January 02, 2026|Franchise Frontlines
January 2, 2026 | Kentucky Court of Appeals | Not to Be Published
Executive Summary
In The Bay Emm Vay Store, Inc. d/b/a The BMW Store v. Kentucky Motor Vehicle Commission, 2026 WL 16034 (Ky. Ct. App. Jan. 2, 2026), the Kentucky Court of Appeals affirmed the denial of a new motor vehicle dealer license for a proposed BMW “Experience Center” in Erlanger, Kentucky. Although the dealer held a valid franchise agreement with BMW North America for its Cincinnati, Ohio location, the court concluded that Kentucky law requires a location-specific franchise agreement authorizing new vehicle sales at the Kentucky site. Because BMW North America expressly prohibited new vehicle sales at the proposed Erlanger location, the applicant did not meet the statutory definition of a “new motor vehicle dealer.” The court reversed and remanded only as to the denial of a used motor vehicle license, finding the trial court had failed to rule on that issue. The opinion underscores the importance of territorial and site-specific franchise authority in highly regulated motor vehicle industries.
Relevant Background
The BMW Store operates in Cincinnati, Ohio, pursuant to a franchise agreement with BMW North America (“BMWNA”) authorizing the sale of new BMW vehicles. Seeking to expand its presence in Northern Kentucky, the dealer proposed establishing a BMW “Experience Center” in Erlanger, Kentucky.
The proposed Experience Center would allow customers to test-drive vehicles, explore features, and build customized configurations. It would also sell non-certified pre-owned vehicles and provide certain services. However, BMWNA did not authorize the Erlanger location to sell new BMW vehicles or perform warranty repair work. Any new vehicle sales would be completed at the Ohio dealership or online.
The dealer applied to the Kentucky Motor Vehicle Commission for both a new motor vehicle dealer license and a used motor vehicle dealer license. The Commission denied both applications. After administrative proceedings and circuit court review, the matter proceeded to the Kentucky Court of Appeals.
Decision
The core issue concerned the interpretation of Kentucky Revised Statutes § 190.010(4), which defines a “new motor vehicle dealer” as a vehicle dealer holding “a valid sales and service agreement, franchise, or contract” granted by a manufacturer for the sale of new motor vehicles.
The dealer argued that because it possessed a valid franchise agreement with BMWNA authorizing new vehicle sales at its Ohio location, it satisfied the statutory definition. The statute, the dealer emphasized, does not expressly state that the franchise agreement must authorize sales “in Kentucky.”
The Court of Appeals rejected that argument.
Applying de novo review of statutory interpretation, the court emphasized that the Motor Vehicle Commission’s statutory framework regulates the sale of motor vehicles within Kentucky. Reading the statute in context, the court concluded that implicit in the definition of “new motor vehicle dealer” is the requirement that the franchise agreement authorize new vehicle sales at the specific Kentucky location for which licensure is sought.
Because BMWNA expressly prohibited the Erlanger Experience Center from selling new BMW vehicles, the applicant did not meet the statutory definition. The court affirmed the denial of the new motor vehicle dealer license.
With respect to the used motor vehicle dealer license, however, the court determined that the circuit court had failed to address that issue in its review of the Commission’s order. The Court of Appeals therefore reversed and remanded for a ruling on that portion of the application.
The court also rejected arguments that the Commission acted arbitrarily or denied due process in its handling of the application, finding that the applicant received a full evidentiary hearing and administrative review.
Looking Forward
Although unpublished and specific to Kentucky’s statutory framework, this decision provides important guidance for franchisors and franchisees operating in highly regulated motor vehicle industries.
First, courts may interpret statutory licensing definitions in light of the broader regulatory scheme, even where territorial language is not expressly stated. In regulated dealer contexts, site-specific franchise authority matters.
Second, franchise agreements that limit sales authority at particular locations can materially affect dealer licensing eligibility. Here, the franchisor’s decision not to authorize new vehicle sales at the Experience Center was dispositive.
Third, “Experience Center” or satellite facility models—particularly those that emphasize brand engagement without full sales authority—must be evaluated carefully against state dealer licensing statutes. Branding, test drives, and marketing functions may not suffice where statutes tie licensure to authorized new vehicle sales.
Finally, the opinion illustrates the continued deference courts give to state motor vehicle commissions in interpreting and enforcing dealer licensing statutes, provided procedural due process is afforded.
This case does not alter general franchise law principles outside the automotive regulatory context. Rather, it reflects the specialized statutory regime governing motor vehicle dealer licensure and the importance of aligning franchise rights with location-specific regulatory requirements.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
