28-4457

28-4457. Franchise termination, cancellation
or nonrenewal; good cause; changes

A. Notwithstanding the terms, provisions or conditions of an agreement or
franchise, the following are not good cause for the termination, cancellation or
nonrenewal of a franchise:

1. The change of ownership of the franchisee's dealership. This paragraph does not
authorize a change in ownership that would have the effect of the sale of the franchise
without the manufacturer's or distributor's consent. The consent shall not be
unreasonably withheld. The burden of establishing the reasonableness is on the
franchisor.

2. The fact that the franchisee refused to purchase or accept delivery of a new
motor vehicle, parts or accessories or any other commodity or service not ordered by the
franchisee.

B. Notwithstanding the terms, provisions or conditions of an agreement or franchise
and subject to subsection F, paragraph 2, in the event of the sale or transfer of
ownership of the franchisee's dealership by sale or transfer of the business or by stock
transfer to the dealer's qualified spouse, son or daughter, the franchisor shall give
effect to the change in the franchise unless the transfer of the franchisee's license
under this chapter is denied or the new owner is unable to obtain a license under this
chapter, as the case may be.

C. If a franchisor enters into or attempts to enter into a franchise, whether on
termination or cancellation, on refusal to renew another franchise or on the
establishment of an additional new motor vehicle dealership in a community where the same
line-make is then represented, without first complying with this chapter, a license under
this chapter shall not be issued to that franchisee or proposed franchisee to engage in
the business of selling new motor vehicles that are manufactured or distributed by that
franchisor.

D. In determining whether good cause has been established for terminating,
canceling or not renewing a franchise, the administrative law judge shall consider the
existing circumstances, including the following:

1. Amount of business transacted by the franchisee.

2. Investment necessarily made and obligations incurred by the franchisee in the
performance of the franchisee's part of the franchise.

3. Permanency of the investment.

4. Whether it is injurious to the public welfare for the business of the franchisee
to be discontinued.

5. Whether the franchisee has adequate new motor vehicle facilities, equipment,
parts and qualified management, sales and service personnel to reasonably provide
consumer care for the new motor vehicles sold at retail by the franchisee and any other
new motor vehicle of the same line-make.

6. Whether the franchisee refuses to honor warranties of the franchisor to be
performed by the franchisee if the franchisor reimburses the franchisee for the warranty
work performed by the franchisee.

7. Except as provided in subsection A:

(a) Failure by the franchisee to substantially comply with those requirements of
the franchise that are determined by the administrative law judge to be reasonable and
material.

(b) Bad faith by the franchisee in complying with those terms of the franchise that
are determined by the administrative law judge to be reasonable and material.

E. If failure by the franchisee to substantially comply with a reasonable and
material provision of the franchise relates to the performance of sales or service by the
franchisee, good cause is established if all of the following are true:

1. The franchisor notifies the franchisee of the failure in writing.

2. The notice states that it is provided for failure of performance pursuant to
this chapter.

3. The franchisee is provided a reasonable opportunity in which to exert good faith
efforts to carry out the provisions of the franchise. The reasonable opportunity
provided shall be over a period of at least one hundred eighty days.

4. The franchisee does not demonstrate substantial compliance with the franchisor's
performance standards during that period and the failure to demonstrate compliance is not
due to factors controlled by the franchisor.

F. In determining whether good cause has been established for entering into an
additional franchise for the same line-make the administrative law judge shall consider
the existing circumstances including the following:

1. Amount of business transacted by other franchisees of the same line-make in that
community.

2. Investment necessarily made and obligations incurred by other franchisees of the
same line-make in that community in the performance of their part of their franchises.

3. Whether the franchisees of the same line-make in that community are providing
adequate consumer care for the new motor vehicle products of the line-make, including the
adequacy of new motor vehicle dealer sales and service facilities, equipment, supply of
parts and qualified management, sales and service personnel.

4. The economic impact on existing franchisees of the same line-make due to the
addition of a franchise.

5. The effect on the retail motor vehicle business and the consuming public.