Recent Blog Posts

    • On Franchising
      Adam J. Siegelheim, member of Stark & Stark's Franchise Group, was quoted in the article On Franchising in the May 6, 2008 edition of the Wall Street Journal. The article addresses some of the most common issues facing new franchisors and some new concerns franchisors need to be aware of before starting a franchise of their own. Mr. Siegelheim comments on some of the factors that franchisors need to take into consideration when starting a new franchise, and some tips to ensure the longevity of your franchise concept. You can read the full article on the Wall Street Journal Online (registration required). ....
    • NJ Legislature to Consider Applying the Franchise Practices Act to "Mobile" Franchises
      House Bill 2491 and Senate Bill 1539 of the New Jersey Legislature seek to expand the type of franchises, which are subject to the New Jersey Franchise Practices Act. In general, the New Jersey Franchise Practices Act currently applies to franchises where: 1) the franchisor has granted the franchisee a license, mark, trade name, etc.; 2) there is a “community of interest” in the marketing of goods and services; 3) where the franchisee has established or maintains a “place of business” in New Jersey; 4) where the gross sales between franchisor and franchisee are more than $35,000 in the prior year; and 5) more than 20% of the franchisee’s sales are derived from the franchise. The proposed change in the statute would apply the provisions of the Franchise Practices Act to “mobile” franchises, in other words, franchises that do not have a brick and mortar location. Under the proposed Bill, a “place of business” would include a location ....
    • Vermont Legislature Introduces Legislation That May Render Non-Compete Provisions in Franchise Agreements
      The Vermont legislature introduced House Bill No. 790 on February 1, 2008.  The Bill would render non-compete provisions of franchise agreements void unless the franchisor can prove to the Court’s satisfaction that the franchise agreement is:  (1) consistent with public policy; (2) necessary to protect the franchisor; (3) not a contract of adhesion; and (4) reasonable considering the subject matter and conditions.  Clearly the third requirement is problematic.  A “contract of adhesion” is legal-speak for “non-negotiable” and is “take-it-or-leave-it” in nature.  Most franchise agreements are non-negotiable because it is important for the system to maintain uniform and consistent standards.  However, various courts have deemed franchise agreements to be contracts of adhesion because of the superior bargaining power of the franchisor.  Since most franchise agreements are contracts of adhesion, and if this Bill ....
    • Two Stark & Stark Attorneys Named Legal Eagles in Franchise
      Rachel Lilienthal Stark, Shareholder in Stark & Stark's Franchise group, and Adam J. Siegelheim, member of Stark & Stark's Franchise group, have been named Legal Eagles in the franchise industry by Franchise Times Magazine. Legal Eagles are chosen annually from hundreds of nominations across the country. Legal Eagles are recognized for their strong reputations among their peers, an active involvement in the franchise community through organizations such as the International Franchise Association and the American Association of Franchisors, and their experience and expertise in the franchise industry. Rachel Lilienthal Stark concentrates her practice in the representation of start-up and emerging franchisors on a variety of issues including compliance with all federal and state regulations, disclosure documents, acquisitions and financing. Adam J. Siegelheim focuses his practice in the representation of franchisors in various matters, including the preparation of disclosure ....
    • New Jersey Legal Update - Podcast # 73
      This week's Franchise Law podcast is an interview with the Vice President of Franchisee Development for Huntington Learning Center, Tom Spadea. The interview took place at February's 2008 International Franchise Association's Annual Convention in Orlando, Florida and discusses franchise development and recruitment strategies, the new Franchise Disclosure Document, and a discussion on how to train your employees on policy and procedure updates. This week's Franchise Law Podcast is presented by  Adam J. Siegelheim of Stark & Stark's Franchise group.You can download the New Jersey Legal Update podcast #73 here (8.6 MB) ....
    • New Jersey Legal Update - Podcast # 72
      This week's Franchise Law podcast is an interview with the President of MFV Expositions, Tom Portesy. The interview discusses the growing rate of franchises in and outside of the United States and what this means for the future of the franchise industry. The interview took place at the 2008 Franchise Expo South, held earlier this month in Miami Beach, Florida. This week's Franchise Law Podcast is presented by Shareholder of Stark & Stark's Franchise Law Group, Adam J. Siegelheim. You can download the New Jersey Legal Update podcast #72 here. (3.6 MB) ....
    • New Jersey Legal Update - Podcast # 71
      This week's Franchise Law podcast is an interview with Chief Franchising Officer of Hollywood Tans, Steve Beagelman. The interview took place at the 2008 Franchise Expo South, held earlier this month in Miami Beach, Florida. This week's Franchis Law Podcast is presented by Shareholder of Stark & Stark's Franchise Law Group, Adam J. Siegelheim. You can download the New Jersey Legal Update Podcast # 71 here. (6.8 MB) ....
    • New Jersey Legal Update - Podcast # 70
      This week's New Jersey Legal Update podcast will discuss the necessary insurance coverage needed for franchisors in order to protect your franchise system against claims. This podcast will address good practices to follow when determining your level of insurance, as well as a discussion on industry standards and the various types of coverage available to you and your business. This week's New Jersey Legal Update is presented by Adam J. Siegelheim, a member of Stark & Stark's Franchise Group. You can download the New Jersey Legal Update Podcast # 70 here. (6 MB) ....
    • At Will Employment Alive and Well in the Franchise Context
      In a recent unpublished decision by the New Jersey Appellate Division, known as Ashwall and Winograd v. Prestige Management Services, Inc., et als. (Decided October 16, 2007), the Court dealt with a claim by employees of a New Jersey automobile dealership franchise who claimed religious discrimination and “promissory estoppel” against their former employer.  The Plaintiffs, a manager and top-salesman, claimed discrimination based on their religious faith (Judaism) under the New Jersey Law Against Discrimination.  One of them had also claimed that, since he had been given the task of turning a non-profitable dealership “around,” that he was entitled to employment for at least a reasonable period of time.  His argument was that he had been a very successful manager of another dealership, and by asking him to take on the management of a non-profitable dealership, the franchisee in effect “owed” him employment for a certain period of ....
    • Coordinated Review Program Indefinitely Suspended
      Franchisors and their counsel are not the only ones scrambling to digest the intricacies of the revised FTC Rule. Citing the challenges in examiners having to learn a new disclosure format, the franchise coordinated review program has been suspended indefinitely.  The suspension went into effect on July 31, 2007.  The coordinated review program was adopted to streamline the franchise registration process.  It provided franchisors with the ability to simultaneously register their franchise offering in two or more participating states.  A lead examiner would then be assigned to coordinate and oversee the registration process among the states.  Prior to the suspension, 11 states participated in the program.  The future of the coordinated review program is not known.  However, state administrators plan to re-evaluate the program after July 1, 2008, when the new disclosure format becomes mandatory and examiners will no longer have to review disclosures ....
    • Do you think you have a deal? Maybe not, according to the Third Circuit.
      In a recent decision by the Court of Appeals for the Third Circuit, the court held that the express language of the franchise agreement will govern over any previously agreed upon terms and conditions.  In Travelodge Hotels, Inc. v Honeysuckle Enterprises, Inc., the franchisee had previously owned and operated an independent hotel in Branson, Missouri.  During discussions with Travelodge, it indicated that it would convert to a Travelodge franchise if it could be assured that such conversion would result in a fifteen percent increase in business.  Sales representatives of Travelodge provided Honeysuckle with a “Monthly Lost Business Summary Report” indicating that Travelodge was unable to fulfill 13,000 reservations in Honeysuckle’s market.  The franchisee and the sales representatives from Travelodge calculated that 5,400 of those reservations would have amounted to a fifteen percent increase in the franchisee’s business. Honeysuckle ....
    • Congress Considering Legislation That Would Render Arbitration Clauses in Franchise Agreements Unenforceable
      Last month, a House bill known as H.R. 3010 and Senate Bill 1782 (both generally known as the “Arbitration Fairness Act of 2007”) started moving through the judiciary committees on their way to further action by Congress.    These bills would seek, among other things, to void all arbitration agreements related to franchise disputes.  A “franchise dispute” is defined in both bills to include disputes regarding franchise sales, operations, and even the franchise fee itself.   These bills are an attempt by legislators to circumvent established case law that have uniformly enforced arbitration agreements in the areas of employee disputes and consumer purchases.   The impact of this legislation is considerable.   New Jersey courts, like several other states, have held that franchise agreement provisions providing for out-of-state arbitrations are enforceable.  See Allen v. World Inspection Network, Int’l, ....
    • The Franchisor Community Dodges Another Legislative Bullet
      The deceptively titled “Employee Free Choice Act of 2007” has been defeated in Congress.  The Act, which would have allowed for, among other things, “card voting” by employees to establish a union (in lieu of an actual, verifiable vote) posed a significant risk to the franchisor community.  Although strong union interests quickly moved the bill through the House in the Spring, bi-partisan action has effectively defeated the Bill.  Although this is good news for franchisors, the franchisor community needs to watch for any attempts to revive this defeated legislation over the next year leading up to the presidential election campaign. ....
    • Big Deal? Domino's Decision could have big impact, or not
      Adam J. Siegelheim, member of Stark & Stark's Franchise Group, was quoted in this month's Franchise Times' article Big Deal? Domino's decision could have big impact, or not. You can read the full article here. ....
    • Court enters Preliminary Injunction Enjoining New Jersey Lawn Care Franchisee From Operating
      NaturalLawn of America, Inc (NaturalLawn), a national franchisor of organic-based lawn care services obtained a preliminary injunction against a former New Jersey franchisee (the West Group), enjoining it from continuing to operate.  NaturalLawn of America, Inc. v. West Group, LLC, 484 F.Supp.2d 392 (D.MD. 2007).  The West Group entered into three separate franchise agreements for different territories in New Jersey.  At the expiration of these agreements, the West Group elected not to renew its franchise agreement, claiming that NaturalLawn’s marketing practices violated New Jersey law regarding pesticides.  Each franchise agreement contained post-termination covenants, including a two-year non-compete.  Notwithstanding, upon the expiration of the franchise agreements, the West Group began operating a substantially similar business in the same territories, providing its customers with a letter indicating that it was now operating under the name ....
    • Don't Go West, Young Man. Buy Yourself a Franchise Instead
      Adam J. Siegelheim, member of Stark & Stark's Franchise Group, was quoted in Thursday's New York Times, in article titled: Don't Go West, Young Man. Buy Yourself a Franchise Instead. The article discusses the increasing number of college graduates seeking to begin their own business rather than work for someone else's. You can read the full article here. ....
    • What's in a Name?
      Throughout New Jersey and Pennsylvania, the familiar Mobil gas station signage and products are gone, replaced with the new brand Lukoil.  Time will tell whether Getty Petroleum Marketing’s (“Getty”) re-branding efforts will have a positive or negative impact on its franchisees.  However, in the matter captioned, Akshayraj, Inc. v. Getty Petroleum Marketing, Inc., certain New Jersey and Pennsylvania franchisee operators are betting on the latter and have filed suit in the United States District Court in the District of New Jersey against Getty and Lukoil Americas Corporation (“Lukoil”).  In their Complaint, the franchisee operators allege that the conversion to Lukoil has constructively terminated their franchise agreements, in violation of the Petroleum Marketing Practices Act, the New Jersey Franchise Practices Act and Pennsylvania’s franchise laws.  The plaintiffs contend that the brand change to Lukoil has resulted in the ....
    • New Jersey Appellate Court finds Arbitration Clause Enforceable
      In the recent decision, Allen v. World Inspection Network, Int’l, Inc., 389 N.J.Super. 115, 911 A.2d 484 (App. Div. 2006), the New Jersey appellate division held that a franchise agreement provision-requiring that all disputes be arbitrated in the State of Washington- was enforceable.    Prior to this decision, the New Jersey Supreme Court held that forum-selection clauses in franchise agreements are presumptively invalid, and should not be enforced. Kubis & Perszyk Assocs. v. Sun Microsystems, 146 N.J. 176 (1996).   The Supreme Court’s rational was based, in part, on the presumption that forum-selection clauses are unfairly imposed on the franchisee, as a result of the franchisor’s superior bargaining position.  However, the Allen Court distinguished the Kubis ruling, on the basis that arbitration clauses are governed by the Federal Arbitration Act, which preempts New Jersey law.   Significantly, the Allen court also rejected the ....
    • Long-Delayed Revisions for Franchise Regs: Many Inconsistencies Between Federal and States' Disclosure Requirements Eliminated
      Adam J. Sieglheim, member of Stark & Stark's Franchise group, authored the article, Long-Delayed Revisions for Franchise Regs: Many Inconsistencies Between Federal and States' Disclosure Requirements Eliminated for the June 25 edition of the New Jersey Law Journal. The article discusses the Federal Trade Commission's announcement of substantial revisions to its franchise disclosure requirements. You can read the full article here. ....
    • Punitive Damages in Employment Cases Continue to Pose a Danger for the New Jersey Franchise Community
      Punitive damages are meant to punish the defendant, not compensate the Plaintiff. Generally speaking, they are allowed only in cases where the defendant’s conduct has been especially egregious. As a result, punitive damages are rarely awarded, leading many in the franchise community to disregard the danger of having punitive damages awarded against them.   The danger, however, is real. A case in point was the recent punitive damages award in Tarr v. Bob Ciasulli's Mack Auto Mall, Inc., 390 N.J.Super. 557, 916 A.2d 484 (A.D. February 2007). According to the published court opinion, this was a sexual harassment case where a relatively manageable award of $25,000.00 against an automobile sales franchisee ballooned into an additional $85,000.00 in punitive damages (and attorneys fees) resulting in a very expensive day for the Franchisee. Other recent cases have awarded significantly higher punitive damage awards (though they are often reduced later ....