Bill Text: NJ S2304 | 2010-2011 | Regular Session | Introduced
Bill Title: Modifies certain procedures for the assignment of franchise interests regarding the retail sale of motor fuel.
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2010-09-23 - Introduced in the Senate, Referred to Senate Commerce Committee [S2304 Detail]
Download: New_Jersey-2010-S2304-Introduced.html
Sponsored by:
Senator GERALD CARDINALE
District 39 (Bergen)
Senator PAUL A. SARLO
District 36 (Bergen, Essex and Passaic)
SYNOPSIS
Modifies certain procedures for the assignment of franchise interests regarding the retail sale of motor fuel.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning the assignment of certain franchise interests and amending P.L.2009, c.63.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 1 of P.L.2009, c.63 (C.56:10-6.1) is amended to read as follows:
1. It shall be a violation of the "Franchise Practices Act," P.L.1971, c.356 (C.56:10-1 et seq.):
a. For a franchisor to transfer, assign, or sell an interest in one or more franchise premises which a franchisee who purchases motor fuels and engages in the retail sale thereof has occupied under a lease agreement or agreements for a period of at least three consecutive years, or occupies under a lease agreement for a term of at least three years, unless the franchisor:
(1) makes a bona fide offer to transfer, assign, or sell to the franchisee all of the franchisor's interest in the franchise premises, which offer the franchisee shall have [60] 120 days to accept, [or] reject or dispute as to the offering price. If the franchisee disputes the offering price the franchisor shall, within 10 days of receiving written notice of such a dispute, provide the franchisee with the formula, calculation and methodology utilized to arrive at the offering price. Within 30 days of receipt of that information from the franchisor, the franchisee shall have the option of engaging in a dispute resolution process by selection of an appraiser. If the franchisee selects an appraiser, the franchisor shall also select an appraiser and together the franchisor's and franchisee's appraiser shall select an independent appraiser, who shall determine the offering price. The franchisee shall have 60 days from receipt of the report of the independent appraiser to accept or reject the offering price set by the independent appraiser; and
(2) if applicable, offers the franchisee a right of first refusal on any offer for the transfer, assignment, or sale of the franchise premises presented by another person acceptable to the franchisor as a successor to the franchisor's interest, which offer the franchisee shall have [60] 120 days to accept or reject. The franchisee shall have the option to dispute the offering price through the mechanism set forth in paragraph 1 of this subsection. If the franchisee accepts an offer by the franchisor made pursuant to this paragraph, the franchisor, as a condition for entering into the contract for the accepted offer, may request as a good faith acknowledgement of the contract, a deposit by the franchisee of up to 10% of the total amount payable under the terms of the contract, which shall be non-refundable if the franchisee willfully defaults on the contract. A franchisor shall not be prohibited from exercising other contractual provisions, and nothing in this paragraph shall be construed to hinder the rights of the franchisor to recover additional damages as provided under the law. Any modification of the offer presented to the franchisor by the other person acceptable to the franchisor as a successor shall require that offer, as modified, to be resubmitted to the franchisee in accordance with the foregoing provisions of this paragraph; except that nothing contained herein shall require the franchisor, having made a bona fide offer or offer under a right of first refusal to transfer, assign, or sell to the franchisee the franchisor's interest in the premises pursuant to paragraph (1) or paragraph (2), respectively, of this subsection, which offer the franchisee has rejected or failed to accept timely, to make a new offer upon the occurrence of a legitimate subsequent change at closing; and
(3) relieves any franchisee who accepts an offer for the transfer, assignment or sale of the franchise premises presented by the franchisor, from any and all covenants that would in any way limit or bind the franchisee to fuel supply contracts of the brand offered by the franchisor.
b. For any successor owner, following a transfer, assignment, or sale subsequent to the franchisee's rejection of, or failure to accept timely, an offer made by the franchisor pursuant to [paragraph (1) or paragraph (2) of] subsection a. of this section:
(1) not to maintain the requirements of the franchise arrangement in effect at the time of the transfer, assignment, or sale for each premises, unless that arrangement is changed only by mutual agreement of the franchisee and the successor owner;
(2) not to renew, at the expiration of the franchise arrangement in effect at the time of the transfer, assignment, or sale, the franchise arrangement of the franchisee for the same number of years as the franchise arrangement in effect at the time of the transfer, assignment, or sale, provided the renewal shall not exceed five years; and
(3) to require the franchisee to:
(a) participate in promotional campaigns of the successor owner's products;
(b) meet sales quotas;
(c) sell any product at a price suggested by the successor owner or successor owner's supplier;
(d) keep the premises open and operating during hours which are documented by the franchisee to be unprofitable to the franchisee; or
(e) disclose to the successor owner or successor owner's supplier any financial records of the operation of the franchisee's premises which are not related or necessary to the franchisee's obligations under the franchise arrangement.
Nothing in this subsection shall affect the successor owner's ability to terminate, cancel, or fail to renew a franchise arrangement for good cause shown in accordance with the provisions of the "Franchise Practices Act," P.L.1971, c.356 (C.56:10-1 et seq.).
c. For any successor owner, as set forth in subsection b. of this section, to transfer, assign, or sell an interest in a single franchise premises where a franchisee has engaged in the retail sale of motor fuel that is not part of two or more franchise premises, presented by the successor owner as a package to transfer, assign, or sell, and that the franchisee has occupied under a lease agreement or agreements for a period of three consecutive years, or occupies under a lease agreement for a term of at least three years, unless the successor owner makes an offer to transfer, assign, or sell to the franchisee the successor owner's interest, or offers the franchisee a right of first refusal on an offer presented by another person acceptable to the successor owner as a new successor to the interest, in accordance with the provisions of subsection a. of this section.
d. For any franchisor not to exercise any option for an extension of leased premises, without first offering an assignment of that lease option to the franchisee who occupies those premises.
(cf: P.L.2009, c.63, s.1)
2. This act shall take effect upon enactment, and shall apply to any franchise arrangement in effect on the effective date or becoming effective thereafter.
STATEMENT
This bill amends the "Franchise Practices Act" (C.56:10-1 et seq.) and establishes certain procedures for the assignment of certain franchise interests that purchase motor fuels and sells them at retail.
Specifically, the bill requires that a franchisor who offers to transfer, assign or sell the franchisor's interest in a franchise to a franchisee must give the franchisee 120 days to consider, accept or reject the franchisor's offer. If the franchisee disputes the offering price, then the franchisor has 10 days from the day the franchisor receives written notice of the dispute to provide the franchisee with the formula, calculation or methodology used to calculate the offering price. Within 30 days of receiving this information, the franchisee may enter into a dispute resolution process and hire an independent appraiser. During this time period, the franchisor may also hire an independent appraiser, and the two appraisers would be required to select an independent appraiser to determine the offering price. The franchisee shall have 60 days from receipt of the report of the independent appraiser to accept or reject the offering price set by the independent appraiser.
The law currently provides that the franchisee shall have the right of first refusal on any offer for the transfer, assignment or sale of the franchise premises presented by a third-party acceptable to the franchisor as a successor to the franchisor's interest. The bill provides that the franchisee shall have 120 days to accept or reject the offer and may use the same dispute resolution process set forth for the transfer, assignment or sale of the franchisor's interest in a franchise to a franchisee.
The bill also provides that if the franchisee accepts an offer for the transfer, assignment or sale of the franchise premises presented by the franchisor, then the franchisee shall be relieved of any and all covenants that would in any way limit or bind the franchisee to fuel supply contracts of the brand offered by the franchisor.
The bill further provides that a franchisor shall be in violation of the "Franchise Practices Act" if the franchisor elects not to exercise any option for an extension of leased premises without initially offering an assignment of such lease option to the franchisee who occupies the premises.
