Kia Motors America sells its cars through hundreds of dealerships in the United States. Kia has the exclusive right to use and license others to use its trademarks, service marks, and trade name. If an individual wants to run a Kia dealership, they must adhere to franchisee requirements like purchasing the required corporate image from Kia. In return for licensing costs and franchisee promises, the individual can gain benefits like the right to sell manufacturer warranties.
In December 2007, TS & A Motors, doing business as Kia of Somersworth (Somersworth), entered a dealership agreement with Kia. The dealership agreement created and governed a franchise relationship between the parties, requiring, among other terms, that Somersworth employ certain parts and service personnel. Several years later, Kia notified Somersworth that it had been violating the franchise license agreement. After repeated incidents and Somersworth’s continued failure to cure the breach, Kia terminated the dealer agreement.
1. Did Kia lawfully terminate the franchise agreement?
2. What are some potential problems that a franchisor and franchisee might experience in their relationship?