October 21, 2026
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
Manufacturers have always asked dealers to enter into “side agreements,” but it seems like there has been a significant uptick lately. Dealers need to know what they say, how they affect their rights, and whether they change the dealer agreement. Side agreements can take many forms: agreements on data privacy, exclusivity, to relocate, not to relocate, to improve facilities, or for site control, along with a wide variety of other dealer obligations.
Manufacturers regularly take the position that side agreements are not franchise agreements and that they do not have to conform to state franchise laws. They are wrong.
First, state franchise laws are seldom limited to regulation of just the dealer sales and service agreement. For example, under Virginia law, all agreements which affect the rights of the parties to the franchise agreement must be filed with the Department of Motor Vehicles to ensure compliance with Virginia law. Under Maryland law, the regulation of manufacturer action is clearly not limited to the dealer sales and service agreement.
Second, manufacturers may not as a matter of course simply coerce dealers into waiving their rights. For example, under Virginia law there is a specific statute which prevents a manufacturer from threatening to impose a detriment or withhold an entitlement to have the dealer waive its rights under law. In Maryland, manufacturers are required by law to act in good faith, and coercion to waive rights is hardly good faith.
So what does a dealer do if a manufacturer has presented it with a “side agreement,” especially in connection with a change in the terms of the dealer agreement sought by the dealer?
- Never assume that the manufacturer considers what is best for the dealer in any action being taken. Always assume that the manufacturer is working in the manufacturer’s best interest, and that may or may not be consistent with the dealer’s interest.
- Read every document presented by the manufacturer. Understand its terms. Understand what you are giving up under the side agreement.
- Assess what you are giving up versus what you are receiving. You should receive fair consideration for any rights you are waiving. Approval of a change that is best for both the dealer and the manufacturer is hardly consideration for the manufacturer to seek additional rights.
- Contact your state trade association and your attorney for advice concerning any document presented to you that gives you concerns.
- Never let a manufacturer condition a renewal of a dealer agreement on whether you enter into a side agreement. In every state, franchise laws protect motor vehicle dealer franchisees from termination or failure to renew without good cause. The standards may vary from state to state, but the general concept is the same: the factory must prove the dealer is not doing the job, a standard lawyers call “good cause.” If it wants to get rid of a dealer, whether terminating the dealer or refusing to renew the franchise, it can only do so by following state law that gives the dealer the right to challenge whether the factory has “good cause.”
We have included a checklist with this article to assist in evaluating those side agreements.
Download the Checklist for Franchisor Agreements and Documents (PDF)