TRENTON, N.J. -- New Jersey Governor Jon Corzine on June 10 signed the "Right of First Refusal Act " (S-2553/A-3726), which concerns franchisors' assignment of interest relating to franchisees engaged in the retail sale of motor fuel. "Today is a great day for small businesses in New Jersey, as Governor Corzine signed into law a measure that protects both small business owners and consumers from the manipulations of Big Oil," Sal Risalvato, executive director of the New Jersey Gasoline, Convenience, Automotive Association (NJGCA), said earlier this week.
Introduced in [image-nocss] February, the legislation, prevents the sale of gas stations to "predatory mega-distributors" without first offering the operating franchisees the opportunity to purchase the property, he said.
"Last fall, NJGCA and small-business franchise dealers learned that Exxon and Shell were seeking to quickly divest their retail assets in New Jersey. Unnoticed by these mega-corporations were the franchisees that currently operate these locations. Big Oil planned to bundle multiple gas station properties together and sell them in a single package; denying the current lessees the chance to own the site their businesses were built upon," Risalvato added.
NJGCA recognized the dangers that would confront dealers if mega-distributors were to purchase these packages by effectively becoming both the landlord and franchisor at these locations, he added. NJGCA led the charge to have the legislature pass a measure that would guarantee each of these small-business owners the first right of refusal before a third party could purchase the location out from under them.
"Why was this necessary?" asked Risalvato. "Only a few years ago, Exxon dealers in South Jersey faced the very same scenario. A mega-distributor purchased a package of 60 locations from Exxon, then raised the dealer's rents, and sold them gasoline at un-competitive prices, making it nearly impossible for them to remain profitable. Ultimately, many had no choice but to turn in their keys and take overwhelming losses. We couldn't allow that to happen again and asked the Legislature to take action."
The "First Right of Refusal Act" affords franchisees the right to purchase their own stations in any assignment, transfer or sale of a franchised location. This legislation does not afford franchisees any special rights under a sale, any special discount for equity invested in the premise or any other tool which can be used to make franchisees the preferred purchaser. Instead, this legislation only states that the premise at an amount equal to or greater than any other offer must be offered to the owner of the franchise premise first.
"Many of these lessees took underperforming locations and borrowed against their homes to build viable businesses. They added value to their stations and shouldn't have the rug pulled out from under them. But Big Oil was looking for a quick sell-off and we knew a sale was imminent. We have been racing against the clock to prevent a disaster which would have wiped out hundreds of franchisees. These owners were just seeking the opportunity to buy their stations; after pouring so much time and money into these locations, do they deserve anything less?", asked Risalvato.
Dealers that are allowed to purchase their properties will also be allowed to shop for a better price of gasoline from competing distributors, the group said.
Risalvato said, "If franchise dealers were forced to pay the 'take-it-or-leave-it' price they will be required to pay from a mega distributor, consumers will get screwed again. When dealers get to shop for the best price on gasoline, then consumers benefit by paying lower prices too."
The bill was sponsored by State Senators Gerry Cardinale and Paul Sarlo, and Assemblymen Patrick Diegnan Jr., Jon Bramnick, Upendra Chivukula and Ruben Ramos Jr. The bill overwhelmingly passed both houses of the state legislature on May 21 before heading to Governor Corzine's desk for his signature.
"Lawmakers recognized the urgency of the situation and worked in record time to get this passed. These small business owners fought a genuine grassroots effort to get this bill passed. I applaud Governor Corzine for recognizing the urgency of these circumstances and for signing the bill into law. Thanks to his action, New Jersey now leads the nation in the most comprehensive protection for small businesses offered in decades; but do not be mistaken, more needs to be done and we will begin working tomorrow to bring an end to zone pricing before gasoline prices fall out of control once again," Risalvato concluded.
Click hereto view the bill.
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