RichardJensen Posted December 4, 2014 Share Posted December 4, 2014 (edited) I don't think you can write a franchise contract that conflicts with state law, can you? No. But please note the relevant section of this law: http://legis.sd.gov/Statutes/Codified_Laws/DisplayStatute.aspx?Type=Statute&Statute=32-6B-69&cookieCheck=true No franchisor may modify a franchise during the terms of the franchise or upon its renewal if the modification would substantially and adversely affect the vehicle dealer's rights, obligations, investment, or return on investment without giving at least sixty days notice of the proposed modification to the vehicle dealer unless the change is required by law. The issue with franchise laws is the emphasized word in the above snippet. It is not that state franchise laws require that manufacturers put up with all sorts of crap from dealers, it is that state franchise laws make it very difficult for manufacturers to rein in crap. A new dealer franchise contract can be written quite stringently, as the quality of Lexus dealers indicates. Edited December 4, 2014 by RichardJensen Quote Link to comment Share on other sites More sharing options...
fordtech1 Posted December 4, 2014 Share Posted December 4, 2014 GM has been running ads crowing about how Chebbies have been winning all these awards, and the ads prominently feature the Silverado and Malibu (or is it the Impala?), which are being curb-stomped by the (outgoing!) F150 and Fusion, respectively. Tell me again, how are awards going to help sales? Awards for most recalled in 2014 2 Quote Link to comment Share on other sites More sharing options...
akirby Posted December 5, 2014 Share Posted December 5, 2014 http://www.gada.com/index.php?module=FileShare&func=download&file_id=97 Page 16. I think that speaks for itself. Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted December 5, 2014 Share Posted December 5, 2014 (edited) http://www.gada.com/index.php?module=FileShare&func=download&file_id=97 Page 16. I think that speaks for itself. Indeed it does: "If reimbursement is made under this subsection, the franchisor is entitled to possession and use of the facilities or location for the period covered by such reimbursement." Tesla would be allowed to run the dealership themselves, if forced to pay a franchisee for termination of a franchise. Edited December 5, 2014 by RichardJensen Quote Link to comment Share on other sites More sharing options...
akirby Posted December 5, 2014 Share Posted December 5, 2014 Indeed it does: "If reimbursement is made under this subsection, the franchisor is entitled to possession and use of the facilities or location for the period covered by such reimbursement." Tesla would be allowed to run the dealership themselves, if forced to pay a franchisee for termination of a franchise. Not exactly. That just says they can use the facilities but it doesn't say they can continue to use the facilities to sell or service Teslas. That's only allowed for up to 1 year and only in cases where it's temporary due to a pending change in ownership. It allows the mfr to keep the dealership going if the dealer goes belly up or during a transition period between owners. There is no way for Tesla to exert any control over a Tesla franchised dealership and it's illegal to put such terms in a franchise contract. That's why it's so hard for Ford to do anything about bad dealers. Quote Link to comment Share on other sites More sharing options...
Gnostic Posted December 5, 2014 Share Posted December 5, 2014 No. Because they can effectively control 100% of the buyer experience by means of a franchise contract. Just like Ford and GM can. That's why they had to spend millions of dollars to buy those franchises out. 1 Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted December 5, 2014 Share Posted December 5, 2014 (edited) Not exactly. That just says they can use the facilities but it doesn't say they can continue to use the facilities to sell or service Teslas. That's only allowed for up to 1 year and only in cases where it's temporary due to a pending change in ownership. It allows the mfr to keep the dealership going if the dealer goes belly up or during a transition period between owners. There is no way for Tesla to exert any control over a Tesla franchised dealership and it's illegal to put such terms in a franchise contract. That's why it's so hard for Ford to do anything about bad dealers. Which one of us has first hand experience with dealer principals and franchise agreements? You or me? I can tell you for a fact that the primary reason why Ford can't do anything about bad dealers is because it is incredibly difficult to ALTER their franchise agreements. It has absolutely NOTHING to do with what can be in the initial franchise agreement and EVERYTHING to do with not being able to alter the agreement once it is down in writing. You can look high and low in the state statutes from the Pacific to the Atlantic Ocean and you will not find any state that sets down statutory definitions of unconscionable terms in a franchise agreement. Elon Musk can put in a clause in a franchise agreement requiring all customer facing employees to wear a suit and tie, and that every dealership have at least two employees fluent in Urdu, and if the dealer signs the contract, it's enforceable. Do you know how flimsy some of those past franchise agreements were? Edited December 5, 2014 by RichardJensen Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted December 5, 2014 Share Posted December 5, 2014 Just like Ford and GM can. That's why they had to spend millions of dollars to buy those franchises out. Why is it so impossible for people to grasp the simplicity of this situation? The problem is NOT what is contained in NEW FRANCHISE AGREEMENTS. It is THE EXISTENCE OF DECADES OLD FRANCHISE AGREEMENTS THAT CANNOT BE EASILY ALTERED. Would someone please tell me which fifty year old Tesla dealership Elon would have problem with if he went along with state franchise laws instead of spending investor money in an wildly unsuccessful effort to overturn them? Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted December 5, 2014 Share Posted December 5, 2014 And then, once you've finished doing that, please tell me how Elon would be at a DISADVANTAGE by having to play according to the SAME rules as EVERY OTHER MANUFACTURER. Geez. People. This isn't rocket science. It's selling cars. Quote Link to comment Share on other sites More sharing options...
fordmantpw Posted December 5, 2014 Share Posted December 5, 2014 Geez. People. This isn't rocket science. It's selling cars. You just broke Dean's heart...he thought he was a rocket scientist! 3 Quote Link to comment Share on other sites More sharing options...
akirby Posted December 5, 2014 Share Posted December 5, 2014 You do realize that every state has their own franchise laws so SD's version is not the same as GA's (or any other state's) version? If the law only says you can't change existing franchise agreements then how would that prevent Tesla from opening their own new dealerships? The law prohibits the mfrs from owning dealerships (except temporarily as stated). That has nothing to do with altering existing agreements. Quote Link to comment Share on other sites More sharing options...
akirby Posted December 5, 2014 Share Posted December 5, 2014 And then, once you've finished doing that, please tell me how Elon would be at a DISADVANTAGE by having to play according to the SAME rules as EVERY OTHER MANUFACTURER. He's not at any further disadvantage than existing mfrs. The problem is ALL current mfrs are disadvantaged by the franchise laws when it comes to guaranteeing a good customer experience. Quote Link to comment Share on other sites More sharing options...
akirby Posted December 5, 2014 Share Posted December 5, 2014 If he owned his own dealerships he can dictate inventory. He can control which vehicles the dealerships stock. He can control the pricing. With a franchised dealer that's illegal. Period. And you can't put that in the franchise agreement. Quote Link to comment Share on other sites More sharing options...
akirby Posted December 5, 2014 Share Posted December 5, 2014 (edited) Reference - from the GA franchise law document above: I may not deal with dealers and dealer principles but I know how to read. No franchisor shall require, attempt to require, coerce, or attempt to coerce any dealer in this state: (1) To order or accept delivery of any new motor vehicle, part, or accessory thereof, equipment, or any other commodity not required by law which shall not have been voluntarily ordered by the dealer, except that this paragraph does not affect any terms or provisions of a franchise requiring dealers to market a representative line of those motor vehicles which the franchisor is publicly advertising;(2) To order or accept delivery of any new motor vehicle with special features, accessories, or equipment not included in the list price of such new motor vehicle as publicly advertised by the franchisor;(3) To refrain from participation in the management of, investment in, or the acquisition of any other line of new motor vehicle or related products. However, this paragraph does not apply unless the dealer maintains a reasonable line of credit for each make or line of new motor vehicle, the dealer remains in compliance with any reasonable facilities requirements of the franchisor, the dealer provides acceptable sales performance, and no change is made in the principal management of the dealer;(4) To expand, construct, or significantly modify facilities without assurances that the franchisor will provide a reasonable supply of new motor vehicles within a reasonable time so as to justify such an expansion in light of the market and economic conditions;(5) To sell, assign, or transfer any retail installment sales contract obtained by such dealer in connection with the sale by such dealer in this state of new motor vehicles to a specified finance company or class of such companies or to any other specified persons;(6) To provide warranty or other services for the account of franchisor, except as provided in Part 3 of this article, the “Motor Vehicle Warranty Practices Act”;(7) To acquire any line-make of motor vehicle or to give up, sell, or transfer any line-make of motor vehicle which has been acquired in accordance with this article once such dealer has notified the franchisor that it does not desire to acquire, give up, sell, or transfer such line-make or to retaliate or take any adverse action against a dealer based on such desire; or(8) To construct, renovate or maintain exclusive facilities, personnel, or showroom area dedicated to a particular line make if the imposition of such a requirement would be unreasonable in light of the existing circumstances, including the franchisor’s reasonable business considerations, present economic and market conditions, and forecasts for future economic and market conditions in the dealer’s retail territory. The franchisor shall have the burden of proof to demonstrate that its demand for exclusivity is justified by reasonable business considerations and reasonable in light of the dealer’s circumstances, but this provision shall not apply to a voluntary It shall be unlawful for any franchisor:(1) To delay, refuse, or fail to deliver new motor vehicles or new motor vehicle parts or accessories in a reasonable time and in reasonable quantity if such vehicles, parts, or accessories are publicly advertised as being available for immediate delivery. This paragraph is not violated, however, if such failure is caused by acts or causes beyond the control of the franchisor;(2) To obtain money, goods, services, or any other benefit from any other person with whom the dealer does business, on account of, or in relation to, the transaction between the dealer and such other person, other than as compensation for services rendered, unless such benefit is promptly accounted for and transmitted to the dealer;(3) To release to any outside party, except under subpoena or as otherwise required by law or in an administrative, judicial, or arbitration proceeding involving the franchisor or dealer, any business, financial, or personal information which may be from time to time provided by the dealer to the franchisor, without the express written consent of the dealer;(4) To resort to or to use any false or intentionally deceptive advertisement in the conduct of business as a franchisor in this state;(5) To make any false or intentionally deceptive statement, either directly or through any agent or employee, in order to induce any dealer to enter into any agreement or franchise or to take any action which is prejudicial to that dealer or that dealer´s business;(6) To require any dealer to assent prospectively to a release, assignment, novation, waiver, or estoppel which would relieve any person from liability to be imposed by law or to require any controversy between a dealer and a franchisor to be referred to any person other than the duly constituted courts of the state or the United States if such referral would be binding upon the dealer, provided that this Code section shall not prevent any dealer from entering into a valid release agreement with the franchisor;(7) To fail to observe good faith in any aspect of dealings between the franchisor and the dealer;(8) To deny any dealer the right of free association with any other dealer for any lawful purposes;(9) To engage in any predatory practice or discrimination against any dealer;(10) To propose or make any material change in any franchise agreement without giving the dealer written notice by certified mail or statutory overnight delivery of such change at least 60 days prior to the effective date of such change;(11) To cancel a franchise or to take any adverse action against a dealer based in whole or in part on the failure of the dealer to meet the reasonable performance criteria established by the franchisor in light of existing circumstances, including but not limited to current and forecasted economic conditions, or when that failure is due to the failure of the franchisor to supply, within a reasonable period of time, new motor vehicles ordered by or allocated to the dealer;(12) To offer to sell or lease or to sell or lease any new motor vehicle or accessory to any dealer at a lower actual price therefor than the actual price offered to any other dealer for the same model vehicle similarly equipped or same accessory or to use any device, including but not limited to an incentive, sales promotion plan, or other similar program, which results in a lower actual price of a vehicle or accessory being offered to one dealer and which is not offered to other dealers of vehicles of the same line-make or the same accessory;(13) To conduct an audit, investigation, or inquiry of any dealer or dealership as to any activity, transaction, conduct, or other occurrence which took place or as to any promotion or special event which ends more than one year prior to such audit, investigation, or inquiry or to base any decision adverse to the dealer or dealership on any activity, transaction, conduct, or other occurrence which took place or as to any promotion or special event which ends more than one year prior to such decision or which took place any time prior to the period of time covered by such audit, investigation, or inquiry or to apply the results of an audit, investigation, or inquiry to any activity, transaction, conduct, or other occurrence which took place any time prior to the time covered by such audit, investigation, or inquiry;(14) To charge back to, deduct from, or reduce any account of a dealer or any amount of money owed to a dealer by a franchisor any amount of money the franchisor alleges is owed to such franchisor by such dealer as a result of an audit, investigation, or inquiry of such dealer or based upon information obtained by the franchisor through other resources which relates to any transaction that occurred more than 12 months prior to the notice to the dealer of the charge back or deduction, but rather if a franchisor alleges that a dealer owes such franchisor any amount of money as a result of an audit, investigation, or inquiry, such franchisor shall send a notice to such dealer for such amount and the dealer shall have not less than 30 days to contest such amount or remit payment;(15) To deny, delay payment for, restrict, or bill back a claim by a dealer for payment or reimbursement for warranty service or parts, incentives, hold-backs, special program money, or any other amount owed to such dealer unless such denial, delay, restriction, or bill back is the direct result of a material defect in the claim which affects the validity of the claim;(16) To engage in business as a dealer or to manage, control, or operate, or own any interest in a dealership either directly or indirectly, if the primary business of such dealer or dealership is to perform repair services on motor vehicles, except motor homes, pursuant to a manufacturer´s or franchisor´s warranty;(17) To refuse to allow, to limit, or to restrict a dealer from maintaining, acquiring, or adding a sales or service operation for another line-make of motor vehicles at the same or expanded facility at which the dealer currently operates a dealership unless the franchisor can prove by a preponderance of the evidence that such maintenance, acquisition, or addition will substantially impair the dealer´s ability to adequately sell or service such franchisor´s motor vehicles;(18) To directly or indirectly condition a franchise agreement or renewal of a franchise agreement, addition of a line-make, approval of relocation or approval of a sale or transfer on the dealer’s or prospective dealer’s willingness to enter into a site control agreement; provided, however that this paragraph shall not apply to a voluntary agreement when separate and adequate consideration is paid to the dealer. The franchisor shall have the burden of proof to show the voluntary, noncoerced acceptance of the site control agreement by the dealer; or(19) To charge back, withhold payment, deny vehicle allocation, or take other adverse action against a dealer when a new vehicle sold by the dealer has been exported to a foreign country unless the franchisor can demonstrate that the dealer knew or reasonably should have known that the customer intended to export or resell the new vehicle. There shall be a rebuttable presumption that the dealer had no such knowledge if the vehicle is titled or registered in any state in this country. Edited December 5, 2014 by akirby Quote Link to comment Share on other sites More sharing options...
akirby Posted December 5, 2014 Share Posted December 5, 2014 And just to be clear that you can't put a clause in a new franchise agreement that contradicts the franchise laws.......... Any provision of any franchise, agreement, waiver, novation, or any other written instrument executed, modified, extended, or renewed after July 1, 1983, which is in violation of any Code section of this article, and any amendments thereto, shall be deemed null and void and without force and effect. Quote Link to comment Share on other sites More sharing options...
92merc Posted December 5, 2014 Share Posted December 5, 2014 Someone please insert our Tan Gent picture here... Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted December 5, 2014 Share Posted December 5, 2014 He's not at any further disadvantage than existing mfrs. THAT'S EXACTLY THE POINT. Elon Musk crusading against franchise laws does NOTHING to benefit his business, and it's been a colossal waste of time. Quote Link to comment Share on other sites More sharing options...
akirby Posted December 5, 2014 Share Posted December 5, 2014 Richard started it...... If Ford went on some stupid crusade against these media awards, they would look every bit as foolish as Elon Musk with his dippy crusade against state franchise laws. State franchise laws do not harm his business, but he doesn't like them, so he's going to spend a fortune in stockholder funds fighting court battles and lobbying legislatures to change something that makes no material difference in how he does business. Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted December 5, 2014 Share Posted December 5, 2014 (edited) State franchise laws do not harm his business You haven't posted a single thing that contradicts that assertion. Edited December 5, 2014 by RichardJensen Quote Link to comment Share on other sites More sharing options...
akirby Posted December 5, 2014 Share Posted December 5, 2014 THAT'S EXACTLY THE POINT. Elon Musk crusading against franchise laws does NOTHING to benefit his business, and it's been a colossal waste of time. If you don't see the business advantage to Tesla a. not having to create and manage franchise agreements with 3rd parties b. being able to control inventory at and between dealerships c. being able to control retail pricing d. being able to shut down unproductive or undesirable dealerships at will e. being able to open new dealerships without restrictions then I give up. Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted December 5, 2014 Share Posted December 5, 2014 If you don't see the business advantage to Tesla That's not the same as alleging that franchise agreements HARM his business. Quote Link to comment Share on other sites More sharing options...
SoonerLS Posted December 5, 2014 Share Posted December 5, 2014 (edited) Someone please insert our Tan Gent picture here... I think we're almost over to penguins in sweaters land at this point. Remember, the kids aren't happy when Mommy and Daddy strenuously disagree... Edited December 5, 2014 by SoonerLS Quote Link to comment Share on other sites More sharing options...
coupe3w Posted December 5, 2014 Share Posted December 5, 2014 Wow this thread went so far off track i forgot the original subject. Quote Link to comment Share on other sites More sharing options...
akirby Posted December 5, 2014 Share Posted December 5, 2014 Wow this thread went so far off track i forgot the original subject. Me, too. We're done. Quote Link to comment Share on other sites More sharing options...
Anthony Posted December 5, 2014 Share Posted December 5, 2014 It was about turtles. I like them. Quote Link to comment Share on other sites More sharing options...
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