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The Franchise Memorandum

Federal Court Requires Franchisee to Plead Place of Business to Succeed on a New Jersey Franchise Practices Act Claim

In Ocean City Express Co., Inc. v. Atlas Van Lines, Inc., 2014 U.S. Dist. LEXIS 20885 (D.N.J. Feb. 19, 2014), the United States District Court for the District of New Jersey denied the plaintiff’s motion to amend its complaint and dismissed without prejudice its claim under the New Jersey Franchise Practices Act. Ocean City Express, which was a party to an agency agreement with Atlas Van Lines, failed to plead that that it had a qualifying place of business in New Jersey. It merely pled that it had a principal place of business within the state of New Jersey.

To qualify for protection under the Act, a party must demonstrate that, among other things, the agreement contemplates or requires the franchisee to establish or maintain a place of business in New Jersey. A place of business is defined as a fixed geographic location at which the franchisee displays or offers for sale, and sells, the franchisor’s goods or services. Because Ocean City failed to plead that it engaged in sales and marketing activities and interacted with customers from its place of business in New Jersey, the court dismissed Ocean City’s Franchise Practices Act claim and gave it fourteen days in which to amend.

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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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