition, bank and third party financing, leasing, franchisor fees, royalties, hidden charges, covenants not to compete and e-commerce issues.
We’ll work to protect you legally and offer practical advice in the real world of NJ franchises.
I consulted with Mr. Niemann following a recommendation from an associate in Brick, New Jersey. I was told that Mr. Niemann would be an excellent person to discuss an investment opportunity which was represented to me as very profitable. Mr. Niemann met with me promptly and reviewed the information which was given by the promoter. After having considered the promotional information, Mr. Niemann cautioned me against the investment. He requested a four-way conference be set up so that he could meet face to face, eye to eye with the promoter of this opportunity. After several hours of intense questioning and discussion, Mr. Niemann courteously and professionally concluded the meeting, whereupon he immediately told me not to invest a single penny into this scam as I would lose my investment. At the time, I was looking to invest several hundred thousand dollars. Thank God I listened to Mr. Niemann.
Since our meeting, I have learned that the deal was, in fact, a scam and that I would have lost my entire investment. The straight talking highly investigative nature of Mr. Niemann’s questioning and insight coupled with his significant past business experience was of invaluable help to me.
Scott Buongiovanni Freehold, New Jersey
Fred has been my attorney since I started my business in 2003. He is always very helpful and has handled several business and personal matters for me. I highly recommend Fred.
– Wayne Sos
When Does the Franchise Act Apply in New Jersey?
New Jersey adopted the Franchise Practices Act (FPA) in 1971. The law was written to prevent the exploitation of franchisees in New Jersey by franchisors with superior bargaining power.
The Act applies to franchises when (1) the performance of the franchise requires that the franchisee establish or maintain a place of business in New Jersey; (2) gross sales of product or services between the franchisor and franchisee must exceed $35,000 during a 12 month period; (3) and more than twenty percent (20%) of the franchisee’s gross sales are from the operation of a franchise.
The law also regulates the Termination of a Franchise Agreement in New Jersey.
Selling, Assigning or Transferring Ownership of an Existing Franchise in NJ
Before transferring, assigning or selling a franchise or interest in a franchise, the franchisee must notify the franchisor in writing. In most instances, the notice must include (1) the transferee’s name, address, financial qualification and (2) business experience during the previous five (5) years.
Failure to notify the franchisor before a transfer, assignment or sale permits a franchisor to allege a breach of the franchise agreement and to terminate the franchise.
After notice is given, the franchisor has sixty (60) days to send a written response to the franchisee either approving the transfer or setting forth the reasons for denying the transfer. If the franchisor does not respond to the notice within sixty (60) days, the law deems the transfer approved by the franchisor.
Again, in NJ a commercially good faith standard exists between a franchisor and franchisee. A franchisor must act in good faith when refusing to approve a transfer. Let us help you in the sale or purchase of your franchised business.
When is a Franchise Termination Permissible in NJ?
Legal Requirements of Notice of Termination of a Franchise
Because of the considerable investment costs of a franchise and the superior economic power and position of the franchisee, NJ has adopted some limited protections on behalf of franchise owners. A franchisor may not terminate, cancel, or fail to renew a franchise without first giving written notice setting forth all the reasons for such termination, cancellation, or intent not to renew the franchisee at least 60 days in advance of such termination, cancellation or intent not to renew. The law imposes a good faith and “commercially reasonable standard” to any purported franchise termination consistent with the underlying terms of the franchise agreement.
CRITERIA FOR PERMISSIBLE TERMINATION
In NJ a franchisor can terminate a franchise only when:
- The franchisee has voluntarily abandoned the franchise. In such a
case, only 15 days’ notice is necessary;
- The franchisee is convicted of an indictable offense which is directly
related to the franchise business in which case termination is effective
- There is “good cause’ for the termination.
“Good cause” is defined as the failure of the franchisee to substantially comply with the contractual requirements imposed upon him under the franchise document. “Good cause” exists if the franchisee breaches an expressed or implied requirement of the franchise agreement. “Good cause” does not exist when the franchise documents are unreasonable. The Act prohibits the franchisor from imposing “unreasonable standards for the performance of the franchise upon a franchisee.”
Attorneys’ Fees and Court Costs
A franchisee may recover attorney’s fees and reasonable litigation costs for all successful claims against a franchisor. Unsuccessful claims do not result in an entitlement to attorney’s fees. Because of the unfair leverage that franchisors have as compared to their franchisees, state law allows a court to award counsel fees and costs to the franchisee if a successful claim is made and proven. Many potential causes of action can be successfully alleged based on long-standing NJ case law and principles of law outside of the state’s franchise statutes; for example, contract law, corporation law, the law of commercial business relationships, and more.
Do you have a question(s) not addressed here? If so, contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at email@example.com to schedule a consultation about your particular needs. He welcomes your calls and inquiries and you’ll find him very approachable and easy to talk to.