You can buy a computer built to order directly from the company that makes it. You cannot, in most of the country, buy a new car the same way. State law stands in between, requiring that new vehicles be sold through independent, locally owned franchised dealers and barring the manufacturer from competing with those dealers by selling straight to you. Layered on top are territorial vetoes over new competitors, limits on firing a dealer, and the right to hand the franchise down by will. Together they turn each dealership into something rare in American business: a scarce, legally defensible, inheritable asset. This is the closest thing in ordinary commerce to a protected license, and it has made a lot of quiet family fortunes. Here is how it works, from the statutes.
The laws, and where they came from
Every state has a motor-vehicle dealer franchise law (Iowa Law Review). The key point is precise: these laws do not ban all factory sales outright, they bar a manufacturer from competing with its own franchised dealers. Texas, for example, forbids a carmaker to own, operate, or control a dealership of the kind of vehicle it builds (Texas Occupations Code 2301.476). California makes it unlawful for a manufacturer "to compete with their franchisees," and in 2023 expanded that rule to close a loophole automakers were using to sell direct (California Senate analysis of AB 473).
The system grew out of intensive lobbying by car dealers from the 1930s to the 1950s, when the Big Three manufacturers dominated and franchise contracts let a carmaker force unwanted inventory on a dealer and cancel the relationship at will (Iowa Law Review). At the federal level, the Automobile Dealers' Day in Court Act of 1956 let a dealer sue a manufacturer for failing to act in good faith in terminating or not renewing a franchise (15 U.S.C. 1222). The National Automobile Dealers Association, founded in 1917, backed that act and has defended the franchise system ever since (NADA).
The protections dealers uniquely hold
The heart of the system is a set of protections that would be extraordinary in almost any other industry. The first is territorial. In most states, an existing dealer of a given brand can force a hearing to block a new or relocated same-brand store nearby. California defines that "relevant market area" as a 10-mile radius; New York uses 6 miles in populous counties; Florida uses 12.5 or 20 miles depending on county size, and requires the manufacturer to prove existing dealers are not providing adequate representation (California Vehicle Code 507; New York V&T 462; Florida Statutes 320.642). A 1986 FTC staff report estimated these entry restrictions raised new-car prices by about 6 percent (FTC).
The second is job security. Every state requires a manufacturer to show good cause before terminating a dealer, and a mere wish to make the dealer network more efficient does not count (Mercatus Center). Oklahoma puts the burden of proof squarely on the factory (47 O.S. 565.2). The third, and the one that makes this a dynasty story, is succession. North Carolina lets a dealership owner name a successor by will, and to block that inheritance the manufacturer must prove the heir is not of good moral character (N.C. Gen. Stat. 20-305). Washington bars a manufacturer from terminating a franchise after a family succession unless a judge first finds good cause (RCW 46.96). The franchise, in other words, passes to your children, and the carmaker cannot easily stop it.
The direct-sales fights
The clearest proof of how strong these protections are is what happened when new carmakers tried to go around them. All fifty states and the District of Columbia limit or prohibit direct manufacturer-to-consumer sales (Wikipedia, "Tesla US dealership disputes"). Tesla, which never had franchised dealers, found openings in some states and walls in others, and roughly a dozen or so states functionally bar its direct-sales model as of 2025 and 2026, though the exact roster shifts year to year (Teslarati tally). Even where Tesla is allowed, many states cap the number of company-owned stores: Ohio at three, New Jersey and Maryland at four, New York and Pennsylvania at five (Wikipedia, "Tesla US dealership disputes"). In Texas, Tesla builds cars in Austin but state residents still cannot buy one directly, completing purchases as out-of-state transactions, and a 2025 bill to change that died in committee (Charged EVs). Rivian and Lucid have fought the same battle; Washington opened direct sales to them only in 2026, ending Tesla's roughly twelve-year solo exemption there (Electrek).
Regulators and economists have long argued the system is protectionism. FTC competition staff wrote in 2015 that blanket bans on direct sales hurt consumers, and that "consumers, not regulation, should determine what they buy and how they buy it" (FTC). A Justice Department antitrust economist went further, arguing for eliminating the state bans outright and concluding that car buyers would benefit from letting manufacturers sell to them directly (DOJ). The University of Michigan's Daniel Crane put it bluntly, calling direct-sales bans "protectionism for car dealers, pure and simple," reasoning that if direct sales were not more efficient, dealers would not need a law to survive (Cato). Estimates of what the dealer-only model costs consumers vary widely and rest on aging studies, from roughly zero to about 9 percent of the price, so they are best treated as contested rather than settled (Iowa Law Review).
The heritable asset
Put the protections together and you get a business that behaves like inherited property. There are about 16,990 franchised light-vehicle dealerships in the country, selling more than $1.3 trillion of vehicles a year and employing about 1.12 million people (NADA 2025 Data). Most of the market still runs through smaller, often family-owned operators: the 150 largest groups account for only about 27 percent of retail new-vehicle sales (Automotive News). And when those family businesses sell, the numbers are enormous. Warren Buffett's Berkshire Hathaway bought the Van Tuyl Group, then the largest family-owned dealer, in 2015 (Berkshire Hathaway). The Miller family's Larry H. Miller Dealerships, built from a single Toyota store, sold for about $3.2 billion in 2021 (Automotive News). The family-owned Herb Chambers group sold in 2025 for about $1.45 billion (Automotive News). The resulting fortunes are real: Forbes estimates Gail Miller and family at about $5.2 billion (Forbes).
What makes those sales possible is that the franchise itself has a market value. Dealers call it "blue sky," the goodwill of the franchise above its tangible assets, quoted as a multiple of earnings that varies by brand (Haig Partners). A Toyota franchise recently carried a national-average multiple around 6.75 to 8.5 times earnings (Haig Partners). That value exists because state law protects the "dealer point," the succession-by-will provisions and the anti-termination rules mean an inherited franchise is shielded from the manufacturer, which is exactly what turns a business into a durable, transferable asset (N.C. Gen. Stat. 20-305).
The dealers' case, and the bottom line
The dealers do not see a cartel; they see a consumer protection, and their argument deserves a fair hearing. NADA contends that selling through franchised dealers benefits buyers, that geographically close same-brand dealers compete on price, that an independent dealer is a shield against manufacturer overreach, and that local dealers keep providing warranty and recall service even when a carmaker fails, as owners of Saab, Fisker, and Suzuki vehicles discovered (NADA). Because antitrust law limits what dealers can do collectively, they argue, state franchise law is the main check on a manufacturer's power. Those are genuine points, and the local-service argument in particular is not trivial.
But the reason the system endures is not only its merits. It is unusually entrenched because dealers are organized and spend accordingly: NADA reported about $5.5 million in federal lobbying in 2024 alone (OpenSecrets). Dealers even hold a distinct federal carve-out, the Dodd-Frank Act exempts them from Consumer Financial Protection Bureau supervision, so the bureau can police the lenders behind a car loan but not the dealers who set the financing markup (CarEdge). The car dealership is, in the end, one of the few businesses in America whose competitive position, whose protection from its own supplier, and whose passage to the next generation are all written directly into state law. That is what makes it a fortune you can inherit, and why the people who hold those franchises have fought so hard, so successfully, to keep the arrangement exactly as it is.
Related reading
- The Hidden Owners and the Quietest Fortunes: more wealth that compounds quietly and out of view.
- Two Percent of the Company, Forty Percent of the Vote: another case where legal structure, not just business, preserves a family's position.
- The Working Ledgers: the market and the money underneath every protected business.
Fact-check notes and sources
- The laws and their origin (every state having a dealer-franchise law that bars manufacturers from competing with their franchised dealers rather than banning all factory sales; the Texas and California prohibitions and California's 2023 expansion; the mid-century origin in dealer lobbying against manufacturer power; and the 1956 Automobile Dealers' Day in Court Act and NADA's role): Iowa Law Review (Crane), Texas Occupations Code 2301.476, California Senate analysis of AB 473, 15 U.S.C. 1222, and NADA. The often-repeated claim that Wisconsin passed the first such law in 1937 could not be confirmed in a primary source and is omitted here.
- The protections (relevant-market-area protest radii in California, New York, and Florida; the good-cause requirement for termination with the burden on the manufacturer; and the succession-by-will and post-succession protections in North Carolina and Washington): California Vehicle Code 507, New York V&T 462, Florida Statutes 320.642, N.C. Gen. Stat. 20-305, RCW 46.96, Oklahoma 47 O.S. 565.2, and the 1986 FTC entry-regulation report.
- The direct-sales fights (all states limiting direct sales, the roughly dozen or so that functionally ban the Tesla model as of 2025 and 2026 as a moving target, the per-state store caps, the Texas and Washington situations, and the FTC, DOJ, and academic criticism): Wikipedia, "Tesla US dealership disputes", Teslarati, Charged EVs, Electrek, FTC, DOJ, and Cato. The state-ban count is a genuine moving target and is given as a dated range, not a fixed number; the consumer-cost estimates rest on aging and contested studies ranging from roughly zero to about 9 percent and are presented as contested.
- The heritable asset and the dealers' defense (the roughly 16,990 franchised dealerships and their sales and employment; the top-150 groups' roughly 27 percent share; the Van Tuyl, Larry H. Miller, and Herb Chambers family sales; the Gail Miller family fortune; blue-sky value and multiples; NADA's consumer-benefit arguments and lobbying spending; and the Dodd-Frank CFPB carve-out): NADA 2025 Data, Automotive News Top 150, Berkshire Hathaway, Automotive News (Larry H. Miller), Automotive News (Herb Chambers), Forbes, Haig Partners, NADA franchise-system defense, OpenSecrets, and CarEdge. The Van Tuyl price was never officially disclosed (Buffett implied about $3.1 billion for the operating business); the roughly 16,990 count is the audited NADA figure, and NADA's "about 18,000 dealerships, 80 percent family-owned" is the association's framing rather than an audited count; net-worth figures are estimates, and blue-sky values are point-in-time snapshots.
This post is informational, not legal or financial advice. Figures are reproduced from the cited statutes, agency reports, and industry sources, with estimates, contested figures, and moving targets flagged as such. Companies and individuals are discussed as nominative fair use from the public record, with no affiliation implied.
