The Franchise System

Why should I care?

State franchise laws are the foundational agreements between manufacturers and retail establishments governing how automobiles are sold. The franchise system, which was first introduced over 100 years ago, is a free-market approach that allows for a level playing field as the market is pushed to innovate and meet consumer demands. These laws were developed to create an equitable system protecting the manufacturer, dealers, consumers, and local communities.

What should I know?

All 50 states have enacted laws governing the sale and servicing of new and used cars. Each year these laws are constantly changing in state chambers throughout the U.S. Whereas Toyota directly engages and monitors all legislative issues impacting state franchise laws, each state dealer’s associations focus is different. Their bills primarily include a handful of the issues listed below, but this is not a comprehensive list.

Direct Sales to Consumers
Franchise Agreements
Reimbursement Rates and Warranty Time Guides
Subscriptions
Over the Air Updates (OTA)
Vehicle Allocation
Safety Recalls
Privacy and Data Protection

There are also decisions made within various state agencies such as the Department of Motor Vehicles (DMV) that impact state franchise laws.

What Should I Say?

Direct Sales – Toyota strongly supports its dealer network and opposes direct sales. Toyota believes in a cooperative working relationship which supports the success of both the manufacturer and individual dealership owners to meet consumers’ needs.
- Exceptions to the franchise system should not be made for the sale of electric vehicles.
- Toyota and Lexus dealers have made significant investments within their communities including providing long-term, good paying jobs and generous charitable contributions, as well as generating significant tax revenue.
Warranty Time Guides – Toyota stands behind its warranty reimbursement time guides that trained, certified technicians use at Toyota and Lexus dealerships. We do not agree with changes proposed in various states that would allow third party time guides or other industry guides for warranty service work.
- We believe Toyota’s approved time guides offer an equitable system for the dealer, consumer, and manufacturer.
- Many non-Toyota/Lexus dealers are requesting adjustments to these reimbursement rates, which adversely impact Toyota, creating an unfair system, and could cause the industry a $3-5 Billion annual increase in costs. These changes will likely increase costs for consumers.

Want to learn more? Contact:

lori.mcmahon@toyota.com

The Rest of the Story

The current franchise system is under attack by new EV automakers seeking to sell directly to consumers. Toyota will continue to defend the franchise system because of the value our dealers provide to customers. As Akio Toyoda recently stated, “There is no Toyota without our dealers.”