Pub. 2 Issue 2

24 www.glancda.org dealership to foot the bill for an expensive repair even though it is not the dealership’s responsibility, that’s great from the car manufacturer’s point of view. But it is also about as ethical as leaving a wallet home so a friend will have to pay for dinner. • Although a dealership might invest millions of dollars into the business, car manufacturers can sometimes take a dealership’s right to do business away arbitrarily and without a good reason. It’s no wonder dealerships don’t appreciate these sorts of business practices. But despite existing federal legislation, the logical place for restraint is really on a state level. Why? Dealerships are local, not national, in nature. As a result, state franchise laws were upheld as constitutional by the U.S. Supreme Court in 1978, and state franchise laws were also exempted from federal antitrust provisions. Car manufacturers, of course, are not happy about the results. They claim that laws to protect franchises make it too expensive for them to conduct business, and that market forces will correct the problem when manufacturers get too complacent about their responsibilities. However, the fact is that this type of market correction doesn’t happen all at once. Cars are a big investment. It takes time to pay for the ones you have, and it takes time to get ready to buy a new one, too. Huge businesses do not usually go out of business overnight; in general, they go through a painful decline first. Car manufacturers are no different. Poor business practices will put them out of business eventually, but that is just too slow a solution, and it also doesn’t address the rights of those who are cheated, injured, or killed along the way. In reality, car manufacturers and dealerships need each other. But at the same time, having a fair and equitable business arrangement can only happen when both sides are on an equal footing. Car manufacturers have had it their own way for a long time when it comes to having the power in the franchise relationship. Some healthy rebalancing of that power might not make car dealerships happy in the short run, but taking advantage of the very businesses that increase your bottom line is a bad, bad business decision. Companies that get too far removed from the interests of customers who are located a long distance away are companies that will eventually fail. And that wouldn’t be good for anyone. Focused on your • Accounting • Taxes • Audit • Review • Bookkeeping • Internal procedures • Cash flow • Consulting services Since the 1940’s we have provided a complete range of services to the owners of dealerships and other automotive related businesses. Put our experience to work for you. We’re focused on you www.LSLCPAS.com Brea, CA (714)672-0022 C E R T I F I E D P U B L I C A C C O U N T A N T S  Franchise System — continued from page 23 