L. Michael Hankes  |  ATTORNEY AT LAW
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Upgrade and Remodeling Requirements Under the Meineke FTA

During the course of the past year, there have been a number of communications from Meineke about its desire to upgrade and enhance the image of individual Meineke Car Care Centers. Traditionally, Meineke Car Care Centers have had a significant emphasis on black and yellow trade dress. Some newer Meineke Car Care Centers incorporate a beige theme similar to Firestone and other competitors.

Beginning in the March-April, 2013 time period, Meineke began publishing for the Meineke Dealers its plans to enhance the brand image by upgrading the appearance of Meineke Centers. For instance, the April, 2013 issue of the Meineke Insight Express contained an Article entitled "Brand Image Enhancement." In that article, Meineke discussed its plans to upgrade Meineke Centers based upon unspecified image ratings. In the same issue, an article entitled "Meineke Spring Cleaning 2013" urged a Spring Cleaning initiative.

Apparently, an advertising agency called PITCH has been hired to decide what Meineke's brand image should be going forward.1 While the desire to make Meineke Car Care Centers more appealing to the public eye is a laudable goal, the expenditures which might be necessary to meet those goals are a significant issue for many Meineke Dealers. In other words, how much should Meineke Dealers be required to spend while Meineke tries to decide what image it would like to present to the public going forward?

When the current Meineke FTA was negotiated in the 1999-2000 time period, Section 7.5 specifically addressed the Meineke Dealers' obligations to make substantial periodic upgrades and/or remodel their Centers. For Meineke Dealers who are still operating under the form 2000 Meineke FTA or any year prior to the form 10/2010 Meineke FTA, Section 7.5 requires a total expenditure of $7,500 for substantial upgrades and remodeling every seven and a half (7 ½) years. In 2010, this substantial upgrade/remodeling requirement was changed to $10,000 every five (5) years.

Section 7.4 of the Meineke FTA generally requires that Meineke Dealers keep the appearance of their Centers clean and attractive. If at any time Meineke determines that the condition or general state of repair of a particular Center needs to be upgraded, Meineke can so notify the Dealer of the necessary repairs and maintenance. Thus, Meineke Dealers should be aware of what their individual FTAs require in terms of the condition of their Centers and periodic substantial upgrade/remodeling obligations. For purposes of clarity, Sections 7.4 and 7.5 as they currently appear in the 05/2013 form of the Meineke FTA state the following:

7.4 Condition of Center/Center Upgrades

You agree to maintain the condition and appearance of your Center so that it is clean and attractive. If at any time the general state of repair, appearance or cleanliness of your Center, or its fixtures, equipment, furnishings or signs, does not meet our standards, we may notify you of the action you must take to correct such deficiency. If, within 30 days after receiving such notice, you fail or refuse to initiate and continue with due diligence a bona fide program to complete such required repair or maintenance, we have the right (in addition to our rights under Article 13), but not the obligation, to enter the Premises and perform such repair or maintenance on your behalf and at your expense. You must promptly reimburse us for the expenses we incur in performing such repair or maintenance.

7.5 Periodic Upgrades

You agree to periodically upgrade and/or remodel your Center as we may reasonably require, including replacing and/or upgrading exterior and interior signs and decor, provided no such upgrading or remodeling during the Term will require any increase in the square footage of the Premises. We agree that substantial upgrades or remodeling shall not be required more than once every 5 years during the Term or involve a capital cost of more than $10,000 per occurrence during the Term. You may not make any alterations to your Center, nor any replacements, relocations or alterations of fixtures, equipment or signs that do not meet our then current standards and specifications. If you should make any improvements in your Center prior to this 5 year period you may receive credit against the $10,000 spending requirement stated in this section of the Agreement, provided that you notify us in writing and provide us with a copy of the invoice showing the cost you paid for the improvement. We will advise you within 30 days from our receipt of these items as to whether improvements satisfy our upgrade requirements.

(Emphasis Added) (Meineke FTA §§ 7.4 and 7.5).

When the Dealers do make expenditures to upgrade their Centers, it is very important that those Dealers maintain a file and keep track of the receipts and payments for those upgrades. Under Section 7.5 of the Meineke FTA, Meineke Dealers can receive credit against their required periodic upgrades and/or remodeling obligations if they notify Meineke in writing of the expenditures and provide Meineke with copies of the invoices showing the costs paid for the improvements. As noted in many of our other articles, it is important for Meineke Dealers to become more familiar with the contract language contained in their individual Meineke FTA.

  1. Whether or not such an expenditure from the Meineke Advertising Fund ("MAF") is contractually appropriate is a discussion for another article.

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.