New Jersey bill bolstering franchisees’ rights is expected to gain passage
Assembly Bill 1958 would make important changes to the New Jersey Franchise Practices Act that would benefit many hotel operators in the state and – if it eventually becomes law – part of the credit will go to AAHOA and its members.
On May 12, a group from AAHOA traveled to Trenton to testify in support of the legislation before the state Assembly’s judiciary committee. Attendees included prominent hotel owners and association leaders such as Mahendra (MZ) Patel, regional director for the Mid-Atlantic; Bhavesh Patel, who served as AAHOA’s chair in 2017-18; and Laura Lee Blake, who was named president and chief executive earlier in the month.
The bill contains several key provisions affecting operators of franchised hotels, including:
- Limiting the duration of non-compete agreements to six months.
- Prohibiting franchisors from requiring a capital investment greater than $25,000 from franchisees more than once every five years, unless franchisors can establish a return on the investment.
- Requiring franchisors that receive “any rebate, commission, kickback, services, other consideration, or anything of value” to fully disclose them to franchisees and turn them over to franchisees.
- Putting restrictions on the mandatory sourcing of goods or resources.
- Prohibiting franchisors from suspending, restricting, or preventing access to franchise services.
Assembly Bill 1958 is sponsored by Democrats Raj Mukherji, Robert J. Karabinchak, and William W. Spearman, along with Republican Ronald S. Dancer.
Mukherji represents densely populated Hudson County, where a large number of hotels compete to serve the New York City and North Jersey markets. After the bill cleared the judiciary committee in May, he said he was “reasonably optimistic” that it would pass the Assembly and state Senate later this year, sending it to Democratic Gov. Phil Murphy to be signed.
“AAHOA’s advocacy has been instrumental in moving this legislation forward because they shared with us, on behalf of their members, what could be done to make the hospitality industry more equitable and how to protect franchisees from unfair, unscrupulous practices,” Mukherji said. “At the heart of this bill, we’re asking for transparency from franchisors.”
According to a 2021 research study by Oxford Economics, AAHOA Members own 45.4% of the hotels in New Jersey, employ more than 72,000 workers, contribute $7.3 billion to the state’s GDP, and pay more than $2 billion in federal, state, and local taxes.
Mukherji said protecting New Jersey‘s hotel operators from unfair business practices took on added importance due to the pandemic, which resulted in “unfathomable” hardships for the hospitality industry.
“In trying to help these businesses recover, we learned about a number of practices by franchisors that are just unfair and seem to be exploiting the lopsided leverage and bargaining power they have,” he said. “In general, I’d rather not have government interfere with the free market, but this is one of those times when public policy and government need to step in and level the playing field somewhat.”