Colorado Considers New Franchise Laws

Colorado franchise law dealership OEM

Colorado's legislature has so far approved giving motorcycle dealers greater freedom in dealing with their vehicle manufacturers.

Senate Bill 91, which applies to motorcycle, car and truck dealerships, prohibits a manufacturer or distributor from:

  • Conditioning the sale, transfer or relocation of a franchise, or renewing a franchise agreement upon site control
  • Refusing to offer the same line-make to franchised dealers based on unreasonable sales and service standards
  • Limiting incentive or sales programs to select dealers
  • Requiring a dealer to devote facilities, personnel or display space exclusively to a single line-make
  • Conditioning a franchise agreement on facility improvements
  • Owning/operating a used vehicle dealership
  • And operating a dealership during a transition between owners/operators for more than 12 months.

SB 91 also requires a manufacturer or distributor to notify a dealer within 30 days if it is denying a franchise location or relocation, denying the sale of a dealership, or denying a change in dealer management.

If a franchise agreement is terminated, the manufacturer or distributor who disapproves of a sale or transfer of a franchise must reimburse prospective purchasers and sellers for any actual costs incurred in relation to the sale or transfer.

Under current Colorado law, manufacturers can determine pricing structures, incentives, dealership expansions and other conditions for contract renewal. Manufacturers also can cancel a contract a dealer decides not to go along with the manufacturer's conditions. Tim Jackson, president of the Colorado Auto Dealers Association, last month told the Denver Business Journal that the new legislation creates a "better balance on behalf of the dealers" by updating car dealer franchising laws dating to 1937 and making them more consistent with the rest of the country.

At press time, SB 91 had passed through the Business, Labor and Technology Committee in the Senate, and the Business Affairs and Labor Committee in the House. If passed, the legislation would take effect July 1.

Guido Ebert