For years, automobile dealers have endured intensifying pressure from manufacturers. From burdensome facility mandates to predatory incentive programs and punitive audits, today’s franchisors are more aggressive than ever. Yet despite these escalating tactics, too many dealers remain passive and reluctant to assert their rights under state franchise laws. At Charapp & Weiss, LLP, we believe it’s time for dealers to push back.
Manufacturers Are Getting Bold, Even With the Federal Government
In a recent and alarming move, the Alliance for Automotive Innovation asked the U.S. Department of Justice to examine and potentially dismantle state franchise protections. Likewise, Scout, a Volkswagen subsidiary, called on the federal government to eliminate state bans on direct-to-consumer vehicle sales. These aren’t isolated requests—they’re coordinated efforts to weaken the legal foundation that protects franchised dealers nationwide.
Dealers’ Common Excuses Don’t Hold Up
At Charapp & Weiss, we hear many of the same justifications for inaction. It’s time to reconsider them.
- “The factory is our partner.” Not if the relationship is built on threats and retaliation. A true partnership doesn’t involve cutting allocations or imposing financial penalties for noncompliance.
- “What difference will it make?” A great deal if enough dealers speak up. Franchisors routinely claim they don’t hear complaints. That excuse disappears when hundreds of dealers voice individual objections.
- “The factory has more resources.” True, but even the most powerful OEMs cannot maintain an oppressive regime when dealers collectively enforce their rights.
What Should Be Keeping Dealers Up at Night
Charapp & Weiss helps dealers identify—and confront—the issues most often used to erode their rights.
1. Retail Reimbursement
Many states mandate full retail compensation for warranty labor and parts. Yet some manufacturers still underpay, hoping dealers won’t notice or act. Don’t let them. If your compensation doesn’t meet legal requirements, appeal it—and escalate if necessary.
2. Audits and Chargebacks
Manufacturers increasingly conduct audits that disregard state laws and result in unfair chargebacks. Dealers must challenge unsupported findings through every available appeal channel.
3. Recall Expenses
OEMs should bear the cost of recall-related expenses, including grounded inventory and customer rentals. If they don’t, push back. Some states (like Virginia) offer additional protections; know them and use them.
4. Performance Disqualifications
Performance-based disqualifiers tied to stair-step incentives are often unfair, unsupported by data, and violate state law. If your market realities aren’t reflected in these metrics, raise the issue with your franchisor and be prepared to litigate if needed.
5. Problematic Dealer Agreements
Before signing any manufacturer document, watch for:
- Waivers of state protections
- Unlawful data-sharing obligations
- Clauses applying out-of-state laws or arbitration mandates
Always consult counsel to ensure these terms don’t jeopardize your franchise.
Construction Agreements: Don’t Sign Blindly
Franchisors often impose aggressive deadlines for facility upgrades that don’t reflect real-world delays like local zoning approvals or disputes with the factory’s architect. Charapp & Weiss recommends negotiating contract language that accounts for:
- Architectural disagreements
- Permit and approval delays
- Force majeure events (e.g., labor stoppages, supply chain issues)
Your franchise agreement could be at risk if you miss a construction deadline—don’t let unreasonable terms put your business in jeopardy.
Use Our Checklist Before You Sign Anything
Charapp & Weiss offers dealers a practical checklist for evaluating manufacturer documents. Ask:
- What are your obligations?
- Does the agreement conflict with your existing DSSA or state law?
- Are the deadlines realistic?
- Are there financial penalties or disqualification risks?
If a requirement is beyond your dealership’s capacity, negotiate or delay. Never sign away your rights—especially those granted under state franchise laws.
Bottom Line: Assert Your Rights Before You Lose Them
At Charapp & Weiss, LLP, we’ve long advocated for dealers’ legal and business interests in the face of manufacturer overreach. State franchise laws are there to protect you—but they only work if you use them. If your franchisor’s demands are out of line, don’t stay silent. Speak up, document everything, and consult experienced legal counsel.
Your dealership is worth protecting. And we’re here to help. Get in touch with Charapp & Weiss, LLP, if you need legal representation.