New Jersey is classified as a non-registration state, as there are no currently enacted laws requiring franchisors to register with the state as a franchise or business opportunity, or to provide disclosures to franchisees beyond what is already required by the Federal Trade Commission Amended Franchise Rule, 16 C.F.R. §§ 436.1 et seq. (the “FTC Rule”), before offering or selling a franchise in New Jersey. New Jersey does, however, regulate certain aspects of the franchise relationship through its New Jersey Franchise Practices Act (the “Act”), which is codified at N.J. Stat. § 56:10-1 et seq. and which, under N.J. Stat. § 56:10-4, applies only to franchises in which (1) the franchisee is required to maintain a place of business in New Jersey; (2) the gross sales between the franchisor and franchisee for the previous twelve months exceeds $35,000; and (3) more than 20% of the franchisee’s gross sales are derived from the franchise.
Generally, the Act prohibits franchisors from terminating or refusing to renew a franchise agreement in the absence of “good cause.” The Act also prohibits franchisors from terminating, cancelling, or refusing to renew a franchise agreement without first providing notice to the franchisee sixty-days in advance in a writing setting forth all the reasons for the decision. However, franchisors are only required to provide notice fifteen-days in advance if a franchisee’s “voluntary abandonment” of the franchise relationship is the reason for the decision, and franchisors are not required to provide any advance notice if a franchisee’s conviction of an offense directly related to the franchise business is the reason for the decision. In addition, the Act prohibits franchisors from requiring franchisees to release franchisors from liability as a condition of entering into a franchise agreement; requiring or prohibiting changes in the franchisee’s management team, unless for good cause and put in writing; and prohibiting franchisees from associating with one another, if for a lawful purpose.
Thus, franchisors in New Jersey are required to comply with requirements set forth in the Act, as well as those set forth the FTC Rule, which, among other things, requires franchisors to disclose a validly issued Franchise Disclosure Document (FDD) before entering into a franchise agreement or accepting payment from a franchisee.