(a) While it is clear that in every franchise a businessman
surrenders some rights, it equally is clear that every franchise does
not create a larger enterprise. In the ordinary case a franchise may
involve no more than an agreement to sell the particular product of the
one granting the franchise. It may also prohibit the sale of a competing
product. Such arrangements, standing alone, do not deprive the
individual businessman of his ``control'' so as to bring him into a
larger enterprise with the one granting the franchise.
(b) The portion of the Senate Report quoted in the Sec. 779.229
cites a ``bona fide independent automobile dealer'' as an example of
such a franchise arrangement. (It is recognized that salesmen,
mechanics, and partsmen primarily engaged in selling or servicing
automobiles, trucks, trailers, farm implements, or aircraft, employed by
nonmanufacturing establishments primarily engaged in the business of
selling such vehicles to ultimate purchasers are specifically exempt
from the overtime pay provisions under section 13(b)(10) of the Act.
Section 779.372 discusses the exemption provided by section 13(b)(10)
and its application whether or not the establishment meets the Act's
definition of a retail or service establishment. The automobile dealer
is used here only as an example of the type of franchise arrangement
which, within the intent of the Congress, does not result in creating a
larger enterprise.) The methods of operation of the independent
automobile dealer are widely known. While he operates under a franchise
to sell a particular make of automobile and also may be required to
stock certain parts and to maintain specified service facilities, it is
clear that he retains the control of the management of his business in
those respects which characterize an independent businessman. He
determines the prices for which he sells his merchandise. Even if prices
are suggested by the manufacturer, it is well known that the dealer
exercises wide discretion in this respect, free of control by the
manufacturer or distributor. Also the automobile dealer retains control
with respect to the management of his business, the determination of his
employment practices, the operation of his various departments, and his
business policies. The type of business in which he is engaged leaves
him wide latitude for the exercise of his judgment and for decisions
with respect to important aspects of his business upon which its success
or failure depends. On the basis of these considerations, it is evident
why the independent automobile dealer was cited as an example of the
type of franchise which does not create a larger enterprise encompassing
the dealer, the manufacturer or the distributor. Similar facts will lead
to the same conclusion in other such arrangements.
