The How, When, and Why of Franchise Termination in New Jersey
Terminating a franchise can pose several potential pitfalls and expose a franchisor to significant liability. A franchisor may not simply cancel, terminate, or refuse to renew a franchisee for just any reason. In most situations, there must be “good cause,” timely notice, and proper documentation to support the decision. Failure to understand and follow these rules may violate the New Jersey Franchise Practices Act, N.J.S.A. § 56:10-1 et seq. (“Act”) and expose a franchisor to liability for monetary relief and an award of attorney fees and costs to the franchisee.
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Recently, McDonald’s has been receiving much attention for its closure of restaurants in Russia due to Russia’s aggression into Ukraine. As part of the coverage, news outlets have been reporting on some of the underlying infrastructure McDonald’s invested in as part of its efforts to expand into Russia. As 
On May 23, 2022, the U.S. Supreme Court, in a unanimous decision, decided Morgan v. Sundance, Inc., No. 21-328, in favor of an employee who sued her employer, a Taco Bell franchisee, for wage theft. The Court concluded that waiving arbitration rights does not require a showing that the party seeking to have their case heard in federal court would be prejudiced by continuing with arbitration. The case, although decided on narrow grounds, demonstrates the risk that a party takes when it decides to delay enforcing a contractual arbitration provision. By eliminating the prejudice requirement, the Court removed a safety valve that saved parties who decided to forgo arbitration for a period of time, then ultimately opted for arbitration. As a result of the holding, a party seeking to invoke the right to arbitrate should not delay, or they will risk forfeiture of the right to arbitrate at a later time.
The vax-or-test legal rollercoaster ride continues, leaving human resource managers’ heads spinning, lawyers prognosticating, and employers simply wondering what comes next.
The Federal Trade Commission (“FTC”) has kept itself busy as of late, issuing a series of notices to over 1,000 businesses (many of them franchise companies) advising them that they could face civil penalties for conduct that the FTC has deemed unlawful. The Notice of Penalty Offenses Concerning Money-Making Opportunities is of particular importance to franchise companies. The first round of notices went out in late October. They advised businesses that if they deceive or mislead consumers about potential earnings or otherwise make false or misleading representations in connection with a money-making opportunity, they could be subject to large civil penalties (up to $43,792 per violation).