Best practice principles for new car dealership agreements

This voluntary guidance has been developed in consultation with industry to improve fairness and transparency in dealership arrangements. 

Principle 1

Franchisors should include provisions in new dealership agreements that provide for fair and reasonable compensation for franchisees in the event of early termination resulting from:

• withdrawal from the Australian market
• rationalisation of their networks
• changes to their distribution models

Principle 2

Franchisors should not include provisions that exclude compensation in new dealership agreements.

Principle 3

The ‘fair and reasonable compensation’ as referred to in Principle 1 should include appropriate allowances for the loss a franchisee may incur, which can include:

• lost profit from direct and indirect revenue
• unrecovered expenditure and unamortised capital expenditure where requested by the franchisor
• loss of opportunity in selling established goodwill
• wind up costs

Principle 4

When an agreement is entered into it should provide franchisees a fair and reasonable time to secure a return on investments that have been required by franchisors as part of the agreement.

Principle 5

Agreements should include reasonable provisions for franchisors to compensate or buy back new vehicle inventory, parts and special tools, in the event of:

• non-renewal
• withdrawal from the Australian market
• rationalisation of their networks
• or changes to their distribution models

Principle 6

Agreements should include provision for timely commercial settlement and dispute resolution. 

Contact us

• Email automotivefranchising@industry.gov.au