Issue link: http://winesandvines.uberflip.com/i/658375
April 2016 WINES&VINES 65 PRACTICAL WINERY & VINEYARD BUSINESS can object to the notice and trigger an admin- istrative hearing. Absent the voluntary release of the brand by the wholesaler or a positive outcome at the hearing, the producer may be forced to withdraw the brand from the state for a period of four years before it can be distrib- uted by a different wholesaler. What this basically boils down to is the state intervening in the private contractual relation- ship between wineries and distributors, and tilting the balance in favor of the distributor. State law, in essence, inserts the termination provisions for any wine wholesale agreement for distribution within that state. Why did states adopt franchise laws? The rise of franchise laws in the United States traces its roots back to the early years of the Ford Motor Co. Ford had to determine how to get their cars out to consumers from its plant in Michigan and adopted a "franchise model," whereby Ford could control how the cars were sold by third-party distributors. Ford, the supplier, dictated the terms of the franchise relationship. "Ford-authorized dealers" sprang up across the United States. Ford would often require the dealers to ex- clusively carry its cars, required them to meet certain sales goals and adhere to certain company standards, in essence allowing Ford to control the consumer experience from beginning to end. Both the state and federal government grew concerned about the unequal bargaining rela- tionship between the iconic Ford Motor Co. and in-state mom-and-pop dealers. They ad- opted laws in the 1950s that governed the contractual relationship between auto manu- facturers and in-state dealerships, requiring "good-faith" behavior, limiting the suppliers' ability to unilaterally terminate an agreement and imposed penalties for violations. By 1970, distributors in other industries— envious of the franchise law protections granted to auto dealers—sought similar pro- Wine is meted out for distribution at a warehouse belonging to Southern Wine & Spirits. Nearly half of states have franchise laws that dictate how difficult it is for wineries to change their distribution agreements. UNEX