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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.
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Last updated: 16 February 2021
Content ID: 68399