Franchisee’s Rights to Renew

A federal district court in New Jersey granted summary judgment to a franchisee, holding that the franchisor must renew its franchise agreements even where those agreements contained no express right of renewal. Under the New Jersey Franchise Practices Act (NJFPA), it is unlawful for a franchisor to terminate, cancel or fail to renew a franchise agreement unless the franchisee has failed to substantially comply with requirements imposed by the franchise. The district court held that this provision of the NJFPA applies regardless of whether the franchise agreement at issue contains an express right of renewal.

The district court’s decision relied heavily on the opinion in Dunkin’ Donuts of America, Inc. v. Middletown Donut Corp. There, the New Jersey Supreme Court stated that “once a franchise relationship begins [under the NJFPA], all that a franchisee must do is comply substantially with the terms of the agreement, in return for which he receives the benefit of an ‘infinite’ franchise-he cannot be terminated or refused renewal.”

BP Products N.A., Inc. v. Hillside Service, Inc., No. 2:09-cv-04210 (D. N.J. Sept. 14, 2011).

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