Franchise FDD Registration in New Jersey

New Jersey Franchise Law

The State of New Jersey is not a franchise registration state. This means that if you would like to offer or sell a franchise in the State of New Jersey you are not required to register your Franchise Disclosure Document (“FDD”) with a New Jersey State regulator. Although you are not required to register your FDD with the State of New Jersey you must nevertheless ensure that your New Jersey franchise offering complies with the Federal Franchise Laws which means that you must maintain an updated FDD that is properly disclosed to a prospective New Jersey franchisee before offering or selling a franchise.

To afford New Jersey based franchisees with additional protections and rights after they sign a franchise agreement, New Jersey has enacted the New Jersey Franchise Practices Act which prohibits certain franchise agreement provisions and actions relating to the franchisor-franchisee relationship.

Federal & New Jersey Franchise Laws

There are no franchise laws in New Jersey requiring the registration of a FDD. FDD disclosure in the state of New Jersey is governed by the FTC Franchise Rule requiring, among other things, that a Franchisor disclose a valid and updated FDD to a prospective franchisee no less than 14 calendar days before signing a franchise agreement or paying any money to the franchisor.

New Jersey Franchise Practices Act

The New Jersey Franchise Practices Act (N.J. Stat. Ann. Sections 56:101, et al.) is a franchise relationship statute that governs relationships between franchisors and franchisees. Under the New Jersey Franchise Practices Act franchisees must be aware of the additional rights that they are afforded and franchisors must carefully consider and comply with the additional obligations imposed on them.

For example, under the New Jersey Franchise Practices Act, among other things:

• Prior to terminating, canceling or failing to renew a franchise, franchisors are required to give franchisees at least 60 days advance notice of the termination, cancellation or non-renewal and the reasons for such action;

• Within 60 days of a franchisee’s request and notification of the franchisee’s intention to transfer or sell his or her franchise, the franchisor must respond within 60 days and must respond to and notify the franchisee as to whether or not the franchisor approves of such request and if the franchisor objects to such request the franchisor must describe the basis for its decision. A franchisors failure to respond within 60 days of a franchisee’s transfer request is automatically deemed an approval; and

• It is unlawful for a franchisor to require a franchisee to sign a general release as a condition for entering into a franchise agreement.

There are other prohibitions contained in the New Jersey Franchise Practices Act and these prohibitions relate to balancing the franchisor franchisee relationship and preventing franchisors from unreasonably interfering with the management of franchisee and imposing what the act refers to as “unreasonable standards of performance” on the franchisee.

Getting Started

From a best practices standpoint, if you are a franchisor offering or selling franchises in New Jersey or you plan to franchise your New Jersey business, you need to be aware of the requirements imposed by the New Jersey Franchise Practices Act. Also you must ensure that your FDD and your franchise disclosure process complies with the Federal Franchise Laws.