Dealer Agreement Renewals and Modifications: Dot Your “I’s” and Cross Your “T’s”

When changes are made to your Dealer Agreement, which many times occurs upon renewal, they should be carefully scrutinized to ensure that they are not harmful to your dealership.  In many states, dealers are afforded the opportunity to challenge these changes, and that opportunity may be waived if a dealer does not act timely or executes the modified version before bringing a challenge.

General Motors LLC is in the process of sending renewal agreements to its dealer body.  The renewal agreements have been modified from their prior version.  The impact of these changes can vary from dealer to dealer.  Additionally, changes may have been made to the dealer-specific addenda included as part of the renewal package.  It is these sorts of changes, that depending on your state’s laws and the nature of the changes, that may be protestable in the appropriate forum.  Dealers should make sure they know the impacts of changes, and their rights to challenge them, before signing.  Factory representatives will invariably pressure dealers to sign quickly.  But, in many states the duration of your Dealer Agreement amounts to a legal fiction due to franchise protections that allow continued operation of the dealership following expiration absent a material breach of the remaining terms and an opportunity to protest a termination or nonrenewal.

Dealer Agreement modifications do not always come in the form of a new Dealer Agreement.  From time-to-time, an OEM may seek to modify a dealer’s assigned geography (sometimes referred to as the PMA, APR, or AOR).  In many instances, your territory boundaries are a term of your Dealer Agreement.  So, it is possible that when a territory modification is proposed it amounts to a modification of your Dealer Agreement subject to protest.  Some states even have specific laws giving a dealer a right to challenge modifications to their territory (independent of whether it modifies the Dealer Agreement).

Recently, we have learned that Hyundai Motor America LLC is notifying certain dealers throughout the country that their territory would be increased due to a decision to eliminate unfilled open points nearby.  Dealers should pay close attention to these sorts of actions and consult with their counsel as a territory increase negatively impacts a dealer’s sales performance scores (by virtue of being responsible for more area).  An increase in the size of your assigned territory and the corresponding number of industry vehicle sales registrations can also impact your net working capital and facility requirements by causing unrealistic increases in both.

Due to the profound impact the terms of your Dealer Agreement may have on your bottom-line and the operation of your dealership, close attention should be paid to any attempts to revise your rights and obligations.