BMW Franchise Agreement: What You Need to Know
As a potential BMW dealer, you need to understand the franchise agreement before signing on the dotted line. The franchise agreement is a legally binding contract between BMW and the dealer, outlining the terms and conditions of the dealership. Here are key factors to consider when reading and reviewing a BMW franchise agreement.
Dealer territory
The franchise agreement typically outlines a specific territory where the dealer can sell new and used BMWs. The dealer will have exclusive rights to sell BMWs within this territory and may not sell outside of it. This is to prevent competition between dealers in the same region and promotes fair competition.
Termination clause
The franchise agreement must specify the circumstances under which BMW can terminate the agreement. Possible reasons for termination include substantial breaches of the franchise agreement, lack of sales volume, or failure to meet BMW’s operational standards. The dealer also has the right to terminate the contract in certain instances.
BMW’s obligations
The franchise agreement outlines BMW’s obligations to the dealer, including providing the dealer with sufficient marketing materials, training programs, and technical support. BMW is also responsible for ensuring that the dealer always has a supply of vehicles available to sell.
Dealer’s obligations
The dealer has obligations to fulfill as well, including maintaining adequate inventory levels, following BMW’s standards for sales and customer service, and adhering to advertising guidelines. The franchise agreement also sets sales targets and outlines penalties for failing to meet them.
Fees and royalties
BMW charges the dealer several fees and royalties for the right to sell BMWs. These fees may include an initial franchise fee, ongoing royalties based on vehicle sales, and advertising fees. The franchise agreement specifies the amounts of these fees and the schedule for payment.
Renewal and transfer
The franchise agreement will also specify the terms for renewal and transfer of the franchise. BMW may require the dealer to renew after a certain period, and the terms of renewal will depend on the dealer’s performance during the previous contract. If the dealer wants to transfer the franchise to another entity, BMW must approve the transfer and the new entity must meet certain qualifications.
In conclusion, a BMW franchise agreement is a vital document for anyone interested in owning and operating a BMW dealership. It outlines the terms and conditions of the dealership, including fees, royalties, and obligations for both BMW and the dealer. As always, it is essential to read and understand the franchise agreement before signing it.
