Kaufmann Gildin & Robbins LLP

Kaufmann Gildin & Robbins Scores a Big Win For Hotel Franchisor Under the New Jersey Franchises Practices Act October 2024 For 40 years, franchisors have had to renew their franchise agreements in New Jersey whether they wanted to or not - - even if the subject franchise agreement was entirely silent on renewal or provided for only a specified number of renewals - - due to the New Jersey Supreme Court’s 1985 ruling holding that: “With the advent of the New Jersey Franchise Practices Act, once a franchise relationship begins, all that a franchisee must do is comply substantially with the terms of the agreement, in return for which he receives the benefit of an “infinite” franchise - - he cannot be terminated or refused renewal.” In a case we defended on behalf of Holiday Hospitality Franchising (a subsidiary of IHG Hotels & Resorts and the franchisor of Holiday Inn and Holiday Inn Express guest lodging facilities), the U.S. District Court for the District of New Jersey on September 18, 2024 granted summary judgment to Holiday in a case involving a franchisee which claimed that Holiday violated the New Jersey Franchise Practices Act by not offering franchise renewal notwithstanding the fact that the franchisee’s Holiday franchise agreement specified that there would be no renewal.? The case is Scion Hotels LLC v. Holiday Hospitality Franchising, LLC. The franchisee, Scion, commenced an action against the hotels franchisor, Holiday, claiming wrongful nonrenewal of its franchise agreement; constructive termination of its ?franchise agreement; and the imposition of unreasonable standards of performance, all in purported violation of the New Jersey Franchise Practices Act. However, in response to Holiday’s motion for summary judgment, the U.S. District Court for the District of New Jersey would have none of it.? Finding that Holiday had good cause for not renewing Scion’s franchise agreement because it had voluntarily abandoned its Holiday franchise relationship by actively pursuing a rival franchise relationship with Hilton, the court granted summary judgment to Holiday and dismissed Scion’s non-renewal claim with prejudice.?“Under these facts, [Holiday] had good cause for not renewing the Franchise Agreement,” held the court.? The court similarly granted summary judgment to Holiday on Scion’s constructive termination claim and Scion’s claim that Holiday imposed unreasonable standards of performance. We note that the decision of the federal court in Newark is being appealed to the Third Circuit Court of Appeals.

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