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AAFD Takes Action on New Jersey Hospitality Franchise Legislation

Posted on Date: Mar 13, 2020

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AAFD has given its support to newly introduced fair franchising legislation in New Jersey.  A2682, a bill concerning hospitality franchisee agreements, has been introduced by Assemblyman Raj Mukherji, who is also Chair of the Assembly Judiciary Committee.  Joining him as primary sponsors are Robert Karabinchak and Ronald Dancer making the introduction a bipartisan bill.  A link to the bill can be found here.  The link to the AAFD letter can be found here.

Key components of A2682 are that it will be a violation of the New Jersey Franchise Practices Act to:

  • Impose or enforce any non-compete on the franchisee for more than six months.
  • Require a franchisee to relocate or make any capital investment over $25,000 more than once every five years without a business case to recover that investment over the remaining term of the franchise agreement.
  • Receive any rebate, commission, kickback, services, other consideration or anything of value from any vendor that sells goods or services to a franchisee unless it is fully disclosed and promptly turned over to the franchisee.
  • Require a franchisee to assent to a general release from liability for the franchisor unless the franchisor provides to the franchisee a reciprocal general release.
  • Require a franchisee to purchase goods, services, supplies or inventory exclusively from the franchisor or sources designated by the franchisor when comparable quality items are available from other sources.
  • Establish, directly or indirectly, a franchisor-owned outlet within the franchisee’s exclusive or protected territory, if the franchise agreement provides for either.
  • Make any material change in terms of the franchise agreement through any unilateral change via the operations manual or through any bulletin or other communication.
  • Impose any fee or charge upon a franchisee that has not previously been disclosed in the franchise disclosure document.
  • Impose any fee or charge based on guest reviews or criticisms of a franchisee.
  • Sell points or credits in a loyalty program without compensating the franchisee at the lowest publicly advertised rate.
  • Suspend, restrict, stop-sell, or prevent access to any franchise services.
  • Impose any costs, fees, charges, or penalties for a franchisee’s failure to perform.

The act will take effect immediately and shall apply to franchise agreements that are entered into, modified, amended, or renewed after its effective date.  And again, to note, this legislation will only apply to the hospitality (lodging) industry.

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