Dealers

[mikenixon]

"Honda motorcycle dealers are independent businessmen solely 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 begins a paragraph in Honda owner's manuals that communicates something very important that is often not well understood: Powersports dealers are private businesses that are almost completely autonomous; they are not simply extensions of the manufacturers.

I realize many of you don't care what goes on inside a dealership because you haven't bought a new bike in recent years. But some of you do own relatively modern bikes, and others may be curious why dealers work the way they do.

Many believe a powersports dealership is like a McDonald's franchise in which each store answers to corporate. In many cases fast-food corporate entities own some of their stores outright. But even if not, they might as well because they own the building, land and equipment. Their restaurants have to charge what the home office says to charge, cook and serve what they say to, use only corporate approved vendors, produce picture-perfect copies of the product indistinguishable from that of other franchises, and of course remit a percentage back to the parent company each month. Not so with motorcycle dealers. Bike dealers pocket every net dollar. They are free to change the color of a new motorcycle, completely customize it or modify it, and can charge whatever they want for it, and sell competing brands in the same store. The manufacturer has absolutely no say in any of this. 1

Well, what makes a dealer then? Five things. First and foremost, the dealer acquires permission to use the manufacturer's name and logo. No one but an authorized dealer can do this. 2 Second, the dealer can purchase new factory product, including parts as well as whole vehicles, at dealer net (in the case of vehicles, this is roughly 20 percent below retail). Only an official dealer can. Third, the dealer has access to product information direct from the manufacturer, not secondhand like everyone else. This is a big deal. Fourth, when the new motorcycle breaks for no fault of the rider's, the dealer can petition the manufacturer to play a role in the cost of the repair. 3, 4 Finally, and fifth, the dealer is designated the manufacturer's agent in completing each vehicle's manufacture when he uncrates, completes the assembly, and fully prepares the vehicle to be ridden. This is probably the most critical of all the dealer's responsibilies. Much is at stake during new vehicle delivery. 5 Outside of these five areas, the dealer is pretty much on their own. In fact, so autonomous is the dealer that when a manufacturer decides one of its dealers is not representing it correctly, it actually has to take the dealer to court to sever the relationship. It's basically the same as a divorce, though not nearly as easy. And the manufacturer doesn't always win. 6

But although the manufacturer has no control, it doesn't mean he never tries to help. He doesn't leave the dealer hanging, with no suggestions, training, advice, programs, systems, financial assistance, or any of that. The manufacturer typically invests very heavily in the success of its dealers. But for most powersports brands it isn't compulsary; the dealer can take it or leave it. And many leave it. In the end, it all boils down to the attitude of the dealer.

And for all manufacturers and dealers, the decisive factor in the relationship is the agreement signed at the beginning of the relationship. That agreement spells out the leverage the manufacturer can apply. The authority they have and will exercise is afforded them beforehand. Manufacturers such as Harley-Davidson, Polaris, KTM, BMW, Triumph and Ducati have some of the strongest contracts in the industry. Their dealer agreements tie product allocations and other "carrots" to dealer performance and participation, including dealer training. The Big Four by contrast have comparitively extremely weak agreements that give the dealer all the power and leave the manufacturer with essentially none. The reason the Japanese companies are so "lame dog" is connected with these companies' famous 1960s push to overtake the powersports industry, in which they universally signed up their dealers with too little demands. The "Japanese invasion." They got their dealers the easy way. There are few if any sticks or carrots. 7, 8

I cringe when I hear folks talking about dealers as if they'll all bad. That's not reality. There are superlative, awesome examples of good dealers. 9 But between the manufacturer's influence or lack of same, and the dealer's own moral ethic, yes, their quality can vary widely. And dealers are just like people in any business: good powersports dealers are good because they want to be, and bad ones are bad because they can be. And that's the way it is.

Notes:
1 Some powersports manufacturers, notably Harley-Davidson, Honda and Yamaha, have attempted to make their dealers separate their brands from others in the store. Yamaha insists that their scooters be isolated from "real" motorcycles, and H-D has long demanded a completely separate building for its iconic brand. But the success with which this has worked has been poor. Only Harley, with one of the industry's most powerful dealer contracts, continues to consistently achieve this today.

2 Powersports manufacturers diligently monitor the unauthorized use of their brand identity. Harley-Davidson regularly sues businesses to protect its iconic bar and shield logo. Kawasaki has been known to force watercraft rental businesses to cease using the phrase "Jet Ski" in their marketing (the famous name is not, as many think, in the public domain, though it soon will be if not protected).

3 Many consider this of dubious benefit. Warranty work is a burden to most authorized dealers. They're paid by the manufacturer less than if the same work was done retail, and the manufacturer often is not honest about the issue and makes the dealer jump through hoops. It's distasteful. And it takes unusually good dealer management to make it all palatable. But it's part of being a dealer (twenty percent or more of a dealer's service work is warranty) and smart, positive dealers know how to leverage warranty, maximizing its profit and using it in ways that promote customer goodwill, that is, loyalty to the dealer's business.

4 Dealer reimbursement for warranty expense is contractual; it's like medical insurance. A book establishes the hours allotted each task, and this is multiplied by the dollar amount previously determined will be paid each dealer per hour. Dealers in lower economic areas are awarded lower dollar rates of reimbursement, and higher ones higher. The end result is applied to the dealer's outstanding parts account.

5 Yes, literally the bike's final manufacturing steps. Set up and delivery is the most serious thing in legal liability terms the dealer does that affects the dealer/manufacturer relationship. Yet it is often treated by the dealer as the least important.

6 Both Honda and Kawasaki have tried to close down dealers that broke all the rules and wreaked havoc with their reputation. The judges in some rather famous cases ruled that the manufacturer couldn't touch the dealers, and in one instance, to add insult to injury, the dealer (who set fire to his own store) was allowed to continue selling bikes -- out of a tent!

7 Yamaha is of course a Big Five dealer, but they have overcome this industry segment's built-in training deficit in a unique way. Yamaha corporate conducts a contest each year to find the best 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. Obviously, this generates, identifies and rewards technical excellence. But even this is voluntary and Yamaha dealers who participate in this program are not in the majority. And, at most, it develops, rewards and identifies the best mechanics, but not necessarily the best dealers.

8 The powersports industry lacks oversight. Even the automotive community's ASE (originally called NIASE), an independent mechanics certificating body stablished in 1972 in response to Senate inquiries into automotive repair business practices, focuses on the mechanic, not the repair business he works for. But the powersports industry doesn't even have that; no similar third party watchdog entity, but rather continues to rely solely on the manufacturers' own mechanics certification programs, where they exist and however inadequate. As was also true in the earliest days of the auto industry, the powersports industry polices itself, and demonstrably badly at that.

9 Many people are not aware that a rider can contact the manufacturer and get recommendations for better dealers. Though historically the manufacturer was hampered legally from doing this, manufacturers are finding ways to promote their best dealers, including numerically rating them in their published dealer catalogs, such as is the case with Honda.

[rcmatt007]

helpful to know, as we forget they are independent businesses. As you mention HD does exert a lot of control of their dealers. I guess it all comes to that we, as the customer, have the right to take our business to another dealer

[mikenixon]

[JSBail]

In regards to your "notes #1" there is a dealeship not far from me that not only sells HD's but Kaws and Yamahas as well but as you stated the HD part of the business is separate from the Kaw/Yamaha. The HD portion of course is first and foremost, then a bike museum (which is pretty cool itself) then the Kaw/Yam portion at the very back. While checking out their museum I talked to the grandson of the owner and he told me that their sales of Kaws and Yamahas is what kept the business open during HD's AMF years.

[mikenixon]

In regards to your "notes #1" there is a dealeship not far from me that not only sells HD's but Kaws and Yamahas as well but as you stated the HD part of the business is separate from the Kaw/Yamaha. The HD portion of course is first and foremost, then a bike museum (which is pretty cool itself) then the Kaw/Yam portion at the very back. While checking out their museum I talked to the grandson of the owner and he told me that their sales of Kaws and Yamahas is what kept the business open during HD's AMF years.