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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.

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.”

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