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BY SAL RISALVATO
EXECUTIVE DIRECTOR, NJGCA
COMMENTARY
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.
Introduced in February, A-3726/S-2553 - more commonly known as the First Right of Refusal Act - will prevent the sale of gas stations to predatory mega distributors without first offering the operating franchisees the opportunity to purchase the property.
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 - thus denying current lessees the chance to own the site their businesses were built upon.
NJGCA recognized the dangers that would confront dealers if mega distributors were to purchase these packages, as it would effectively have made them both the landlord and franchisor at these locations. Recently history illustrates that this creates a disastrous situation for small business owners.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.
The bill was sponsored by Senators Cardinale and Sarlo, and Assemblymen Diegnan, Bramnick, Chivukula, and Ramos. The bill overwhelmingly passed both houses of the Legislature on May 21st
Many franchisees took under-performing 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 raced 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?
Additionally, gasoline prices are rising unnecessarily again. Dealers that are allowed to purchase their properties will also be allowed to shop for a better gasoline prices from competing distributors. If a mega distributor were to force lessees to pay the ‘take it or leave it' price, consumers will get screwed again. When a dealer owns their location, they get to shop for the best price on gasoline and consumers benefit by paying lower prices too.
I applaud Governor Corzine for recognizing the urgency of these circumstances, signing the bill into law, and protecting small business owners. Thanks to his action, New Jersey now leads the nation in the most comprehensive protection for small businesses offered in decades!
However, more needs to be done before volatile gasoline prices create further havoc for motorists. New Jersey must bring to an end the practice known as zone pricing if both consumers and small business owners are to be truly protected.
Sal Risalvato is a former small business owner and currently the Executive Director of the New Jersey Gasoline-Convenience-Automotive Association (NJGCA), a state-wide trade association representing 1,500 small businesses.
If not, we could find any recovery from a recession as impossible.