Automobile Dealer Franchises: Vertical Integration by Contract

Abstract

American business has developed three kinds of retail sales outlets. At one end of the scale is the independent retailer, exemplified by the general store or the corner grocery store. His independence is safeguarded: the manufacturer or wholesaler from whom he buys is only one of many possible sources supplying him with the goods he needs for resale. At the other end of the scale is the agent who may be a branch or subsidiary of the manufacturer. The franchised dealer occupies a position between the two extremes. Under the franchise system, distribution of the product is limited to chosen retailers in each community.