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Let's say you borrow money, and open a nice profitable dealership. The manufacturer, then decides to steal your profits by raising the wholesale price of cars
by jcampbell1 12y ago
Let's say you borrow money, and open a nice profitable dealership. The manufacturer, then decides to steal your profits by raising the wholesale price of cars for you until you are bankrupt, and the manufacturer buys the dealership out from under you in bankruptcy court.
That type of behavior is what created franchise laws in the first place.
- dpe82 12y agoYou shouldn't have opened the dealership without an agreement with the manufacturer giving you exclusive rights to sell in your market for enough time to justify your investment.
- jcampbell1 12y agoHow would that matter? You are bankrupt, so you'd be forced to sell the rights to pay back the bank.
- dpe82 12y agoApologies: exclusivity and price guarantees.
- gamblor956 12y agoOnce upon a time, such agreements were considered anti-competitive. Hence, states passed franchise laws providing similar protections without the exclusivity agreements.
- jessaustin 12y agoThat smells like a just-so story. The grim scenario you describe could happen in any franchise situation. What stops McDonald's from doing this to its franchisees? Not this type of law.
- gamblor956 12y agoVarious laws, court rulings, and even provisions written into the contracts themselves as a result of earlier abuses by other franchises stop this kind of thing from happening to McD franchises. But make no mistake--this does happen to other types of franchises. These lawsuits simply don't make the news because they're not general-interest or (for HN) tech-interest events.