L. Michael Hankes  |  ATTORNEY AT LAW
tel (781) 817-5215  |  fax (781) 849-1472

The 50,000 Motor Vehicle Protection Found in the Meineke FTA

As noted in our latest article, Meineke’s expansion plans also raise the issue of territorial encroachment. The Meineke FTA contains an unusual protection against the establishment of competing Meineke centers that is not just limited to the 2 mile radius contractually provided to a Meineke center.

Not only does a Meineke Dealer have a protected territory with a radius of 2 miles from the premises and an outer radius of 3 miles from the premises providing for a Right of First Refusal, but that Dealer is also entitled to a minimum number of motor vehicles as part of the Protected Area. The Meineke FTA prohibits Meineke from establishing more than 1 Meineke center for every 50,000 motor vehicles in the Market Area at the time each center is opened. The first paragraph of Section 2.3 entitled “Your Territorial Protection” states:

Once the Premises have been identified in accordance with Section 2.2, we will not during the Term operate, nor grant others the right to operate, (a) a Meineke Center within a radius of 2 miles from the Premises (the “Protected Area”), (b) a Meineke Center outside of the Protected Area but within a radius of 3 miles from the Premises without offering you a right to first refusal, as described in this Section 2.3, or (c) more than 1 Meineke Center for every 50,000 motor vehicles (i.e., automobiles and light trucks that are licensed to operate on public highways) registered in the Market Area at the time each Center is opened.

(Emphasis added). (Meineke FTA § 2.3).

There are at least three issues related to the 50,000 motor vehicle protection. First, the Meineke FTA defines motor vehicles as “automobiles and light trucks that are licensed to operate on public highways.” As we go forward, if Meineke uses data which includes snow mobiles and trailers which are registered within a particular market area, those registrations would not fall within the Meineke FTA’s definition of motor vehicles.

Another part of the inquiry concerns the Meineke FTA’s definition of “Market Area.” Section 1.3 of the Meineke FTA entitled “Definitions” states at number (18):

“Market Area” – The MSA, PMSA, NECMA, county, parish or other corresponding geographical area used by the U.S. Census Bureau and as described in Schedule A, attached hereto and incorporated herein by reference.

(Emphasis in original). This means that the definition of Market Area contained in each individual Dealer’s Meineke FTA is important to the vehicle count.

There is a third significant issue with regard to the 50,000 motor vehicle protection. We think that the 50,000 motor vehicle limit was made part of the Meineke FTA to provide a guaranteed customer base to each Dealer. In other words, since there can be no more than 1 Center per 50,000 motor vehicles1, it should follow that each center must have at least 50,000 motor vehicles within its protected territory, which may require the Dealer’s 50,000 motor vehicle count to go beyond the 2 or 3 mile radii. If the standard 2 and 3 mile protected radii and the 50,000 motor vehicle count are read together as they are written, the 50,000 motor vehicle count should be read as a minimum customer base for each Center.

Thus, Meineke should not attempt to put additional Meineke centers in a particular market area unless each Meineke center has 50,000 motor vehicles available to it. As noted, this may mean that the Dealer may have to go beyond the 2 and 3 mile radii to achieve that goal.

  1. Keep in mind that 50,000 motor vehicles was the number needed to support one Meineke shop in the late 1990’s.

This article is intended for informational purposes only and is not to be relied upon as legal advice, as individual facts and circumstances may vary.