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Legal advice over manufacturer control on dealer principal dismissals

Several dealer councils have worked with law firm TLT to negotiate the removal of contractual provisions which grant manufacturers control over who runs specific dealerships.

As manufacturers seek to renegotiate dealer agreements TLT said they are now seeking more control over the appointment and removal of dealer principals.

Richard Brennan, associate in TLT’s employment team, said: "The justification is that the legal risks to the dealer in having to comply with such an obligation are material, not to mention the fact that the dealer – who is subject to the highest retail standards - should be final arbiter as to whether its dealer principal is doing a good job.

"When asked to sign up to new agreements, be on the look-out for these provisions and seek advice."

Even if the manufacturer does not have a good reason for its request, TLT said it can sometimes be lawful to bow to its pressure.

However, Brennan has urged dealers to consider:

does the manufacturer have the contractual right to demand that you remove the dealer principal? If so then, potentially, the dismissal is more likely to be 'fair'

- are the manufacturer's demands unjust? If so, you will have to consider what steps you can take to prevent the injustice, including the sometimes difficult task of trying to convince the manufacturer to change its mind

- whether there are alternative roles which you could offer to the dealer principal.



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Comments

  • archie - 29/10/2012 17:03

    At least they make it simple,either pre register our pack cars or find another franchise!

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  • 9000up - 30/10/2012 14:19

    Premium manufacturers have been forcing dealers to remove staff for years;whilst running a large dealer group I can recall a number of situations where I was being forced to remove management staff by zone managers who in general has less idea of running a department than running a tap.

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  • chizzy - 30/10/2012 15:00

    When on earth are some of these dealer groups going to grow some and take back control of their own businesses?

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    • archie - 30/10/2012 15:05

      @chizzy - Not as simple as that,if only it were! Groups will very soon have to remove all of their own identity from showrooms,including signage and stationary as the makers move further down the retail chain.Imagine investing 10m in a facility but not allowed your local brand name above the door!

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    • chizzy - 30/10/2012 15:19

      @archie - It's as difficult as anyone wants to make it for themselves. I suspect that the bigger groups are kept onside to the point that it isn't worth their time rocking any boat, and the rest of the field are left to tag along and be good boys being told what to do and think all the time. These attitudes are amongst the reasons I left the retail industry 20 years ago, and why the manufacturers hate the likes of us. We aren't beholding to them and that infuriates the hell out of them. Fortunately there's enough of them to go around and be friendly with in turns - once the roundabout has done a full circle their personnel have all changed (again) and we start over. But I still don't understand how they get away with virtually ignoring the Supply of New Cars Order 2000. But it's by collusion, and that's all I know.

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    • A Casual Observer - 31/10/2012 16:58

      @archie - On one level you're right that having invested in your facility you lose the right to have your own "brand". It's important not to underestimate the pull of the brand above the door from the Manufacturer. Afetr all they have invested hundreds of millions in providing the cars your selling. It's becoming more like routine franchising - how many McDonalds or Holiday Inn sites do you here the actual owners moaning they can't display their own ownership names?

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  • xd65 - 31/10/2012 17:25

    A more pressing point is that the manufacturer wants to steer the dealership one way, to sell thier product. In my time as a senior manager we did what our bosses said not what the franchise said. Does this mean we would be bound by the rules of the specific franchise and not our actual employer??

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