Chicago Business Litigation Lawyer Blog
Dealers invest millions of dollars in facilities, inventory, people, and goodwill. Yet when a manufacturer pushes back on a transfer, a succession plan, or even the renewal of a franchise, it can feel like the factory is the real owner and the dealer is just renting the right to do business.
Illinois law does not accept that premise. The Illinois Motor Vehicle Franchise Act sets rules for how manufacturers can behave, and it gives dealers procedural and substantive protections that can be the difference between keeping your store and losing it. The Act is not a magic shield, but it is a set of tools. The dealer who understands those tools is not negotiating from a position of weakness.
Transfer approval is not supposed to be a black box. In a sale or ownership transfer, the manufacturer often acts like it holds absolute veto power. Illinois law pushes back. The Act contemplates a process and timelines for approval decisions once a dealer submits the manufacturer’s completed application materials along with the agreements for the proposed transaction. If a manufacturer refuses approval, it is expected to state the grounds and the criteria used to evaluate the proposed transferee, and the dealer has a path to protest. Just as importantly, a timely protest can stop the manufacturer from treating a refusal as final while the dispute is still being heard.
Succession planning without factory interference. Family dealerships are built over decades, and succession is often the most emotional and financially significant decision a dealer will make. Illinois law protects a dealer’s ability to pass the dealership to certain family members and other designated successors, and it limits the manufacturer’s ability to block that succession. In plain terms, the manufacturer cannot simply say it does not like your successor. The statute contemplates that the manufacturer must prove a legally recognized basis to refuse, such as concerns about moral character or whether the successor meets existing, reasonable capital and business experience standards that are applied uniformly. The practical takeaway is simple: succession is a legal process, not just a family conversation. Your estate plan, your corporate documents, and your factory communications have to be coordinated so the manufacturer does not get an opening to claim there is no valid designation or that deadlines were missed.
Termination and nonrenewal defense and what good cause really means. When a manufacturer threatens termination, nonrenewal, or a major modification of dealer obligations, the first question is whether the manufacturer can prove good cause under Illinois law. Good cause is not supposed to mean “because we said so.” The Act contemplates a process where disputes are heard through the Motor Vehicle Review Board, and in many high stakes situations the manufacturer bears the burden of proving that its proposed action is justified. Illinois law also recognizes that certain things, standing alone, should not be treated as good cause, such as a change in ownership or executive management. The point is not that every termination threat is wrongful. The point is that the manufacturer must play by rules, and a dealer has the right to demand proof, to challenge vague accusations, and to enforce procedural protections that can stop a rushed termination from becoming a fait accompli.
Inventory repurchase and fair compensation when the franchise ends. If a franchise ends through termination or nonrenewal, the financial damage is not limited to lost future profits. Dealers are left with inventory, parts, signage, and special tools that were purchased to satisfy factory requirements. Illinois law addresses this reality by requiring fair and reasonable compensation in certain circumstances. That compensation can include repurchase of eligible new vehicles in inventory, eligible parts and accessories in resalable packaging, and payment for signs and special tools that were required or requested by the manufacturer. The statute also addresses timing, including monthly installment payments for certain facility related compensation and shorter deadlines for inventory related amounts. In a dispute, documentation matters. A dealer who can show what was purchased, why it was purchased, and what condition it is in will be in a stronger position to enforce repurchase rights.
A practical warning for dealers is that the Act’s protections are often deadline driven. Manufacturers know that dealers are busy running stores, and they count on inertia. If you receive a notice of refusal, a termination letter, or a “notice of intent” that affects your franchise, treat it like litigation paperwork, not like a customer complaint. Preserve emails. Preserve performance data. Identify the dates that trigger response windows. A missed protest deadline can turn a strong case into a weak one overnight.
At DiTommaso Lubin, P.C., we represent Illinois dealers in franchise disputes, succession planning conflicts, transfer approval fights, and high stakes manufacturer litigation. If you are facing manufacturer pushback, call 630-333-0333 or contact us online.