Monday, May 11, 2015


"Honda motorcycle dealers are independent businessmen responsible for their own business transactions.  In the event of a dispute with your dealer, make every effort at resolving the issue with dealer management."

Thus began one of the paragraphs on transaction remedies in Honda owner's manuals of some years ago.  Honda was communicating something very important that is often not understood even today.  That is, that dealers are all but completely autonomous, and more to the point, they are not simply extensions of the manufacturers but privately-owned businesses.

Many believe a powersports dealership is like a fast food franchise, but it is not.  Far from it.  McDonald's or Chick-Fil-A stores are in fact extensions, satellites, of their franchisers.  As such the home companies impose strict requirements.  Each store answers to corporate.  In many cases corporate outright owns the business, but even if not, they might as well because they do own the building, land and equipment.  Their restaraunts have to charge what the home office says to charge, cook and serve what they say to, even use only corporate approved vendors.  Even the store monthly income statements (P&L sheets) are managed by corporate, with a certain percentage always going back to the parent company.  Your powersports dealer is nothing at all like this.  Not even close.  He or she pockets every net dollar, it's no one else's.  Their financials are their concern alone, the manufacturer has nothing to do with it, and in fact the powersports dealer is awesomely autonomous by comparison with a McDonald's.  The dealer is free to change the color of a new motorcycle, completely customize it or modify it for performance, whatever, and he can charge whatever he wants for it.  He can offer a different warranty than the factory one, or add another warranty on top of the factory's, sell competing brands of bikes in the same store (you won't see that at Chick-Fil-A), almost anything he wants to do.  The manufacturer has absolutely no say in any of it.  

Well, what makes a dealer then?  Here's a simple list.  Here are five things that happen when a dealer signs up.  First and probably most important, he pays for permission to use (and agrees to not abuse) the manufacturer's name.  That is, the manufacturer's name displayed in the manufacturer's way, with logo, script, color, the whole deal.  No one but an authorized dealer can do this.  In fact each manufacturer keeps tabs on unauthorized folks attempting to use their logos and trademarks, naturally.  Second, the authorized dealer has been given the right to purchase new in the wrapper factory parts, including of course whole vehicles in the crate, at a special dealer discount.  This is critical, and again, it is a right no one but an official dealer has.  No one else can even get the parts, let alone at a rate.  Third, the dealer has access to manufacturer information direct from the manufacturer, not secondhand like everyone else.  This is a big deal, and again, it is an exclusive right.  With a few notable exceptions, most of what passes for product information outside the factory's own channels is spurious at best.  So this is a huge benefit.  Fourth, the dealer is endowed with the position of the manufacturer's representative in warranty matters.  That is, when the motorcycle breaks for no fault of the owner's, the dealer does not have to provide remedy on his own dime, that is, as if it were his product, but can petition the manufacturer to play a role in the cost of the repair.  By contrast, a McDonald's store is most assuredly on the hook when you complain of a bad burger.  It gets no help from corporate.  So this is an important benefit.  While many dealers look at this the wrong way, that is, that warranty work often pays less than retail work, and its true that it does, it would be best if they kept in mind the fact that the manufacturer hasn't left them completely on their own as regards warranty.  They could, just like McDonald's, and in a few cases, namely certain very specialized offroad bikes, they in fact do.  Finally, and fifth, the dealer agrees to be the manufacturer's agent in the area of new vehicle preparation.  That is, the dealer takes on the responsibility of actually completing each vehicle's manufacture when he or she uncrates, completes the assembly, and fully prepares the vehicle to be used.  This is probably the most critical of all the dealer's responsibilies from the manufacturer's point of view, as the manufacturer is temporarily exposing itself to much legal liability, in sharing its creative role with the dealer.  Only during a warranty repair is the relationship between manufacturer and dealer at stake as much as it is during new vehicle delivery.

Obviously, there are a lot of details that go far beyond this simple list, but, outside these five areas, the dealer is pretty much on their own.  They can sell what they want, for how much they want, service or not service what they want, in ways and using tools and procedures and  vendors and other resources they choose, set their own hours, location, store size, and determine for themselves the competence, positions, compensation, and size of their staff.  In short, just about everything is in their perview. 

This comes as a surprise to many people.  But it is how it is.  The fact is, when a manufacturer decides one of its dealers is not representing it correctly in some way, it actually has to take the dealer to court to do something about it.  Legally, the process a manufacturer goes through to get rid of a dealer is something like a divorce, though not nearly as easy.  

Now this is not to say the manufacturer leaves the dealer hanging, with no suggestions, training, advice, programs, systems, financial assistance, or any of that.  They do, certainly, and depending on the manufacturer, they do it very well indeed.  But, all of these things just mentioned are completely voluntary; none of it is compulsary.  With most powersports manufacturers, the dealer can take it or leave it.  And there is the crux of the thing.  Folks say dealers are no good and independents are better on average.  Maybe, but if some dealers give the industry a bad name, certainly not all do, and more to the point, as we have just seen, it's a choice.  Dealers that are good are so because they choose to be.  And the not-so-good made their choices also.

And, manufacturers do have some voice.  But, and this is important, whatever leverage the manufacturer can legally apply has to be afforded them beforehand in the agreement both the manufacturer and dealer signed at the beginning of the relationship.  In other words, the dealer has already agreed on it.  You could say therefore that this power comes from the dealer.  In essence the dealer is the orginator of even the manufacturer's power over them, whatever level of power that is.  This is important to understanding motor vehicle dealers.  

Each manufacturer has its own unique dealer agreement.  They don't all read the same, and one big area they differ in is how much power the agreement vests the manufacturer with.  Manufacturers such as Harley-Davidson, Polaris, KTM, BMW and Ducati have some of the strongest contracts in the industry.  Their agreements tie product allocations to performance, for example, including the area of dealer training.  This helps these manufacturers make technical training mandatory.  None of the others do.  That's right.  Most powersports dealers are not obligated to have trained mechanics.  Except for the few brands just mentioned, if these dealers have good, well-trained techs, its because they want to, not because they have to.  Back to that autonomy thing again.

The point of all this is, if you like to think of dealers as bad, however you think of this, remember that it isn't the fact of their being a dealer that makes them bad, if they are bad.  Instead, it is a choice every dealer has, to be a good one or a bad one.  There are in fact some  exceptional dealers.  For example, Yamaha corporate every year conducts a contest to find the best Yamaha dealer techs in the country, and ultimately the world.  It's called Yamaha Technician Grand Prix, and it's a big deal.  The U.S. finalists go to Japan for their shot at the World title.  Some other brands (Harley and Polaris, for example) invest similar effort at technical training, and correspondingly, a higher percentage of their dealers participate and employ exceptional techs than do individuals working for dealers whose manufacturers do not make the effort.  The problem is, again, it's mandatory, and dealers who invest in training are not in the majority.  But, also again, it all boils down to this: the good ones are good because they want to be, and the bad ones are bad because they want to be.  And that's the way it is.


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