Termination of Franchise; Grounds; Notice; Dealer Costs Reimbursed by Franchisor; Applicability to Distributors

  1. Law
  2. Georgia Code
  3. Commerce and Trade
  4. Selling and Other Trade Practices
  5. Motor Vehicle Franchise Practices
  6. Motor Vehicle Franchise Continuation and Succession
  7. Termination of Franchise; Grounds; Notice; Dealer Costs Reimbursed by Franchisor; Applicability to Distributors

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  1. Notwithstanding the terms, provisions, or conditions of any franchise and notwithstanding the terms or provisions of any waiver, no franchisor shall cancel, terminate, or fail to renew any franchise with a dealer unless the franchisor:
    1. Has satisfied the notice requirement of subsection (e) of this Code section; and
    2. Has good cause for cancellation, termination, or nonrenewal.
  2. Notwithstanding the terms, provisions, or conditions of any franchise or the terms or provisions of any waiver, good cause shall exist for the purposes of a termination, cancellation, or nonrenewal when there is a failure by the dealer to comply with a provision of the franchise which is both reasonable and of material significance to the franchise relationship, provided the dealer has been notified in writing of the failure within 180 days after the franchisor first acquired knowledge of such failure or after the dealer is given a reasonable opportunity to correct such failure for a period of not less than 180 days.
  3. If the failure by the dealer, as described in subsection (b) of this Code section, relates to the performance of the dealer in sales or service, then in this Code section the term "good cause" means the failure of the dealer to comply with reasonable performance criteria established by the franchisor in light of existing circumstances, including, but not limited to, current and forecasted economic conditions, provided the following conditions are satisfied:
    1. The dealer was notified by the franchisor in writing of such failure;
    2. Said notification stated that notice was provided of failure of performance pursuant to this Code section;
    3. The performance criteria established by the franchisor was:
      1. Reasonable, fair, and equitable;
      2. Based on accurate information;
      3. Inclusive of relevant and material local and regional data considered by the franchisor that was provided by the dealer that was beyond the control of the dealer and that adversely affected the dealer's performance; and
      4. Based on a statistically significant and valid random sample, if such performance criteria included a survey; and
    4. The dealer was afforded a reasonable opportunity, for a period of not less than six months, to comply with such criteria.
  4. The franchisor shall have the burden of proof under this Code section.
    1. Notwithstanding franchise terms to the contrary, prior to the termination, cancellation, or nonrenewal of any franchise, the franchisor shall furnish notification, as provided in paragraph (2) of this subsection, of such termination, cancellation, or nonrenewal to the dealer as follows:
      1. Not less than 90 days prior to the effective date of such termination, cancellation, or nonrenewal;
      2. Not less than 15 days prior to the effective date of such termination, cancellation, or nonrenewal with respect to any of the following:
        1. Insolvency of the dealer, or filing of any petition by or against the dealer under any bankruptcy or receivership law;
        2. Failure of the dealer to conduct its customary sales and service operations during its customary business hours for seven consecutive business days, except for acts of God or circumstances beyond the direct control of the dealer;
        3. Conviction of the dealer, general manager, or managing executive or any owner with a substantial interest therein of any crime which materially relates to the operation of the dealership or any felony which is punishable by imprisonment;
        4. Suspension for a period of more than 14 days or revocation of any license which the dealer is required to have to operate a dealership; or
        5. Fraud or intentional misrepresentation by the dealer which materially affects the franchise, provided the franchisor gives notice within one year of the time when the fraud or misrepresentation occurred or was discovered, whichever is later; or
      3. Not less than 180 days prior to the effective date of such termination or cancellation where the franchisor is discontinuing the sale of the product line.
    2. Notification under this Code section shall be in writing and shall be by certified mail or statutory overnight delivery or personally delivered to the dealer and shall contain:
      1. A statement of intention to terminate, cancel, or not to renew the franchise;
      2. A statement of the reasons for the termination, cancellation, or nonrenewal; and
      3. The date on which such termination, cancellation, or nonrenewal is to take effect.
      1. Upon the termination, cancellation, or nonrenewal of any franchise by the franchisor, the franchisor shall repurchase from the dealer any new and undamaged motor vehicles of the current and one year prior model year and acquired by the dealer within 12 months of the date of termination, cancellation, or nonrenewal so long as such motor vehicles have been acquired from the franchisor or from another dealer of the same line-make in the ordinary course of business prior to receipt of the notice of termination, cancellation, or nonrenewal and so long as such motor vehicles have not been altered, damaged, or materially changed while in the dealer's possession. Any new motor vehicle repurchased by the franchisor shall be repurchased at the net cost to the dealer. For purposes of this subparagraph, a motor vehicle shall be considered new if it has less than 500 miles on the odometer and has not been issued a certificate of title.
      2. In addition to the motor vehicles repurchased under subparagraph (A) of this paragraph, the franchisor shall repurchase demonstration motor vehicles acquired by the dealer within 12 months of the date of termination, cancellation, or nonrenewal so long as such motor vehicles have been acquired from the franchisor or from another dealer of the franchisor prior to receipt of the notice of termination, cancellation, or nonrenewal and so long as such motor vehicles have not been altered, damaged, or materially changed and so long as such motor vehicles do not have more than 6,000 miles each on their odometers. Any such demonstration motor vehicle shall be repurchased at the net cost to the dealer less an allowance for use equal to the net cost to the dealer times the current mileage divided by 100,000. The franchisor shall repurchase a number of demonstration motor vehicles equal to 10 percent of the number of motor vehicles repurchased under subparagraph (A) of this paragraph; however, in no event shall the number of demonstration motor vehicles which the franchisor is required to repurchase ever be less than two or more than 15 motor vehicles.
      3. For purposes of this paragraph, a motor vehicle shall not be deemed to have been altered, damaged, or materially changed if it has been provided with original equipment or with nonoriginal equipment which does not alter, damage, or materially change the motor vehicle, such as undercoating, pinstriping, interior conditioning, or paint sealant.
    2. Upon the termination, cancellation, or nonrenewal of any franchise by the dealer, the franchisor shall repurchase from the dealer any new and undamaged motor vehicles, except motorcycles as defined in paragraph (29) of Code Section 40-1-1 and except motor homes as defined in paragraph (31) of Code Section 40-1-1 and except school buses as defined in paragraph (55) of Code Section 40-1-1, of the current and prior model year acquired by the dealer within 12 months prior to the effective date of the termination so long as such motor vehicles have been acquired from the franchisor or from another dealer of the franchisor of the same line-make and in the normal course of business and so long as such motor vehicles have not been altered, damaged, or materially changed while in the dealer's possession. Any new motor vehicle repurchased by the franchisor shall be repurchased at the net cost to the dealer. For purposes of this paragraph, a motor vehicle shall be considered new if it has less than 500 miles on the odometer and has not been issued a certificate of title. For purposes of this paragraph, a motor vehicle shall not be deemed to have been altered, damaged, or materially changed if it has been provided with original equipment or with nonoriginal equipment which does not alter, damage, or materially change the motor vehicle, such as undercoating, pinstriping, interior conditioning, or paint sealant.
      1. Upon the termination, cancellation, or nonrenewal of any franchise by the franchisor or upon the termination, cancellation, or nonrenewal of any franchise by the franchisee, the franchisor shall repurchase, at fair and reasonable compensation, from the dealer the following:
        1. Any unused, undamaged, and unsold parts which have been acquired from the franchisor, provided such parts are currently offered for sale by the franchisor in its current parts catalogue and are in salable condition. Such parts shall be repurchased by the franchisor at the current catalogue price, less any applicable discount;
        2. Any supplies, equipment, and furnishings, including manufacturer or line-make signs, purchased from the franchisor or its approved source within three years of the date of termination, cancellation, or nonrenewal; and
        3. Any special tools purchased from the franchisor within three years of the date of termination, cancellation, or nonrenewal or any special tools or other equipment which the franchisor required the dealer to purchase regardless of the time purchased.
      2. Except as provided in division (i) of subparagraph (A) of this paragraph, fair and reasonable compensation shall be the net acquisition price if the item was acquired in the 12 months preceding the effective date of the termination, cancellation, or nonrenewal; 75 percent of the net acquisition price if the item was acquired between 13 and 24 months preceding the effective date of the termination, cancellation, or nonrenewal; 50 percent of the net acquisition price if the item was acquired between 25 and 36 months preceding the effective date of the termination, cancellation, or nonrenewal; 25 percent of the net acquisition price if the item was acquired between 37 and 60 months preceding the effective date of the termination, cancellation, or nonrenewal; or fair market value if the item was acquired more than 60 months preceding the effective date of the termination, cancellation, or nonrenewal.
    4. The repurchase of any item under this subsection shall be accomplished within 60 days of the effective date of the termination, cancellation, or nonrenewal or within 60 days of the receipt of the item by the franchisor, whichever is later in time, provided the dealer has clear title to the inventory and other items or is able to convey such title to the franchisor and does convey or transfer title and possession of the inventory and other items to the franchisor.
    5. In the event the franchisor does not pay the dealer the amounts due under this subsection or subsection (h) of this Code section within the time period set forth in this subsection, the franchisor shall, in addition to any amounts due, pay the dealer interest on such amount. This interest shall not begin to accrue until the time for payment has expired. The interest shall be computed monthly on any balance due and the monthly interest rate shall be one-twelfth of the sum of the then current Wall Street Journal Prime Interest Rate and 1 percentage point.
  7. If a termination or nonrenewal of a franchise is the result of a bankruptcy filing or reorganization of a franchisor or the sale or other change in the business operation of the franchisor, the franchisor shall be required to pay the fair market value of the franchise as of the date of the notice of termination or nonrenewal or 12 months prior to the date of notice of termination or nonrenewal, whichever is greater. Fair market value shall be the goodwill value of the dealer's franchise in the dealer's community or territory. In addition, if a termination or nonrenewal of a franchise is the result of a bankruptcy filing or reorganization of a franchise or the sale or other change in the business operation of the franchisor, the franchisor shall also be required to reimburse the dealer for the cost of facility upgrades and renovations required by the franchisor within two years prior to termination or nonrenewal. Termination assistance provided for in this subsection shall be in addition to repurchase obligations otherwise set forth in this Code section.
  8. Within 60 days of the termination, cancellation, or nonrenewal of any franchise by the franchisor, the franchisor shall commence to reimburse the dealer for one year of the dealer's reasonable cost to rent or lease the dealership's facility or location or for the unexpired term of the lease or rental period, whichever is less, or, if the dealer owns the facility or location, for the equivalent of one year of the reasonable rental value of the facilities or location. If more than one franchise is being terminated, canceled, or not renewed, the reimbursement shall be prorated equally among the different franchisors. However, if a franchise is terminated, canceled, or not renewed but the dealer continues in business at the same location under a different franchise agreement, the reimbursement required by this subsection shall not be required to be paid. The provisions of this subsection shall not apply if the dealer is convicted of any criminal offense which conviction is cause of the termination, cancellation, or nonrenewal. In addition, any reimbursement due under this subsection shall be reduced by any amount received by the dealer by virtue of the dealer leasing, subleasing, or selling the facilities or location during the year immediately following the termination, cancellation, or nonrenewal. If reimbursement is made under this subsection, the franchisor is entitled to possession and use of the facilities or location for the period covered by such reimbursement.
  9. If, in an action for damages under this Code section, the franchisor fails to prove that there was good cause for the franchise termination, cancellation, or nonrenewal, then the franchisor may pay the dealer an amount equal to the value of the dealership as an ongoing business, at which time the franchisor shall receive any title to the dealership facilities which the dealer may have and the franchisee shall surrender his franchise agreement to the franchisor. If the dealer receives an amount equal to the value as an ongoing business, the dealer shall have no other recovery from the franchisor absent a showing such as would warrant punitive damages under Code Section 10-1-623.
  10. Without limitation as to factors which may constitute or indicate a lack of good cause, no termination shall be considered to be for good cause:
    1. If such termination relates to the death or disability of an owner and the franchisor has not complied with Code Section 10-1-652; or
    2. If such termination relates to a change in ownership or management and the franchisor has not complied with Code Section 10-1-653.
  11. All procedures, protections, and remedies afforded to a motor vehicle dealer under this Code section shall be available to a motor vehicle distributor whose distributor agreement is terminated, canceled, not renewed, modified, or replaced by a manufacturer or an importer.

(Code 1981, §10-1-651, enacted by Ga. L. 1993, p. 1585, § 2; Ga. L. 2000, p. 1589, § 3; Ga. L. 2010, p. 988, § 7/HB 1072; Ga. L. 2017, p. 774, § 10/HB 323; Ga. L. 2019, p. 517, § 5/SB 122.)

The 2017 amendment, effective May 9, 2017, part of an Act to revise, modernize, and correct the Code, revised language in division (f)(3)(A)(i).

The 2019 amendment, effective July 1, 2019, in subsection (c), substituted "described" for "defined" near the beginning, substituted "in this Code section the term 'good cause' means" for "good cause shall be defined as" in the middle, and inserted commas following "including" and "limited to" near the end; deleted "and" at the end of paragraph (c)(2); added paragraph (c)(3); and redesignated former paragraph (c)(3) as present paragraph (c)(4).

Code Commission notes.

- Pursuant to Code Section 28-9-5, in 2010, "line-make" was substituted for "line make" in the first sentence of subparagraph (f)(1)(A).

Editor's notes.

- Ga. L. 2000, p. 1589, § 16, not codified by the General Assembly, provides that the amendment to this Code section is applicable with respect to notices delivered on or after July 1, 2000.

Ga. L. 2010, p. 988, § 1, not codified by the General Assembly, provides: "WHEREAS, the General Assembly desires to reaffirm the legislative findings and declarations set forth in Code Section 10-1-621 and to make changes to the Georgia Motor Vehicle Franchise Practices Act in an effort to promote the stability of franchised motor vehicle dealerships in this state, thereby maintaining necessary reliable services to the consuming public, maintaining full and fair competition among dealers in the public interest, and providing continued employment to the citizens of this state."

JUDICIAL DECISIONS

Burden of proof on franchisor.

- Burden is placed on the franchisor to prove the franchisor's refusal to approve the transfer of the franchise was not arbitrary and that the franchisor had good cause to terminate the franchise. Moore v. American Suzuki Motor Corp., 203 Ga. App. 189, 416 S.E.2d 807 (1992).

No legal duty to consumer.

- Trial court erred by denying a franchisor's motion for summary judgment with regard to a consumer's negligence claim predicated on the Franchise Practices Act, O.C.G.A. § 10-1-620 et seq., as the Act did not impose a legal duty upon the franchisor to prevent a franchisee from presenting an unreasonable risk of harm to members of the public like the consumer. DaimlerChrysler Motors Co. v. Clemente, 294 Ga. App. 38, 668 S.E.2d 737 (2008).

Cited in Moore v. American Suzuki Motor Corp., 211 Ga. App. 337, 439 S.E.2d 43 (1993); Nissan N. Am., Inc. v. Walker-Jones Nissan, LLC, 345 Ga. App. 447, 812 S.E.2d 130 (2018).


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