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March 12, 2007 – Dealer group developing a model franchise bill

A national dealer council is working toward creating a model franchise protection bill that could be used by state dealer associations.
The model bill is expected to include some of the most current dealer-friendly state regulations on such hot topics as territory rights and shifting the burden of proof on dealer-OEM disputes.
The group, the National Council of Motorcycle Dealer Associations, is hoping to address those issues and more in the model bill at the council’s next meeting in November, said Ed Lemco, the group’s executive director.
The national council met Feb. 21-22 in Dallas. Representatives from the state dealer associations of New Mexico, Illinois, Iowa, Georgia, Virginia, Maryland, Florida, Oklahoma, Texas, Washington, Missouri and California attended the two-day event. Members from Canadian dealer associations were also on hand.
Lemco was involved in some of the first state franchise bills that came into effect in the early 1970s. He said “for the most part the bills that are in place in most states come from that 1970s mindset. So many things have changed that we just really need to update them.
“Many states have brought on enhancements to the franchise law and we want to incorporate all of those” into the model franchise protection bill.
One of those enhancements deals with dealer-OEM disputes. Virginia currently has a law that puts the burden of proof in such disputes on the manufacturer. So if a manufacturer wants to place a new dealer near a current store, it’s up to the manufacturer to show a court the current dealer’s sales are inadequate, Lemco said.
That’s not the case in many states, which have franchise laws that provide the dealer a means to protest such a move. The dealer, however, has the burden of proof to show any potential financial harm from the move.
“The dealer, in most cases, has a huge undertaking trying to muster all the expert witnesses, all the demographic studies,” Lemco said. “Even after you muster that, it’s kind of like playing cards — now you’ve shown your hand. It’s much easier to shoot at the hand that’s exposed.”
The model franchise bill also will address territory exclusivity, which some states have while others do not.“That’s a harder thing sometimes to try and sell to a legislature because it’s viewed as protective legislation for the dealer and not necessarily for the public’s interest,” Lemco said of territory exclusivity.
Lemco said the model franchise bill also could address how large a dealer’s territory should be, noting he believes Texas’ law of 15 miles for an urban environment and 25 miles for a rural area is among the best in the nation.
The national council also is working toward creating a panel of blue-ribbon dealers, Lemco said. This panel would act as an executive oversight committee for the national group.The panel would include about 10 individuals. psb

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