New Jersey Franchise Practices Act

Franchise Practices Act

• 56:10-1. Short title This act shall be known and may be cited as the “Franchise Practices Act.”
• 56:10-2. Legislative findings The Legislature finds and declares that distribution and sales through franchise arrangements in the State of New Jersey vitally affects the general economy of the State, the public interest and the public welfare. It is therefore necessary in the public interest to define the relationship and responsibilities of franchisors and franchisees in connection with franchise arrangements and to protect franchisees from unreasonable termination by franchisors that may result from a disparity of bargaining power between national and regional franchisors and small franchisees. The Legislature finds that these protections are necessary to protect not only retail businesses, but also wholesale distribution franchisees that, through their efforts, enhance the reputation and goodwill of franchisors in this State. Further, the Legislature declares that the courts have in some cases more narrowly construed the Franchise Practices Act than was intended by the Legislature.
• 56:10-3.Definitions As used in this act:

1. “Franchise” means a written arrangement for a definite or indefinite period, in which a person grants to another person a license to use a trade name, trade mark, service mark, or related characteristics, and in which there is a community of interest in the marketing of goods or services at wholesale, retail, by lease, agreement, or otherwise.
2. “Person” means a natural person, corporation, partnership, trust, or other entity and, in case of an entity, it shall include any other entity which has a majority interest in such entity or effectively controls such other entity as well as the individual officers, directors, and other persons in active control of the activities of each such entity.
3. “Franchisor” means a person who grants a franchise to another person.
4. “Franchisee” means a person to whom a franchise is offered or granted.
5. “Sale, transfer or assignment” means any disposition of a franchise or any interest therein, with or without consideration, to include but not be limited to bequest, inheritance, gift, exchange, lease or license.
6. “Place of business” means a fixed geographical location at which the franchisee displays for sale and sells the franchisor’s goods or offers for sale and sells the franchisor’s services. Place of business shall not mean an office, a warehouse, a place of storage, a residence or a vehicle, except that with respect to persons who do not make a majority of their sales directly to consumers, “place of business” means a fixed geographical location at which the franchisee displays for sale and sells the franchisor’s goods or offers for sale and sells the franchisor’s services, or an office or a warehouse from which franchisee personnel visit or call upon customers or from which the franchisor’s goods are delivered to customers.

• 56:10-4.Application of act This act applies only:

1. to a franchise (1) the performance of which contemplates or requires the franchisee to establish or maintain a place of business within the State of New Jersey, (2) where gross sales of products or services between the franchisor and franchisee covered by such franchise shall have exceeded $ 35,000.00 for the 12 months next preceding the institution of suit pursuant to this act, and (3) where more than 20% of the franchisee’s gross sales are intended to be or are derived from such franchise; or
2. to a franchise for the sale of new motor vehicles as defined inS. 39:10-2, the performance of which contemplates or requires the franchisee to establish or maintain a place of business within the State of New Jersey.

• 56:10-5. Termination of franchise; notice; grounds It shall be a violation of this act for any franchisor directly or indirectly through any officer, agent, or employee to terminate, cancel, or fail to renew a franchise without having first given written notice setting forth all the reasons for such termination, cancellation, or intent not to renew to the franchisee at least 60 days in advance of such termination, cancellation, or failure to renew, except (1) where the alleged grounds are voluntary abandonment by the franchisee of the franchise relationship in which event the aforementioned written notice may be given 15 days in advance of such termination, cancellation, or failure to renew; and (2) where the alleged grounds are the conviction of the franchisee in a court of competent jurisdiction of an indictable offense directly related to the business conducted pursuant to the franchise in which event the aforementioned termination, cancellation or failure to renew may be effective immediately upon the delivery and receipt of written notice of same at any time following the aforementioned conviction. It shall be a violation of this act for a franchisor to terminate, cancel or fail to renew a franchise without good cause. For the purposes of this act, good cause for terminating, canceling, or failing to renew a franchise shall be limited to failure by the franchisee to substantially comply with those requirements imposed upon him by the franchise.
• 56:10-6. Transfer of franchise; notice; approval; agreement of compliance It shall be a violation of this act for any franchisee to transfer, assign or sell a franchise or interest therein to another person unless the franchisee shall first notify the franchisor of such intention by written notice setting forth in the notice of intent the prospective transferee’s name, address, statement of financial qualification and business experience during the previous 5 years. The franchisor shall within 60 days after receipt of such notice either approve in writing to the franchisee such sale to proposed transferee or by written notice advise the franchisee of the unacceptability of the proposed transferee setting forth material reasons relating to the character, financial ability or business experience of the proposed transferee. If the franchisor does not reply within the specified 60 days, his approval is deemed granted. No such transfer, assignment or sale hereunder shall be valid unless the transferee agrees in writing to comply with all the requirements of the franchise then in effect.
• 56:10-6.1.Violations of the “Franchise Practices Act. “It shall be a violation of the “Franchise Practices Act,” P.L.1971, c.356 (C.56:10-1et seq.):

1. 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:

• 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 days to accept or reject; and
• 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 days to accept or reject. 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.

1. 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:

• 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;
• not to renew, at the expiration of the franchise arrangementin 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
• to require the franchisee to:
• participate in promotional campaigns of the successor owner’s products;
• meet sales quotas;
• sell any product at a price suggested by the successor owner or successor owner’s supplier;
• keep the premises open and operating during hours which are documented by the franchisee to be unprofitable to the franchisee; or
• 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.56:10-1et seq.).

1. 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.

• 56:10-6.2.Inapplicability of act to certain distributors The provisions ofP.L.2009, c.63(C.56:10-6.1et seq.) pertaining to franchisors shall not apply to any distributor which owns or otherwise controls through lease, fewer than 40 premises. For purposes of this section, “distributor” means any person, including any affiliate of such person, who: (1) purchases motor fuel for sale, consignment, or distribution to another; or (2) receives motor fuel for consignment or distribution to the person’s or affiliate’s own motor fuel accounts, but shall not include a person who merely serves as a common carrier providing transportation services for another.
• 56:10-6.3. Inapplicability of act relative to family members The provisions of P.L.2009, c.63 (C.56:10-6.1 et seq.) shall not apply to the sale, transfer, or assignment of one or more franchise premises from one family member to another family member. For the purposes of this section, “family member” means a spouse, child, parent, sibling, aunt, uncle, niece, nephew, first cousin, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepparent, stepchild, stepbrother, stepsister, half brother, or half sister, whether the individual is related by blood, marriage, or adoption.
• 56:10-6.4. Severability If any provision of P.L.2009, c.63 (C.56:10-6.1 et seq.) or the application of any such provision to any person or circumstance should be held invalid by a court of competent jurisdiction, the remainder of P.L.2009, c.63 (C.56:10-6.1 et seq.) and the application of its provisions to persons or circumstances other than those with respect to whom or which it is held invalid shall not be affected thereby.
• 56:10-7.Prohibited practices It shall be a violation of this act for any franchisor, directly or indirectly, through any officer, agent or employee, to engage in any of the following practices:

1. To require a franchisee at time of entering into a franchise arrangement to assent to a release, assignment, novation, waiver or estoppel which would relieve any person from liability imposed by this act.
2. To prohibit directly or indirectly the right of free association among franchisees for any lawful purpose.
3. To require or prohibit any change in management of any franchisee unless such requirement or prohibition of change shall be for good cause, which cause shall be stated in writing by the franchisor.
4. To restrict the sale of any equity or debenture issue or the transfer of any securities of a franchise or in any way prevent or attempt to prevent the transfer, sale or issuance of equity securities or debentures to employees, personnel of the franchisee, or spouse, child or heir of an owner, as long as basic financial requirements of the franchisor are complied with, and provided any such sale, transfer or issuance does not have the effect of accomplishing a sale or transfer of control, including, but not limited to, change in the persons holding the majority voting power of the franchise. Nothing contained in this subsection shall excuse a franchisee’s obligation to provide prior written notice of any change of ownership to the franchisor if that notice is required by the franchise.
5. To impose unreasonable standards of performance upon a franchisee.
6. To provide any term or condition in any lease or other agreement ancillary or collateral to a franchise, which term or condition directly or indirectly violates this act.

• 56:10-7.1.Prohibition of purchase of alternate motor fuel by franchisee; violation

1. It shall be a violation of the act to which this act is a supplement for any franchisor, directly or indirectly, through any officer, agent, or employee, to prohibit any franchisee engaged in the retail sale of motor gasoline from purchasing any suitable alternate motor fuel from whatever authorized source that it is available; to reduce allocations of motor gasoline to any franchisee because of the purchase by the franchisee of an alternate motor fuel; or to prohibit the use of franchisor issued credit cards to purchase a suitable alternate motor fuel; provided that:

• The franchisee has shown that reasonable efforts to secure adequate supplies of the alternate motor fuel from the franchisor have failed;
• The franchisee continues to meet all other terms and conditions of the franchise agreement;
• The franchisee shall adequately inform consumers of the alternate motor fuel of the change in type or trade name with reasonable labeling of pumps dispensing the alternate motor fuel to indicate, where appropriate, that such alternate motor fuel is not manufactured, distributed, or sold by such franchisor.

1. As used in this section, “alternate motor fuel” means diesel fuel or any liquid which is the product of the combination of motor gasoline and any other liquid or gaseous substance which is not derivative of petroleum, and which is used for the purpose of operating a mechanical device powered by internal combustion.

• 56:10-7.2.Findings, declarations The Legislature hereby finds and declares the following:

1. Notwithstanding the enactment of the “Franchise Practices Act,” P.L. 1971, c. 356 ( 56:10-1et seq.), and other legislation dealing with the franchisor-franchisee relationship, including, but not limited to P.L. 1982, c. 156 (C. 56:10-17et seq.), inequality of bargaining power continues to exist between motor vehicle franchisors and motor vehicle franchisees. This inequality of bargaining power exists even as to motor vehicle franchisees who have had their franchises for many years and who have expended large sums of money in the promotion of their franchises.
2. This inequality of bargaining power enables motor vehicle franchisors to compel motor vehicle franchisees to execute franchises and related leases and agreements which contain terms and conditions that would not routinely be agreed to by the motor vehicle franchisees absent the compulsion and duress which arise out of the inequality of bargaining power. These terms and conditions are detrimental to the interests of the motor vehicle franchisees in that they require the motor vehicle franchisees to relinquish their rights which have been established by the “Franchise Practices Act” and supplemental legislation and other statutes and laws of this State.
3. As a result, motor vehicle franchisees have been denied the opportunity to have disputes with their motor vehicle franchisors arising out of the franchisor-franchisee relationship heard in an appropriate venue, convenient to both parties, by tribunals established by statute for the resolution of these disputes. It is therefore necessary and in the public interest to ensure that motor vehicle franchisees voluntarily determine whether to agree to certain terms and conditions contained in franchises and related leases and agreements presented to them by motor vehicle franchisors and under circumstances unaffected by the compulsion which arises from the inequality of bargaining power.

• 56:10-7.3.Prohibited conditions, terms of franchise

1. It shall be a violation of the “Franchise Practices Act,” P.L.1971, c.356 (C.56:10-1et seq.) for a motor vehicle franchisor to require a motor vehicle franchisee to agree to a term or condition in a franchise, or in any lease or agreement ancillary or collateral to a franchise, which:

(1)Requires the motor vehicle franchisee to waive trial by jury in actions involving the motor vehicle franchisor; or

(2)Specifies the jurisdictions, venues or tribunals in which disputes arising with respect to the franchise, lease or agreement shall or shall not be submitted for resolution or otherwise prohibits a motor vehicle franchisee from bringing an action in a particular forum otherwise available under the law of this State; or

(3)Requires that disputes between the motor vehicle franchisor and motor vehicle franchisee be submitted to arbitration or to any other binding alternate dispute resolution procedure; provided, however, that any franchise, lease or agreement may authorize the submission of a dispute to arbitration or to binding alternate dispute resolution if the motor vehicle franchisor and motor vehicle franchisee voluntarily agree to submit the dispute to arbitration or binding alternate dispute resolution at the time the dispute arises.

1. For the purposes of this section, it shall be presumed that a motor vehicle franchisee has been required to agree to a term or condition in violation of this section as a condition of the offer, grant or renewal of a franchise or of any lease or agreement ancillary or collateral to a franchise, if the motor vehicle franchisee, at the time of the offer, grant or renewal of the franchise, lease or agreement is not offered the option of an identical franchise, lease or agreement without the term or condition proscribed by this section.
2. In addition to any remedy provided in the “Franchise Practices Act,” any term or condition included in a franchise, or in any lease or agreement ancillary or collateral to a franchise, in violation of this section may be revoked by the motor vehicle franchisee by written notice to the motor vehicle franchisor within 60 days of the motor vehicle franchisee’s receipt of the fully executed franchise, lease or agreement. This revocation shall not otherwise affect the validity, effectiveness or enforceability of the franchise, lease or agreement.

• 56:10-7.4.Additional practices prohibited. It shall be a violation of P.L.1971, c.356 (C.56:10-1et seq.) for any motor vehicle franchisor, directly or indirectly, through any officer, agent or employee, to engage in any of the following practices:

1. To impose unreasonable standards of performance or unreasonable facilities, financial, operating or other requirements upon a motor vehicle franchisee.
2. To base the disapproval of the transfer, sale or assignment of a motor vehicle franchise, or any interest therein, on the ground that the proposed transferee is not a natural person.
3. To fail to compensate a motor vehicle franchisee for all reasonable costs incurred by the franchisee in complying with the requirements imposed on the franchisee by the franchisor relating to a product recall.
4. To utilize an arbitrary or unreasonable formula or other calculation or process intended to gauge performance as a basis for making any decision or taking any action governed by P.L.1971, c.356 (56:10-1et seq.).
5. Except as provided pursuant to section 6 ofL.2015, c.24(C.56:10-27.1), to own or operate or enter into an agreement with a person, other than an existing motor vehicle franchisee, to operate a retail facility for the servicing of motor vehicles, which is authorized to perform warranty service on motor vehicles manufactured or distributed by the motor vehicle franchisor. The establishment, relocation, reopening or reactivation of such a facility pursuant to an agreement with a motor vehicle franchisee shall be subject to the provisions of P.L.1982, c.156 (C.56:10-16et seq.), except that paragraph (3) of subsection b. of section 8 of that act (C.56:10-23) shall not be applicable. Notice shall be given to motor vehicle franchisees in the same line make or makes within six miles of the proposed retail facility for the servicing of motor vehicles which is authorized to perform warranty service on motor vehicles manufactured or distributed by the motor vehicle franchisor.
6. To require an unconditional release from a motor vehicle franchisee without permitting the franchisee to except from the release any claims for outstanding financial obligations of the motor vehicle franchisor to the motor vehicle franchisee for which payment will not be made at or before the giving of the release.
7. (1) To require or attempt to require a motor vehicle franchisee to order or purchase a new or used motor vehicle, or any accessory or equipment thereof not required by law; or (2) to require or attempt to require a motor vehicle franchise to accept delivery of any motor vehicle, or any accessory or equipment thereof not required by law, which is not as ordered by the motor vehicle franchisee; or (3) to take or withhold or threaten to take or withhold any action, impose or threaten to impose any penalty, or deny or threaten to deny any benefit, as a result of the motor vehicle franchisee’s failure or refusal to purchase, order or accept delivery of any such motor vehicle, accessory or equipment. This subsection shall not prevent a motor vehicle franchisor from requiring that a motor vehicle franchisee carry a representative inventory of models offered for sale by the motor vehicle franchisor.
8. To fail or refuse to sell or offer to sell to all motor vehicle franchisees in a line make every motor vehicle sold or offered for sale to any motor vehicle franchisee of the same line make, or to fail or refuse to sell or offer to sell such motor vehicles to all motor vehicle franchisees at the same price for a comparably equipped motor vehicle, on the same terms, with no differential in discount, allowance, credit or bonus, and on reasonable, good faith and non-discriminatory allocation and availability terms. However, the failure to deliver any such motor vehicle shall not be considered a violation of this section if the failure is not arbitrary and is due to a lack of manufacturing capacity or to a strike or labor difficulty, a shortage of materials, a freight embargo or other cause over which the franchisor has no control. A motor vehicle franchisor shall not require a motor vehicle franchisee to purchase unreasonable quantities of advertising materials, purchase special tools not required to properly service a motor vehicle or undertake sales person or service person training unrelated to the motor vehicle or meet unreasonable display requirements as a condition of receiving a motor vehicle.
9. Unless compelled by law or legal process, (1) if the customer has objected thereto in writing, to require a motor vehicle franchisee to publish, release, convey or otherwise provide information obtained with respect to any customers, contracts, products, services or other transactions of the motor vehicle franchisee which is not necessary for the motor vehicle franchisor to meet its obligations to consumers or the motor vehicle franchisee, including vehicle recalls or other requirements imposed by State or federal law, or for complying with the duties or obligations of the respective parties under the franchise; or (2) to release such information which has been provided to it by the motor vehicle franchisees to any third party.
10. To impose or attempt to impose any requirement, limitation or regulation on, or interfere or attempt to interfere with, the manner in which a motor vehicle franchisee utilizes the facilities at which a motor vehicle franchise is operated, including, but not limited to, requirements, limitations or regulations as to the line makes of motor vehicles that may be sold or offered for sale at the facility, or to take or withhold or threaten to take or withhold any action, impose or threaten to impose any penalty, or deny or threaten to deny any benefit, as a result of the manner in which the motor vehicle franchisee utilizes his facilities, except that the motor vehicle franchisor may require that the portion of the facilities allocated to or used for the motor vehicle franchise meets the motor vehicle franchisor’s reasonable, written space and volume requirements as uniformly applied by the motor vehicle franchisor. The provisions of this subsection shall not apply if the motor vehicle franchisor and the motor vehicle franchisee voluntarily agree to the requirement and separate and valuable consideration therefor is paid.
11. To require or attempt to require a motor vehicle franchisee, or the owner or landlord of property on which a motor vehicle franchise is operated, to give a motor vehicle franchisor or any person under the control of the motor vehicle franchisor an interest in or option with respect to the real property on which the motor vehicle franchise is operated, to restrict the uses to which the facility at which the motor vehicle franchise is operated may be put during or after the term of the franchise, or to take or withhold or threaten to take or withhold any action, impose or threaten to impose any penalty, or deny or threaten to deny any benefit, as a result of the failure or refusal of a motor vehicle franchisee, property owner, or landlord to agree to or comply with any such demand or restriction. Nothing in this subsection shall be deemed to bar a voluntary agreement between a motor vehicle franchisor and a motor vehicle franchisee, or the owner or landlord of property on which a motor vehicle franchise is operated, to give the motor vehicle franchisor or the person under the control of the motor vehicle franchisor an interest in or option with respect to the real property on which a motor vehicle franchise is operated, or to restrict the uses to which the facility at which the motor vehicle franchise is operated is put, provided that separate and valuable consideration is paid for such interest, option or restriction.
12. To require or attempt to require a motor vehicle franchisee to relocate his franchise or to implement any facility or operational modification or to take or withhold or threaten to take or withhold any action, impose or threaten to impose any penalty, or deny or threaten to deny any benefit as a result of the failure or refusal of such motor vehicle franchisee to agree to any such relocation or modification, unless the motor vehicle franchisor can demonstrate that: (1) funds are generally available to the franchisee for the relocation or modification on reasonable terms; and (2) the motor vehicle franchisee will be able, in the ordinary course of business as conducted by such motor vehicle franchisee, to earn a reasonable return on his total investment in such facility or from such operational modification, and the full return of his total investment in such facility or from such operational modifications within 10 years; or (3) the modification is required so that the motor vehicle franchisee can effectively sell and service a motor vehicle offered by the motor vehicle franchisor based on the specific technology of the motor vehicle. This subsection shall not be construed as requiring a motor vehicle franchisor to guarantee that the return as provided in paragraph (2) of this subsection will be realized.
13. Directly, or through any financial institution having any commonality of ownership with the motor vehicle franchisor, to require or attempt to require, or to take or withhold or threaten to take or withhold any action, impose or threaten to impose any penalty, or deny or threaten to deny any benefit, as a result of the failure or refusal of a motor vehicle franchisee to maintain working capital, equity, floor plan financing or other indications of financial condition, greater than the lesser of (1) the minimum required to operate the motor vehicle franchise based on the operations of the franchise over the prior 12-month period; or (2) an increase of no more than 5% over the prior calendar year, unless the motor vehicle franchisor, or the financial institution having any commonality of ownership with a motor vehicle franchisor, can establish that such failure or refusal prevents the franchisee from operating the franchise in the ordinary course of business. This subsection shall not apply if the working capital, equity, floor plan financing or other indication of financial condition is the result of an accommodation by the motor vehicle franchisor, or financial institution with a commonality of ownership with the motor vehicle franchisor, to the motor vehicle franchisee, containing specific terms and deadlines for the restoration of the motor vehicle franchisee’s working capital, inventory, floor plan financing or other indication of financial condition, which accommodation is agreed to in writing by the motor vehicle franchisee.
14. To impose or attempt to impose any conditions on the approval of the transfer of a motor vehicle franchise, except as provided in section 6 of P.L.1971, c.356 (56:10-6).
15. To amend or modify the franchise of a motor vehicle franchisee, or any lease or agreement ancillary or collateral to such franchise, including in connection with the renewal of a franchise, if such amendment or modification is not in good faith, is not for good cause, or would adversely and substantially alter the rights, obligations, investment or return on investment of the motor vehicle franchisee.
16. To take or withhold or threaten to take or withhold any action, impose or threaten to impose any penalty, or deny or threaten to deny any benefit, because the motor vehicle franchisee sold or leased a motor vehicle to a customer who exported the vehicle to a foreign country or who resold the vehicle, unless the motor vehicle franchisor can establish that the motor vehicle franchisee knew or reasonably should have known, prior to the sale or lease, that the customer intended to export or resell the motor vehicle; provided, however, that it shall be presumed that the motor vehicle franchisee did not know or should not have reasonably known that the vehicle would be exported if the vehicle is titled or registered in any state or the District of Columbia.
17. To require a motor vehicle franchisee, at the time of entering into a franchise arrangement, any lease or agreement ancillary or collateral to a motor vehicle franchise, or any amendment, modification, renewal or termination thereof, to assent to a release, assignment, novation, waiver or estoppel, which would relieve any person from liability imposed by P.L.1971, c.356 (56:10-1et seq.); provided that nothing in this subsection shall be deemed to prohibit a voluntary agreement between the motor vehicle franchisor and the motor vehicle franchisee which contains a release, assignment, novation, waiver or estoppel for which separate and valuable consideration is paid by the motor vehicle franchisor to the motor vehicle franchisee.
18. To provide any term or condition in any motor vehicle franchise, in any lease or other agreement ancillary or collateral to a motor vehicle franchise or in any renewal, amendment or modification thereof, which term or condition directly or indirectly violates P.L.1971, c.356 (56:10-1et seq.).
19. To allocate vehicles to or evaluate the performance of a motor vehicle franchise based on, or offer any discount, incentive, bonus, program, allowance or credit that differentiates between vehicle sales by a motor vehicle franchisee within a territory or geographic area assigned to the motor vehicle franchisee and vehicle sales outside of such territory or geographic area.

• 56:10-8. Application of act to prior grants of franchises This act shall not apply to a franchise granted prior to the effective date of this act, provided, however, that a renewal of a franchise or an amendment to an existing franchise shall not be excluded from the application of this act.
• 56:10-9. Action against franchisor; defenses It shall be a defense for a franchisor, to any action brought under this act by a franchisee, if it be shown that said franchisee has failed to substantially comply with requirements imposed by the franchise and other agreements ancillary or collateral thereto.
• 56:10-10. Action against franchisor; damages; injunction; costs Any franchisee may bring an action against its franchisor for violation of this act in the Superior Court of the State of New Jersey to recover damages sustained by reason of any violation of this act and, where appropriate, shall be entitled to injunctive relief. Such franchisee, if successful, shall also be entitled to the costs of the action including but not limited to reasonable attorney’s fees.
• 56:10-11. Severability If any provision of this law or the application thereof to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of the law which can be given effect without the invalid provision or application, and to this end the provisions of this law are severable.
• 56:10-12. Limitation of liability of franchisor, its officers, agents or employees for furnishing information No liability on the part of and no cause of action of any nature other than as provided by this act shall arise against any franchisor, its officers, agents or employees furnishing information as to reasons for termination, cancellation, intent not to renew, failure to renew, unacceptability of a proposed transferee, or relating to the character, financial ability or business experience of a proposed transferee, or for statements made or evidence submitted at any hearing or trial conducted in connection therewith.’’
• 56:10-13.Definitions For the purposes of this act:

“Motor vehicle franchisor” means a franchisor engaged in the business of manufacturing or assembling new motor vehicles, who will, under normal business conditions during the year, manufacture or assemble at least 10 new motor vehicles, and his motor vehicle distributors;

“Motor vehicle franchisee” means every franchisee actively engaged in the business of buying, selling or exchanging new motor vehicles and who has an established place of business;

“Motor vehicle franchise” means a franchise for the marketing of new motor vehicles;

“New motor vehicle” means only a newly manufactured motor vehicle, and includes all vehicles propelled otherwise than by muscular power, and motorcycles, trailers and tractors, excepting: (1) those vehicles as run only upon rails or tracks and motorized bicycles, and buses, including school buses; and (2) those motor vehicles not designed or used primarily for the transportation of persons or property and only incidentally operated or moved over a highway.

• 56:10-13.1. Violations concerning relocations It shall be a violation of the “Franchise Practices Act,” P.L.1971, c.356 (C.56:10-1et seq.) for any motor vehicle franchisor, directly or indirectly, through any officer, agent or employee, to prohibit or restrict the relocation of a motor vehicle franchise unless:

1. the relocation will leave that franchisor without representation in the primary market area of the relocating motor vehicle franchisee;
2. the relocation will have a material adverse effect on an existing motor vehicle franchisee;
3. the place of business to which the motor vehicle franchisee proposes to relocate does not substantially satisfy the reasonable standards for franchise facilities established by the motor vehicle franchisor in writing and made available to its franchisees; or
4. the relocation is determined to be injurious pursuant to P.L.1982, c.156 (56:10-16et seq.).

• 56:10-13.2.Repurchase of certain vehicles and equipment on termination, cancellation or nonrenewal Within 90 days of the termination, cancellation or nonrenewal of a motor vehicle franchise as provided for in section 5 of P.L.1971, c.356 (C.56:10-5), or the termination, cancellation or nonrenewal of a motor vehicle franchise by the motor vehicle franchisee or by mutual agreement of the motor vehicle franchisee and motor vehicle franchisor, the motor vehicle franchisor shall repurchase from the motor vehicle franchisee:

1. any unused, undamaged and unsold vehicles from current and all prior year inventories with 500 miles or less registered on the odometer, or recreational vehicles that were acquired from the motor vehicle franchisor within 12 months before the effective date of the termination, and any unused, undamaged and unsold parts, supplies and accessories, listed in the franchisor’s current price catalog and acquired from the franchisor or a source approved or recommended by the franchisor at the franchisee’s net acquisition cost therefor, including transportation, delivery and similar charges paid by the franchisee, plus the franchisee’s cost of handling, packing, loading and transporting the vehicle inventory, parts, supplies and accessories for return to the franchisor. For the purposes of this subsection, vehicle inventory, parts, supplies and accessories used by the franchisee or its employees for display, demonstration or other marketing purposes shall be deemed to be unused or unsold.
2. any special tools and signs which were required by the franchisor, at:

• the franchisee’s net acquisition cost if the item was acquired in the 12 months immediately preceding the effective date of the termination, cancellation or nonrenewal;
• the greater of the fair market value or 75% of the franchisee’s net acquisition cost if the item was acquired more than 12 but less than 24 months immediately preceding the effective date of the termination, cancellation or nonrenewal;
• the greater of the fair market value or 50% of the franchisee’s net acquisition cost if the item was acquired more than 24 but less than 36 months immediately preceding the effective date of the termination, cancellation or nonrenewal;
• the greater of the fair market value or 25% of the franchisee’s net acquisition cost if the item was acquired more than 36 but less than 60 months immediately preceding the effective date of the termination, cancellation or nonrenewal; or
• the fair market value if the item was acquired more than 60 months immediately preceding the effective date of the termination, cancellation or nonrenewal; plus the franchisee’s cost of handling, packing, loading and transporting the item for return to the franchisor.

Payment shall be made by the motor vehicle franchisor within 30 days after the date on which the motor vehicle franchisee notifies the motor vehicle franchisor in writing that the property is available for repurchase.

Nothing in this section shall prohibit the franchise from containing provisions in addition to, but not inconsistent with, those required by this section.

• 56:10-13.3.Violations related to termination, cancellation or nonrenewal

1. It shall be a violation of the “Franchise Practices Act,” P.L.1971, c.356 (56:10-1et seq.) for any motor vehicle franchisor, directly or indirectly, through any officer, agent or employee, to terminate, cancel or fail to renew a motor vehicle franchise as the result of:
   • any change in the ownership, operation or control of all or any part of the franchisor’s business, whether by sale or transfer of the assets, corporate stock or other equity interest; assignment; merger; consolidation; combination; reorganization; restructuring; redemption; operation of law or otherwise; or
   • the termination, suspension or cessation of all or any part of the franchisor’s business operations due to the discontinuance of a line make or otherwise, unless the franchisor complies with the provisions of subsections b., c., d. and e. of this section or unless the franchisor, or another motor vehicle franchisor, pursuant to an agreement with the franchisor, offers the franchisee a replacement motor vehicle franchise which takes effect no later than the date of the termination, cancellation or nonrenewal of the franchisee’s existing motor vehicle franchise.
2. Within 90 days of the effective date of the termination, cancellation or nonrenewal, the motor vehicle franchisor shall compensate the motor vehicle franchisee in an amount at least equivalent to the fair market value of the motor vehicle franchise on
   • the day before the date the franchisor announces the action which results in the termination, cancellation or nonrenewal; or
   • the date on which the notice of termination, cancellation or nonrenewal is issued, whichever amount is higher.
3. The franchisor shall authorize the franchisee to continue servicing and supplying parts, including service and parts pursuant to a warranty issued by the franchisor, for any goods or services marketed by the franchisee pursuant to the motor vehicle franchise for a period of not less than five years from the effective date of the termination, cancellation or nonrenewal and shall continue to reimburse the franchisee for warranty parts and service in an amount and on terms no less favorable than those in effect prior to the termination, cancellation or nonrenewal and in accordance with section 3 of P.L.1977, c.84 (56:10-15).
4. The franchisor shall continue to supply the franchisee with replacement parts for any goods or services marketed by the franchisee pursuant to the motor vehicle franchise for a period of not less than five years from the effective date of the termination, cancellation or nonrenewal, at the same price and terms as the franchisor supplied them to the remaining franchisees of the franchisor, or if there are no such remaining franchisees, at a price and on terms no less favorable than those in effect prior to the termination, cancellation or nonrenewal.
5. If the franchisee continues to service motor vehicles and sell parts after the termination, cancellation or nonrenewal, as provided for in subsections c. and d. of this section, the compensation paid to the franchisee pursuant to subsection b. of this section shall be reduced to the extent, if any, of the fair market value of such rights as of the effective date of the termination, cancellation or nonrenewal.

• 56:10-13.4. Discontinuation of a series or line, effective termination For the purposes of sections 3 and 4 of this 1991 amendatory and supplementary act, and section 5 of the “Franchise Practices Act,” P.L.1971, c.356 (C.56:10-5), the termination, cancellation or discontinuation of a series, line, brand or class of new motor vehicle marketed by a motor vehicle franchisor as a distinct series, line, brand or class shall be deemed to be the termination, cancellation or nonrenewal of the motor vehicle franchise of a motor vehicle franchisee holding a franchise which includes that series, line, brand or class, even if that series, line, brand or class of new motor vehicle is part of a motor vehicle franchise which includes other series, lines, brands or classes of new motor vehicles. Notwithstanding the provisions of this section, a franchisor may change, add or delete models, specifications, model names, numbers or identifying marks or similar characteristics of the new motor vehicles it markets, if those changes, additions or deletions do not result, directly or indirectly, in the termination, cancellation or discontinuation of a distinct series, line, brand or class of new motor vehicle.
• 56:10-13.5. Interest on overdue payments If a motor vehicle franchisor fails to make any payment required by this 1991 amendatory and supplementary act within the time specified for payment, interest shall be added to that payment at the rate of 12% per annum from the date payment was due.
• 56:10-13.6. Violations by franchisor It shall be a violation of the “Franchise Practices Act,” P.L.1971, c.356 (C.56:10-1 et seq.), for a motor vehicle franchisor to exercise a right of first refusal or other right to acquire a motor vehicle franchise from a motor vehicle franchisee as a means to influence the consideration or other terms offered by a person in connection with the acquisition of the motor vehicle franchise or to influence a person to refrain from entering into, or to withdraw from, negotiations for the acquisition of the motor vehicle franchise.
• 56:10-13.7.Exceptions to violations by franchisor, “acquiring transferee” defined It shall be a violation of the “Franchise Practices Act,” P.L.1971, c.356 (C.56:10-1et seq.), for a motor vehicle franchisor to exercise a right of first refusal or other right to acquire a motor vehicle franchise from a motor vehicle franchisee unless the motor vehicle franchisor:

1. at the election of the motor vehicle franchisee, assumes the lease for or acquires the real property on which the motor vehicle franchise is conducted on the same terms as those on which the real property or lease was to be sold or transferred to the acquiring transferee in connection with the sale of the motor vehicle franchise, unless otherwise agreed to by the motor vehicle franchisee and motor vehicle franchisor; and
2. reimburses the acquiring transferee of the motor vehicle franchise for the reasonable expenses paid or incurred by him in evaluating and investigating the motor vehicle franchise and negotiating and pursuing the acquisition of the motor vehicle franchise prior to the motor vehicle franchisor’s exercise of the right of first refusal or other right to acquire the motor vehicle franchise. For purposes of this subsection, expenses to evaluate and investigate the motor vehicle franchise means, in addition to any other expenses associated with the evaluation and investigation of the motor vehicle franchise, legal and accounting expenses, and expenses associated with the evaluation and investigation of any real property on which the motor vehicle franchise is conducted, including, but not limited to, expenses associated with title examinations, environmental assessments and other expenses directly related to the acquisition or lease of such real property by the acquiring transferee. Upon reimbursement, any title reports, or other reports or studies received by the acquiring transferee as a result of the evaluation or investigation of the motor vehicle franchise or the real property on which the motor vehicle franchise is conducted shall be provided to the motor vehicle franchisor. The acquiring transferee shall submit an itemized list of the expenses to be reimbursed along with supporting documents, if any, to the motor vehicle franchisor no later than 30 days after receipt of a written request for same from the motor vehicle franchisor. The motor vehicle franchisor shall make payment within 30 days of receipt of the itemized list.
3. for purposes of this section, “acquiring transferee” means the person to whom the motor vehicle franchise would have been transferred had the right of first refusal or other right to acquire the motor vehicle franchise not been exercised by the motor vehicle franchisor.56:10-14. Indemnification and holding harmless franchisees by franchisors for claims and damages due third parties All motor vehicle franchisors shall indemnify and hold harmless their motor vehicle franchisees from any and all claims, losses, damages, and expenses, including attorneys’ fees, resulting from or related to complaints, claims or suits against the motor vehicle franchisee by third parties concerning defects or alleged defects in any of the merchandise or service systems, procedures or methods of the motor vehicle franchisors which are sold or performed by the motor vehicle franchisee. With regards to services rendered by a motor vehicle franchisee, the motor vehicle franchisor shall not be liable to the motor vehicle franchisee by virtue of this section for any claims, losses, expenses or damages arising as a result of negligence or willful malfeasance by the motor vehicle franchisee, but the motor vehicle franchisor shall be liable for damages arising from or in connection with any services rendered by a motor vehicle franchisee in accordance with any service system, procedure or method suggested or required by the motor vehicle franchisor. The foregoing provisions for indemnification shall specifically include, but without limiting the generality of the foregoing, any defects or damages to merchandise occurring in transit from the motor vehicle franchisor to the motor vehicle franchisee in situations in which the motor vehicle franchisor designates the carrier or method of transportation.

• 56:10-15.Reimbursement for services or parts under warranty or law; payment pursuant to incentive, bonus, sales, performance or other programs If any motor vehicle franchise shall require or permit motor vehicle franchisees to perform services or provide parts in satisfaction of a warranty issued by the motor vehicle franchisor:

1. The motor vehicle franchisor shall reimburse each motor vehicle franchisee for such services as are rendered and for such parts as are supplied, in an amount equal to the prevailing retail price charged by such motor vehicle franchisee for such services and parts in circumstances where such services are rendered or such parts supplied other than pursuant to warranty; provided that such motor vehicle franchisee’s prevailing retail price is not unreasonable when compared with that of the holders of motor vehicle franchises from the same motor vehicle franchisor for identical merchandise or services in the geographic area in which the motor vehicle franchisee is engaged in business.
2. The motor vehicle franchisor shall not by agreement, by restrictions upon reimbursement, or otherwise, restrict the nature and extent of services to be rendered or parts to be provided so that such restriction prevents the motor vehicle franchisee from satisfying the warranty by rendering services in a good and workmanlike manner and providing parts which are required in accordance with generally accepted standards. Any such restriction shall constitute a prohibited practice hereunder.
3. The motor vehicle franchisor shall reimburse the motor vehicle franchisee pursuant to subsection a. of this section, without deduction, for services performed on, and parts supplied for, a motor vehicle by the motor vehicle franchisee in good faith and in accordance with generally accepted standards, notwithstanding any requirement that the motor vehicle franchisor accept the return of the motor vehicle or make payment to a consumer with respect to the motor vehicle pursuant to the provisions ofL.1988, c.123(C.56:12-29et seq.).
4. For the purposes of this section, the “prevailing retail price” charged by: (1) a motor vehicle franchisee for parts means the price paid by the motor vehicle franchisee for those parts, including all shipping and other charges, multiplied by the sum of 1.0 and the franchisee’s average percentage markup over the price paid by the motor vehicle franchisee for parts purchased by the motor vehicle franchisee from the motor vehicle franchisor and sold at retail. The motor vehicle franchisee may establish average percentage markup under this section by submitting to the motor vehicle franchisor 100 sequential customer paid service repair orders or 90 days of customer paid service repair orders, whichever is less, covering repairs made no more than 180 days before the submission, and declaring what the average percentage markup is. The average percentage markup so declared shall go into effect 30 days following the declaration subject to audit of the submitted repair orders by the motor vehicle franchisor and adjustment of the average percentage markup based on that audit. Only retail sales not involving warranty repairs, parts covered by subsection e. of this section, or parts supplied for routine vehicle maintenance, shall be considered in calculating average percentage markup. No motor vehicle franchisor shall require a motor vehicle franchisee to establish average percentage markup by a methodology, or by requiring information, that is unduly burdensome or time consuming to provide, including, but not limited to, part by part or transaction by transaction calculations. A motor vehicle franchisee shall not request a change in the average percentage markup more than twice in one calendar year; and (2) a recreational motor vehicle franchisee for parts means actual wholesale cost, plus a minimum 30% handling charge and any freight costs incurred to return the removed parts to the motor vehicle franchisor.
5. If a motor vehicle franchisor supplies a part or parts for use in a repair rendered under a warranty other than by sale of that part or parts to the motor vehicle franchisee, the motor vehicle franchisee shall be entitled to compensation equivalent to the motor vehicle franchisee’s average percentage markup on the part or parts, as if the part or parts had been sold to the motor vehicle franchisee by the motor vehicle franchisor. The requirements of this section shall not apply to entire engine assemblies and entire transmission assemblies. In the case of those assemblies, the motor vehicle franchisor shall reimburse the motor vehicle franchisee in the amount of 30% of what the motor vehicle franchisee would have paid the motor vehicle franchisor for the assembly if the assembly had not been supplied by the franchisor other than by the sale of that assembly to the motor vehicle franchisee.
6. The motor vehicle franchisor shall reimburse the motor vehicle franchisee for parts supplied and services rendered under a warranty within 30 days after approval of a claim for reimbursement. All claims for reimbursement shall be approved or disapproved within 30 days after receipt of the claim by the motor vehicle franchisor. When a claim is disapproved, the motor vehicle franchisee shall be notified in writing of the grounds for the disapproval. No claim that has been approved and paid shall be charged back to the motor vehicle franchisee unless it can be shown that the claim was false or fraudulent, that the services were not properly performed, that the parts or services were unnecessary to correct the defective condition, or that the motor vehicle franchisee failed to reasonably substantiate the claim in accordance with reasonable written requirements of the motor vehicle franchisor, provided that the motor vehicle franchisee had been notified of the requirements prior to the time the claim arose and the requirements were in effect at the time the claim arose. A motor vehicle franchisor shall not audit a claim after the expiration of 12 months following the payment of the claim unless the motor vehicle franchisor has reasonable grounds to believe that the claim was fraudulent.
7. The obligations imposed on motor vehicle franchisors by this section shall apply to any parent, subsidiary, affiliate or agent of the motor vehicle franchisor, any person under common ownership or control, any employee of the motor vehicle franchisor and any person holding 1% or more of the shares of any class of securities or other ownership interest in the motor vehicle franchisor, if a warranty or service or repair plan is issued by that person instead of or in addition to one issued by the motor vehicle franchisor.
8. The provisions of this section shall also apply to franchisor administered service and repair plans:

• if the motor vehicle franchisee offers for sale only the franchisor administered service or repair plan; or
• if the motor vehicle franchisee is paid its prevailing retail price for all service or repair plans the motor vehicle franchisee offers for sale to purchasers of new motor vehicles; or
• for the first 36,000 miles of coverage under the franchisor administered service or repair plan, if the warranty offered by the motor vehicle franchisor on the motor vehicle provides coverage for less than 36,000 miles; or
• for motor vehicles covered by a franchisor administered service or repair plan, if the motor vehicle franchisee does not offer for sale the franchisor administered service or repair plan.

With respect to franchisor administered service or repair plans covering only routine maintenance service, this section applies only to those plans sold to customers on or after the effective date ofP.L.1999, c.45.

1. A motor vehicle franchisor shall make payment to a motor vehicle franchisee pursuant to incentive, bonus, sales, performance or other programs within 30 days after receipt of a claim from the motor vehicle franchisee. When a claim is disapproved, the motor vehicle franchisee shall be notified in writing of the grounds for disapproval. No claim shall be disapproved unless it can be shown that the claim was false or fraudulent, or that the motor vehicle franchisee failed to reasonably substantiate the claim in accordance with reasonable written requirements of the motor vehicle franchisor, provided that the motor vehicle franchisee had been notified of the requirements prior to the time the claim arose and the requirements were in effect at the time the claim arose. A motor vehicle franchisor shall not audit a claim after the expiration of 12 months following the payment of the claim.

• 56:10-16.Definitions
  1. “Committee” means the Motor Vehicle Franchise Committee established in section 2 [56:10-17] of this act;
  2. “Franchise” means a written arrangement for a definite or indefinite period in which a motor vehicle franchisor grants a right or license to use a trade name, trademark, service mark or related characteristics and in which there is a community of interest in the marketing of new motor vehicles at retail, by lease agreement or otherwise;
  3. “Franchisee” means a natural person, corporation, partnership or entity to whom a franchise is granted by a motor vehicle franchisor;
  4. “Motor vehicle” or “new motor vehicle” means only a newly manufactured motor vehicle, except a nonconventional type of motor vehicle, and includes all such vehicles propelled otherwise than by muscular power, and motorcycles, trailers and tractors, excepting such vehicles as run only upon rails or tracks and motorized bicycles; a “nonconventional type of motor vehicle” means every vehicle not designed or used primarily for the transportation of persons or property and only incidentally operated or moved over a highway;
  5. “Motor vehicle franchisor” means a natural person, corporation, partnership or entity engaged in the business of manufacturing, assembling or distributing new motor vehicles, who will under normal business conditions during the year, manufacture, assemble or distribute at least 10 new motor vehicles;
  6. “Relevant market area” means a geographic area 14 miles in radius from a proposed franchise or business as it relates to the grant, reopening or reactivation of a franchise or the establishment, reopening or reactivation of a business; and a geographic area 8 miles in radius from a relocated franchise or business, but if there are no existing franchisees in the same line make within an 8-mile radius of the relocated franchise or business, then the relevant market area includes the next closest existing franchisee in the same line make within a 14-mile radius. Determining whether an existing franchisee is within the relevant market area of a proposed or relocated franchise or business, and ascertaining any other measurement of distance, shall be made by measuring the distance between the nearest surveyed boundary line of the existing franchise and the nearest surveyed boundary line of the proposed or relocated franchise or business.
• 56:10-17. Motor Vehicle Franchise Committee There is established in the Executive Branch of the State Government a committee which shall be known as the Motor Vehicle Franchise Committee. The committee shall consist of the Director of the Division of Motor Vehicles, the Commissioner of the Department of Commerce and Economic Development and the Director of the Division of Consumer Affairs. The Director of the Division of Motor Vehicles shall be the chairman of the committee. The committee shall meet from time to time at the call of the chairman, for the purpose of conducting hearings and rendering final determinations as provided for in this act. All papers required to be filed with the committee pursuant to this act shall be filed with the Director of the Division of Motor Vehicles. For purposes of complying with the provisions of Article V, Section IV, paragraph 1 of the New Jersey Constitution, the committee is allocated within the Department of Law and Public Safety, but notwithstanding that allocation, the committee shall remain independent of any supervision or control by the department or by any personnel thereof.
• 56:10-18. Conditions for franchise A motor vehicle franchisor may grant, relocate, reopen or reactivate a franchise or establish, relocate, reopen or reactivate a business, for the purpose of doing business on the retail level, only if the franchise or business will not be injurious as determined pursuant to section 8 of P.L.1982, c.156 (C.56:10-23).
• 56:10-19. Notice to existing franchisees, protest, appeal A motor vehicle franchisor shall give its existing franchisees in the same line make within 20 miles of the proposed location for the proposed franchise or business as calculated using the methodology set forth in subsection f. of section 1 of P.L.1982, c.156 (C.56:10-16) not less than 90 days’ advance written notice of its intention to grant, relocate, reopen or reactivate a franchise of the same line make or establish, relocate, reopen or reactivate a business. Any franchisee in the relevant market area of the proposed franchise or business may file with the committee a protest to the granting, relocating, reopening or reactivation of the franchise or the establishment, relocation, reopening or reactivation of the business within 30 days of receipt of the notice or 30 days after the end of any appeal procedure provided by the motor vehicle franchisor, whichever is later. Any motor vehicle franchisee entitled to file a protest that does not receive the written notice from the motor vehicle franchisor and consequently does not file a protest may file an action in the Superior Court against the motor vehicle franchisor and the court shall enjoin and nullify the grant, relocation, reopening or reactivation of the franchise or the establishment, relocation, reopening or reactivation of the business, regardless of whether a protest by such motor vehicle franchisee would have been successful. In any such action, a successful motor vehicle franchisee shall be entitled to an award of reasonable attorneys’ fees, court costs and expenses. A protest shall set forth all reasons for objecting to the granting, reopening, or reactivation of a franchise and shall be accompanied by a concise statement of the facts and supporting affidavits for all issues raised in the protest. When a protest is filed, the chairman of the committee shall notify the motor vehicle franchisor and the franchisee in writing that it has been filed and shall forthwith determine either to transmit the protests to the Office of Administrative Law for hearing or to conduct a hearing directly.
• 56:10-20.Rights of franchisor The provisions of sections 3 and 4 of P.L.1982, c.156 (C.56:10-18and56:10-19) notwithstanding, a motor vehicle franchisor may:

1. Permit an existing franchisee to relocate his franchise within two miles of the franchisee’s existing franchise location, except that a franchise may not be relocated pursuant to this subsection unless at least five years have elapsed since any previous relocation pursuant to this subsection;
2. Reopen or reactivate a franchise or business which has not been in operation for a period of two years or less at a site within two miles of the prior site, provided that the rights accorded to the franchisor herein shall not apply to a successor or assignee of the franchisor of the franchise or business at the time the franchise or business was closed or deactivated; or
3. Permit the purchaser of a controlling interest in the shares or substantially all of the operating assets of an existing franchise to relocate the place of business of the franchise within two miles of the previously approved franchise location within 180 days of the date of purchase.

• 56:10-21. Hearing on protest The hearing referred to in section 4 of P.L.1982, c.156 (C.56:10-19) shall be conducted as a contested case in accordance with the provisions of the “Administrative Procedure Act,” P.L.1968, c. 410 (C.52:14B-1 et seq.) and P.L.1978, c.67 (C.52:14F-1 et seq.). The franchisor shall have the burden of proving by a preponderance of the evidence that the proposed franchise or business will not be injurious. The testimony taken at the hearing shall be under oath and recorded verbatim, but the parties shall not be bound by the rules of evidence. True copies of any transcript and of any other record made of or at the hearing shall be furnished to any party upon request and at that party’s expense. The committee may subpoena witnesses and compel their attendance, administer oaths and require the production for examination of any books or papers relating to any matter involved in the hearing. The committee, at the request of any party, may subpoena and compel the attendance of such witnesses as the party may designate and require the production for examination of any books or papers relating to any matter involved in the hearing.
• 56:10-22. Motion for determination that final determination will favor franchisee; prohibition of action by franchisor When a protest has been filed, as provided for in this act, the franchisee may move for a determination by the committee that a prima facie case has been made that the final determination will be in favor of the franchisee. If such a finding is made, the motor vehicle franchisor shall not grant, relocate, reopen or reactivate the proposed franchise or establish, relocate, reopen or reactivate the proposed business until the committee has made a final determination that that action does not violate this act.
• 56:10-23.Factors for consideration if proposed franchise will harm public interest

1. The grant, reopening or reactivation of a franchise or establishment, or the reopening or reactivation of a business shall be deemed injurious to existing franchisees or to the public interest unless the franchisor proves, by a preponderance of the evidence, that:
   • The proposed franchise or business would materially enhance the availability of stable, adequate and reliable sales and service to purchasers of vehicles in the same line make in the market area served by the franchisees entitled to notice;
   • The proposed franchise or business would not affect the stability of existing franchisees in the same line make;
   • The existing franchisees in the same line make have not provided adequate representation of the line make in their market areas for a period of at least two years based on the availability of motor vehicle sales and service facilities, equipment, supply of motor vehicle parts and qualified service personnel;
   • The franchisor’s action is in good faith.
2. In determining whether the grant, relocation, reopening or reactivation of a franchise or establishment, relocation, reopening or reactivation of a business will be injurious to existing franchisees or to the public interest, it shall be conclusively presumed that the proposed grant, relocation, reopening or reactivation of the franchise or establishment, relocation, reopening or reactivation of the business will be injurious to existing franchisees or to the public interest if:
   • for the 24-month period prior to notice pursuant to section 4 of P.L.1982, c.156 (56:10-19), the average market penetration of the franchisees given notice pursuant to section 4 of P.L.1982, c.156 (C.56:10-19), in the area of primary responsibility or territory assigned to such franchises, is at least equal to the average market penetration of all franchisees in the same line make in this State;
   • the proposed franchise or business is likely to cause not less than a 25% reduction in new vehicle sales or not less than a 25% reduction in gross income for the protesting franchisee;
   • the proposed franchise or business will not operate a full service franchise or business at the proposed location; or
   • an owner or operator of the proposed franchise or business has engaged in materially unfair or deceptive business practices with respect to a motor vehicle franchise or business.
3. The presumption in subsection b. of this section shall not apply to the grant, reopening or reactivation of a franchise or to the establishment, reopening or reactivation of a business if the proposed franchisee is a minority or a woman. For the purposes of this subsection, “minority” means a person who is:
   • Black, which is a person having origins in any of the black racial groups in Africa; or
   • Hispanic, which is a person of Spanish or Portuguese culture with origins in Mexico, South or Central America, or the Caribbean Islands, regardless of race; or
   • Asian American, which is a person having origins in any of the original peoples of the Far East, Southeast Asia, Indian Subcontinent, Hawaii, or the Pacific Islands; or
   • American Indian or Alaskan native, which is a person having origins in any of the original peoples of North America.
4. In determining whether the relocation of an existing franchise or business will be injurious to existing franchisees or the public interest, the committee shall consider in making its determination, whether the franchisor has proven, by a preponderance of the evidence, that:
   • The relocation would materially enhance the availability of stable, adequate and reliable sales and service to purchasers of vehicles in the same line make in the market areas served by the franchisees entitled to notice;
   • The relocation would not affect the stability of the existing franchises in the same line make;
   • The existing franchisees in the same line make have not provided adequate representation of the line make in their market areas for a period of at least two years based on the availability of motor vehicle sales and service facilities, equipment, supply of motor vehicle parts and qualified service personnel;
   • The relocation is in good faith; and
   • The effect on the relocating dealer of the denial of its relocation outweighs the injury to an existing franchisee.

• 56:10-24. Parties responsible for own costsIn any administrative proceeding under this act, each party shall be responsible for his own litigation costs and attorney fees. The committee shall assess and equally apportion among the parties to the hearing, and shall transfer to the Office of Administrative Law, the administrative hearing costs resulting from a protest filed pursuant to this act. Administrative hearing costs shall be based on a billing rate established by the Office of Administrative Law and approved by the Director of Budget and Accounting.
• 56:10-25. Rules and regulations The committee may promulgate such rules and regulations as are necessary to implement the provisions of this act.
• 56:10-26.Definitions. As used in this act:

“Consumer” means the purchaser, other than for resale, of a motor vehicle.

“Franchise” means a written arrangement for a definite or indefinite period in which a motor vehicle franchisor grants a right or license to use a trade name, trademark, service mark or related characteristics and in which there is a community of interest in the marketing of new motor vehicles at retail, by lease, agreement or otherwise.

“Motor vehicle” means and includes all vehicles propelled otherwise than by muscular power, and motorcycles, trailers and tractors, excepting: (1) those vehicles as run only upon rails or tracks, motorized bicycles, and buses, including school buses; and (2) those motor vehicles not designed or used primarily for the transportation of persons or property and only incidentally operated or moved over a highway.

“Motor vehicle franchisee” means a person to whom a franchise is granted by a motor vehicle franchisor and who or which holds a current valid motor vehicle dealer’s license issued pursuant to R.S.39:10-19 and has an established place of business.

“Motor vehicle franchisor” means a person engaged in the business of manufacturing, assembling or distributing new motor vehicles, or importing into the United States new motor vehicles manufactured or assembled in a foreign country, who will under normal business conditions during the year, manufacture, assemble, distribute or import at least 10 new motor vehicles.

“New motor vehicle” means a newly manufactured motor vehicle.

“Person” means a natural person, corporation, partnership, trust, or other entity and, in the case of an entity, it shall include any other entity which has a majority interest in that entity or effectively controls that other entity as well as the individual officers, directors, and other persons in active control of the activities of each such entity.

“Place of business” means a fixed geographical location at which the motor vehicle franchisor’s motor vehicles are offered for sale and sold, but shall not include an office, a warehouse, a place of storage, a residence or a vehicle.

“Zero emission vehicle” means a motor vehicle certified as a zero emission vehicle pursuant to the California Air Resources Board zero emission vehicle standards for the applicable model year, but shall not include an advanced technology partial zero emission vehicle, a partial zero emission vehicle, or a hybrid electric vehicle.

• 56:10-27. Sales through franchises only. Except as provided pursuant to section 6 of P.L.2015, c.24 (C.56:10-27.1), it shall be a violation of this act for any motor vehicle franchisor, directly or indirectly, through any officer, agent, employee, broker or any shareholder of the franchisor, except a shareholder of 1% or less of the outstanding shares of any class of securities of a franchisor which is a publicly traded corporation, or other person, to offer to sell or sell motor vehicles, to a consumer, other than an employee of the franchisor, except through a motor vehicle franchisee.
• 56:10-27.1.Sale of zero emission vehicle. Notwithstanding the provisions of any law, rule or regulation to the contrary, a motor vehicle franchisor licensed pursuant toR.S.39:10-19on or prior to January 1, 2014 and exclusively manufacturing zero emission vehicles may buy from and sell, offer to sell, or deal to a consumer a zero emission vehicle, provided that the franchisor owns or operates, directly or indirectly:

• no more than four places of business in the State; and
• at least one retail facility for the servicing, including warranty servicing, of zero emission vehicles sold, offered for sale, or otherwise distributed in this State. This facility shall be furnished with all the equipment required to service a zero emission vehicle.

A franchisor shall not be required to establish or operate a place of business at a retail facility for the servicing of zero emission vehicles.

• 56:10-28.Prohibition of ownership by franchisor. Except as provided pursuant to section 6 ofP.L.2015, c.24(C.56:10-27.1), it shall be a violation of this act for a motor vehicle franchisor, directly or indirectly, through any officer, agent, employee, broker or any shareholder of the franchisor, except a shareholder of 1% or less of the outstanding shares of any class of securities of a franchisor which is a publicly traded corporation, or other person, to own or operate a place of business as a motor vehicle franchisee, except that this section shall not prohibit the ownership or operation of a place of business by a motor vehicle franchisor for a period, not to exceed 24 consecutive months, during the transition from one motor vehicle franchisee to another; or the investment in a motor vehicle franchisee by a motor vehicle franchisor if the investment is for the sole purpose of enabling a partner or shareholder in that motor vehicle franchisee to acquire an interest in that motor vehicle franchisee and that partner or shareholder is not otherwise employed by or associated with the motor vehicle franchisor and would not otherwise have the requisite capital investment funds to invest in the motor vehicle franchisee, and has the right to purchase the entire equity interest of the motor vehicle franchisor in the motor vehicle franchisee within a reasonable period of time not to exceed 10 years.
• 56:10-29. Action by franchisee A motor vehicle franchisee may bring an action against the motor vehicle franchisor which has granted its franchise, or any other person, in the Superior Court to enjoin any violation of this act and to recover, where appropriate, any damages sustained by the franchisee as a result of a violation of this act. The franchisee, if successful, shall also be entitled to costs of the action, including, but not limited to, reasonable attorney fees.
• 56:10-30.Actions, alternate dispute resolution proceedings relative to franchise termination; notice of transfer, assignment or sale
  1. Upon timely institution of an action or alternate dispute resolution proceeding to enjoin the termination of a motor vehicle franchise on the ground that such termination would be in violation of the “Franchise Practices Act,” P.L.1971, c.356 (56:10-1et seq.), the termination shall be automatically stayed pending the final disposition of such action or proceeding, and the motor vehicle franchisor shall accord the motor vehicle franchisee all rights and privileges of a franchisee as if notice of termination had not been given.
  2. A successful motor vehicle franchisee in an action or alternate dispute resolution proceeding to enjoin the termination of a motor vehicle franchise shall be entitled to an injunction barring termination of the motor vehicle franchise in addition to any other relief provided for in section 10 of P.L.1971, c.356 (56:10-10).
  3. In any action or alternate dispute resolution proceeding with respect to the termination of a motor vehicle franchise, the motor vehicle franchisor shall have the burden of proving that termination of the motor vehicle franchise does not violate section 5 of P.L.1971, c.356 (56:10-5). In proving good cause for termination in any such action, the motor vehicle franchisor shall be limited to the grounds for termination set forth in the written notice provided for in section 5 of P.L.1971, c.356 (C.56:10-5).
  4. Notwithstanding the giving of notice of termination of a motor vehicle franchise pursuant to section 5 of P.L.1971, c.356 (56:10-5), at any time prior to the date on which the termination becomes effective, the motor vehicle franchisee may enter into an agreement for, and submit to the motor vehicle franchisor, notice of the transfer, assignment or sale of the motor vehicle franchise to another person. Thereupon, the motor vehicle franchisor shall proceed as provided for in section 6 of P.L.1971, c.356 (C.56:10-6). Upon approval of the transfer, assignment or sale by the motor vehicle franchisor and upon consummation of same, the notice of termination of the motor vehicle franchise shall be deemed withdrawn, and the transferee shall receive the motor vehicle franchise free and clear of all grounds for termination. Notwithstanding the terms of any notice, any court order or any other provision of law, a motor vehicle franchise termination shall not become effective while a notice of transfer, assignment or sale is pending with a motor vehicle franchisor.

• 56:10-31.Request for additional information by franchisor If a motor vehicle franchisor desires information about a transaction or a proposed transferee, in addition to that provided with the notice of intent pursuant to section 6 of P.L.1971, c.356 (C.56:10-6), the motor vehicle franchisor shall request all such additional information in writing within 15 days of receipt of the notice of intent. A request for additional information shall not extend the time within which the motor vehicle franchisor must approve or disapprove the transfer, provided that the additional information is submitted to the motor vehicle franchisor within 30 days after the additional information is requested by the motor vehicle franchisor. If the additional information is submitted to the motor vehicle franchisor more than 30 days after the request for that information, the time period for the motor vehicle franchisor to approve or disapprove the transfer shall be extended so that the motor vehicle franchisor has 30 days to approve or disapprove the transfer after receipt of the additional information.