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The Franchise Memorandum

Distributor Must Have a Sales Location Within New Jersey to Succeed On NJFPA Claim

The United States District Court for the District of New Jersey recently denied a Nestle distributor's request for preliminary injunctive relief under the New Jersey Franchise Practices Act because the distributor failed to demonstrate that it maintained a "place of business" in New Jersey, within the meaning of the Act. Watchung Spring Water Co., Inc. v. Nestle Waters N. Am., Inc., 2014 U.S. Dist. LEXIS 151178 (D.N.J. Oct. 23, 2014). The court defined "place of business" to mean a location where selling is the predominant activity and where there is a substantial level of marketing to customers or other sales-related interplay with customers (i.e., a sales location). Watchung asserted that it had a place of business in New Jersey because it had an exclusive territory within New Jersey, it was contractually obligated to maintain a facility for storing and loading Nestle products in New Jersey, and customers appeared at the facility. The court, however, focusing on the volume and nature of the sales activities occurring at Watchung's facility, concluded that the location was predominately a warehouse and that the forty to fifty customer sales occurring each month at the facility was a miniscule portion of activities taking place at the warehouse. Because Watchung failed to establish that it engaged in sales and marketing activities and interacted with customers from its facility in New Jersey, the court denied its motion for a preliminary injunction.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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