North Carolina Expands Motor Vehicle Franchise Act Protections

The General Assembly of North Carolina recently amended Section 4 of General Statute 20-305 to prohibit under specific circumstances the establishment, implementation and enforcement of criteria for measuring the sales or service performance of franchised dealers for the purpose of cancelling, terminating or non-renewing a franchise agreement.

Effective June 22, 2018, the performance criteria of the manufacturer or distributor must be implemented and enforced uniformly and may not constitute any part of the basis for a determination in any franchise-related decision pertaining to whether good cause exists for the termination of a dealer’s franchise if:

• The performance measurement criteria are determined to be “unfair, unreasonable, arbitrary, or inequitable”
• The performance measurement criteria do not consider available local, State, and regional criteria, data, and facts which include those of motor vehicle dealerships of comparable size in comparable markets
• If performance measurement criteria are based, in whole or in part, on a survey, such survey must be based on a statistically significant and valid random sample

The restrictions placed on franchisors in the automotive and all other industries are continually evolving and our franchise attorneys are experienced in helping clients navigate this complex regulatory landscape.