Franchising agreements an important part of automotive industry

Television, radio and even billboards throughout Maryland consistently entice the consumer to trade their current vehicle for a newer or simply different model. Both car companies and car dealerships expend a great deal of time and money in their efforts to attract the consumer. Currently, vehicles in Maryland are sold through car dealerships, many of which are established by means of franchising agreements.

Recently, Tesla Motors Inc. has sought to sell its cars directly to the consumer. The company has been met with resistance in many states, including Maryland. Car dealers fear that allowing Tesla to market its cars in this manner would open the door for other companies to bypass franchise agreements and sell directly to the consumer. This action could prove detrimental to car dealerships.

Currently, car dealers throughout Maryland and several other states are fighting to ensure that the current method for buying and selling cars is maintained. Recently, New York has reached an agreement with Tesla that will allow it to operate company-owned stores and sell directly to consumers. Tesla currently operates five company stores throughout the state of New York. Car dealers throughout the other states will certainly be keeping an eye on developments to see how franchising agreements are handled with this new development.

Franchising agreements are in place to assist the owner of the business. They also serve as a means of providing the parent company's product to the consumer through a middleman who is approved by the parent company. Both parties are concerned with maintaining and protecting existing franchising agreements. Franchise disputes can often result in lost business and business litigation.

Source: Crain's New York Business, "Tesla reaches deal with NY auto dealers", , March 28, 2014

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