Dealers are increasingly worried that the franchise system is under attack from major OEM brands, who may stand to gain more from a direct-sales model instead. On this episode of Inside Automotive, Don Hall, president and CEO of the Virginia Automobile Dealers Association (VADA), and one of the most recognized leaders in auto retail, joins host Jim Fitzpatrick to discuss the latest on the conflict between franchisees and franchisors.
“What I’ve seen over the years…[manufacturers] are making this big grab to have more and more control over the dealers,” begins Hall. While many retailers are aware of the increasing authority OEMs exercise over their franchisees, the tendency of many business owners to focus on their corner of the market without being aware of the big picture is, in Hall’s eyes, of equal concern. “The manufacturers have made the decision: they want to get more in your pockets,” he adds.
There are multiple reasons why abandoning the franchise system would have major consequences for both OEMs and former dealers. One such issue, Hall explains, is the lack of transparency on the side of automakers. While some retailers have started to warm up to the idea of an alternative sales system, Hall remarks: “The fact of the matter is this…I assure you manufacturers cannot help themselves. They will give you a figure today, and that figure will change tomorrow.” Instead, he cautions dealers to exercise caution when listening to pitches from their automaker partners.
Automakers also stand to suffer by subverting the franchise system, Hall notes. The current strength of the car business is thanks to retailers who have represented their brands well while adapting to their local markets and improving the quality of care they provide to their consumers. That customer-focused attitude is essential, not only to the interests of dealers and consumers but to the longevity and profitability of car makers themselves, argues Hall. “No matter what is going on out there, if the customers are demanding these things, [dealers] will do it,” he concludes.
