Manufacturer Facility Image Programs

By Jason T. Allen

Image is everything.  That was the catchy slogan from a Canon advertising campaign over thirty years ago, which made its way into our vocabulary and is still used today.  That slogan can feel applicable to manufacturer facility programs today.  The facility demands that were commonplace before the COVID pandemic seemed to slow during the pandemic years, but they are seemingly back in full force.  As a result, dealers are facing pressure to comply with new image programs, or possibly lose out on significant benefits tied to those programs.  So, what can dealers do when faced with a new manufacturer facility image program, and in particular one that contains significant benefits that are not available unless the facility is image compliant?  This article will explore some practical considerations when that situation arises. 

It is worth acknowledging that manufacturer facility standards are not new, and manufacturers requesting that dealers upgrade or update their facilities is not new.  Many state laws tackled this issue and contain a prohibition on a blanket “requirement” that a dealer take action on its facility unless such action is economically feasible.  However, as the readers know, the manufacturers shifted to “optional” facility programs that contain monetary (or possibly other) benefits tied to compliance with the facility standards.  The cat and mouse game evolved from a mandatory facility modification requirement to an “optional” facility upgrade that just so happens to be tied to potentially significant dollars or other benefits.         

In response, some state laws have been modified to address this situation too.  Currently, many state statutes contain provisions that are commonly referred to as facility grandfather clauses.  Those statutes essentially provide that if a dealer has completed a facility (either new or modified) that was approved by the manufacturer as compliant with the manufacturer facility image standards at the time, then the dealer is deemed compliant for a period of years to follow even if a new image program is put into place – or put more simply, the dealer’s facility is grandfathered in under the new facility image program.  

Those provisions can be particularly helpful as image programs can change at the manufacturer’s discretion and not on the dealer’s timeline.  I am confident readers are aware of facility horror stories such as when a dealer completed a new facility that was approved by the manufacturer as image compliant and a short time later the manufacturer unveiled a “new image program”, which would make the dealer immediately non-compliant.  The facility grandfather provisions are designed to ensure that a dealer receives benefits under a new image program so long as the dealer has completed an image compliant facility within the period of years identified by the statute.

Finally, certain state laws also contain limitations on a manufacturer’s ability to impose per-vehicle benefits based on facility image compliance.  For example, in Florida, the statute provides that a manufacturer may offer a per-vehicle benefit that is related to a facility program, but the dealer is entitled to receive a “reasonable percentage” of the benefit so long as it qualifies under the other criteria of the program.  And, that reasonable benefit is presumed to be not less than 80% of the total per-vehicle benefit.

With that in mind, how can dealers evaluate a new manufacturer image program and the potential benefits related to that image program?  A threshold question is whether the manufacturer image program is mandatory or optional.  As noted above, in many states, mandatory facility modification requirements are prohibited (subject to some limited caveats).  If the program is “optional”, then dealers should consider whether they were compliant under a prior version of the program, or whether their facility was approved by the manufacturer, and if so, when.  Dealers may have the ability to continue receiving benefits under the new program if their state statute contains a facility image grandfather clause.  Finally, dealers should evaluate whether the facility image program has other qualifying criteria such that the dealer would be entitled to some portion of the benefit even if it does not make a change to the facility image.  

In conclusion, just because a manufacturer has a new image program does not mean that a dealer must automatically make significant facility changes to receive the new program benefits.  Dealers facing this situation should consult with experience motor vehicle franchise counsel to evaluate their rights.