Your dealership has had several good years. You decide it is time for the facility upgrades the manufacturer has been pressuring you to do. You seek approval from the manufacturer that the upgrades fulfill its policy demands, and it sends you a letter. It is a form, probably created by the lawyers, with your information filled in. It contains several provisions which you should review and fully understand. The provisions that are the subject of this article – construction deadlines – merit special attention.
Typically, an agreement contains deadlines for submitting plans to the manufacturer’s architect at various stages, obtaining a building permit, commencing construction, and completing construction. The typical manufacturer letter provides too little time for these steps. Factory personnel may not understand the difficulties of your local approval process. Or they may want to keep the pressure on. Or they may have other reasons to be unrealistic. You must be proactive to ensure that time periods work for you.
When you receive the letter from the manufacturer, consult with your architect, engineer, builder, and attorney. Are there zoning and planning steps that must be taken even before you begin the process? How long will it take to complete each stage of the plans? Has time been built in for delays of the manufacturer’s architect? What will be required for approval and issuance of a building permit and what delays are foreseeable? How long will construction take? Make sure those responsible agree on the answers to these questions.
Negotiate language that gives you relief from the deadlines in three critical circumstances:
- Manufacturer’s architect. What happens if the manufacturer’s architect and your architect disagree? What if delays are caused by the manufacturer’s architect? Language should be included to protect you against delays in the architects reaching agreements on plans.
- Approval delays. Even the best experts cannot foresee the ingenuity of employees in local zoning, planning, and permit offices to cause delays. Include language giving relief from deadlines from zoning and permit delays.
- Force majeure. A French term translated as “greater force”, this refers to a variety of causes outside your control that delay construction. Have a force majeure provision that protects you from natural or other events beyond your control that interrupt the expected course of construction and prevent you from fulfilling your obligations, such as work stoppages, natural disasters, and the like.
Don’t forget, you are signing a legally binding document. Depending on the terms, your franchise agreement could be endangered if you fail to meet requirements. Be careful in executing a facility upgrade agreement to be sure you can meet the terms and you are protected from the unexpected.