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Loading ...With the current block exemption eradicating the postcode system of franchising, retail dealers could in theory set up where they liked.
This, however, was countered by manufacturers imposing strict and costly showroom display standards in an attempt to retain control of their car dealer retail operations.
But strong sales in prime location can often give car dealers more negotiating power with vehicle manufacturers.
Bill Bexson, managing director of Automotive Property consultancy, felt the negotiating balance between dealers and manufacturers was now more even than in the recent past and said new dealer agreements could lead to a relaxation of standards to keep dealers in the brand.
“Certain manufacturers will be obliged to relax their standards because their top selling vehicle is only worth around £8,000 with a few hundred pounds margin and servicing costs of £200. They cannot afford the same costs as luxury brands. They may gave to accept a property that is older, small and in a secondary position. It’s part of sensible right-sizing and getting the right cost base.,
“I expect some manufacturers to take pragmatic views toward their standards. They may decide to relax them for a time,” said Bexson. Ian Bingham, a director at chartered surveyors Caxtons, agreed that manufacturers were keen to see representation in prime locations and were prepared to relax car dealers standards to do so.
But Anthony Keohane, direct of automotive at property advisors Colliers CRE, believed this could set a precedent with other franchises demanding similar terms.
“This is a serious dilution of the brand. However, manufacturers can often have different levels of standards which can be dictated by the market area. They have different standards for a prime-location inner city dealership and a smaller town showroom.
“Lower margin car dealer brands within London won’t get represented because they can’t afford it. The cost of entry means they may never get entry,” said Keohane.
He mentioned Chevrolet, which has struggled to establish itself in the UK and has faced considerable overheads to open franchises.
Multi-franchises dealer operations.
With these financial constraints, multi-franchising has become more common, in the past few years. Bingham said there were often unusual mixes at multi-franchise dealerships without any problems so long as the brands were not competing head to head,. The advantages of multi franchise sites were representation in a prime location.
“If you are a small new car outlet selling volume stock you want the opportunity to be associated with a major player in the big market.”
Service-only Centres
These car centres are often on industrial estates. This trend is apparent in London docklands dover court land rover, VW and Audi aftersales have recently opened a 75-000 sqr ft site for a workshop in an industrial area in Wandsworth.
Investment in location?
Some feel it would be an idea to maximise the location of dealerships by building a hotel, office space or flats on top of say a Ford dealer with the space then massively utilised for maximum return on investment.
Alfa Romeo car dealers in London