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What Ohio Auto Dealers Need to Know about Franchise Law

Posted by Vic Lance | Sat, Jul 15, 2017 @ 09:00 AM

Ohio auto dealersIn 2016, the State of Ohio updated its law on motor vehicle franchises, affecting the state auto industry at large and directly impacting both auto dealers (franchisees) and manufacturers (franchisors). The most significant amendments include new protective measures for Ohio auto dealers such as reimbursements for warranty and recalls and stricter rules for termination of franchise agreements.

Similar to the way car buyers are protected from dealers’ unlawful actions by motor vehicle surety bonds, the updated law ensures better security for franchise car sellers. Additionally, Ohio motor vehicle franchisors will need to fulfill specific obligations and abstain from a number of prohibited actions.

Senate Bill 242 introduced the changes in the Ohio franchise law for motor vehicles. It came into effect on September 14, 2016.

Below are the most important stipulations in the updated law that affect Ohio dealers.

Reimbursement Calculations Affecting Ohio Auto Dealers

new Ohio auto dealersOne of the major updates introduces new rules that compensate dealerships for warranty and recall obligations. The amendments to the Ohio Revised Code Section 4517.52 state that auto makers have to reimburse franchisees at the rates that dealers charge for warranty-like labor and for parts used in non-warranty repairs.

The updated law sets a method for calculating the retail labor rates and retail parts markups that dealerships demand for warranty and recall reimbursements from auto makers. It also defines a way for franchisors to challenge the rates and markup percentages. The formula for reimbursement rates is voluntary, but dealers are advised to make use of it. 

Last but not least, manufacturers are not allowed to keep a dealer out of its programs if the franchisee hasn’t sold enough vehicles because of the manufacturer.

More Obligations for Motor Vehicle Franchisors

Ohio auto dealersThe Ohio motor vehicle franchise law contains a number of auto maker restrictions, and the amendments add more obligations to this list. Under the new rules, franchisors are not allowed to alter the area of responsibility of Ohio auto dealers arbitrarily. Also, they cannot deny reimbursement of warranty and recall repairs until the franchisee has passed the internal appeal and other legal processes.

Furthermore, the updated law states that franchisors cannot demand franchised dealers to research car buyers. They are also prohibited from requiring franchisees to provide non-public information about consumers unless certain special conditions are present. In other words, franchisors are required to comply with all state and federal laws that govern the use and disclosure of consumer information.

Introducing a “Local Market Conditions” Rule

Previously, franchisors had to prove that Ohio dealerships did not meet their performance criteria before they could terminate or discontinue a motor vehicle franchise agreement. The updated law introduces the right for franchisees to present in their defense proof of unfavorable local market conditions affecting their performance.

Ohio auto dealersFranchisors now need to consider a number of local factors that may impact the work of underperforming franchise dealers. They include economic and market conditions and demographics as well as the presence of similar dealerships and manufacturers in the area. 

Additionally, Ohio auto dealers who have not met the requirements of manufacturers can still name a successor to their operations, and franchisors are not allowed to stop the succession planning of failed franchisees.

How do you see the updates in the Ohio franchise law affecting the auto industry in the state? Please share your thoughts in the comment section.

CrossCheck and Dealer Functionality

The recent changes to franchise laws affecting Ohio auto dealers provide another layer of functionality that simplifies the process of selling new autos. CrossCheck has specialized in enhancing that functionality for the last 34 years with a suite of payment solutions benefiting both dealerships and consumers.

The C.A.R.S. program allows dealers to accept a wider range of down payment checks while eliminating claim submission forms and wait times. It also includes:

  • Multiple Check – a premium giving consumers 30 extra days to fund their down payments
  • Check on Deliver (COD) – a premium enabling the pre-approval of checks for Parts and Service transactions
  • 24/7 online transaction reporting
  • No-cost loaner equipment

Download our free guide to learn how C.A.R.S. can help streamline the sales process at your dealership.

auto dealer remote deposit capture

Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps auto dealers get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Master of Business Administration (MBA) from the University of Michigan’s Ross School of Business.

Topics: Auto Dealerships

Written by Vic Lance

Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps auto dealers get licensed and bonded. Vic holds a degree in Business Administration from Villanova University and a Master of Business Administration (MBA) from the University of Michigan.