New Jersey Hospitality Bill A-1958 Passes Assembly, Sparks Backlash from International Franchise Association

The controversial legislation could disrupt the franchise business model, affecting over 19,000 establishments and over 203,000 employees in New Jersey, according to the IFA.

By Luca Piacentini1851 Franchise Managing Editor

Updated 4:16PM • 05/25/23

The New Jersey Assembly has passed a new bill, A-1958, that could negatively affect hospitality franchises throughout the state, according to a statement released by the International Franchise Association (IFA).

The bill contains a list of hospitality franchisor activities that will be considered a violation of the “Franchise Practices Act”, outlining new restrictions on non-compete terms, relocation requirements, exclusive vendor partnerships, loyalty program points and more. The IFA notes that the bill is set to intrude on private franchise contracts, encourage litigation and lower brand standards, which are considered integral to the franchise business model. The IFA argues that the legislation constitutes government overreach and is counterproductive to the recovery of businesses still grappling with the aftermath of the COVID-19 pandemic.

“Today New Jersey legislators voted against locally owned businesses in favor of government overreach, which will undoubtedly harm the state’s hospitality industry,” said Jeff Hanscom, IFA Vice President of State Government Relations. “A-1958 undermines franchised businesses in the hospitality sector, making it more difficult to do business and serve their guests at a time when they are still trying to recover from the worst effects of the pandemic.”

Hanscom also urged the Senate to stand with New Jersey businesses and oppose the legislation. The IFA had previously sent a letter in March to the New Jersey Assembly Commerce and Economic Development Committee, expressing their opposition to the bill.

The legislation has also been criticized for potentially destabilizing the franchise business model entirely by hindering the enforcement of brand standards, the IFA notes. Tom Baber, a New Jersey-based franchisee for IHOP and Money Mailer, expressed these concerns during a testimony on behalf of the IFA before the committee.

“A-1958 has far-reaching and harmful ramifications for hospitality franchisors, franchisees, and the New Jersey economy,” Baber said. “But more than that, the legislation is a fundamental dismantling of the franchise business model by entirely removing any ability for franchise brands to enforce brand standards.”

The potential impact of the legislation is significant, considering that there are currently 19,000 franchise establishments in New Jersey, which generate over $20 billion in economic output and employ more than 203,000 residents. The bill could negatively affect both existing hospitality franchises and the entire franchise model within the state, the IFA states, as well as any future expansion.

The IFA has raised concerns that the legislation could also impede local businesses' contributions to the success of the 2026 World Cup, which is expected to receive substantial support from the franchise industry.

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