STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

KAWASAKI MOTORS CORP., U.S.A., ) and WILLIS S. BRIGHAM and ) MICHAEL WAYNE HAMPTON d/b/a ) KAWASAKI OF DELAND, )

)

Petitioners, )

)

vs. ) CASE NO. 80-1264

) DAYTONA SPORTS CENTER, INC., ) and DEPARTMENT OF HIGHWAY )

SAFETY AND MOTOR VEHICLES, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, R. L. Caleen, Jr., held a formal hearing in this case on October 13, 1980, in DeLand, Florida.

APPEARANCES

For Petitioner: Peter J. Winders, Esquire

Post Office Box 3239 Tampa, Florida 33601

For Respondent: Joseph C. Jacobs, Esquire and

Dean Bunch, Esquire

For Daytona Sports Center, Inc. Post Office Box 1170 Tallahassee, Florida 32302

ISSUE PRESENTED

Whether Respondent, Department of Highway Safety and Motor Vehicles, should grant Petitioners', Willis S. Brigham and Michael Wayne Hampton, application for a motor vehicle dealer license under Section 320.642, Florida Statutes (1979), on the ground that existing Kawasaki motorcycle dealers are providing inadequate representation in the territory or community involved.

CONCLUSIONS AND RECOMMENDATION

Petitioners have sustained their burden of proof by demonstrating that existing Kawasaki motorcycle dealers are not providing adequate representation in the territory or community involved. Therefore, the application for license should be granted.

Background

On June 3, 1980, Petitioners, Willis S. Brigham and Michael Wayne Hampton, d/b/a Kawasaki of DeLand (hereinafter "APPLICANT") applied to the Respondent, Department of Highway Safety and Motor Vehicles (hereinafter "DEPARTMENT"), for a motor vehicle dealer's license authorizing it to operate a Kawasaki motorcycle dealership in DeLand, Florida.

On June 30, 1980, Respondent, Daytona Sports Center, Inc. (hereinafter "PROTESTANT"), an existing Kawasaki dealership in Daytona Beach, Florida, protested licensing the proposed DeLand dealership, asserting that Petitioner, Kawasaki Motors Corp., U.S.A. (hereinafter "KAWASAKI"), was already adequately represented in the community or territory involved. PROTESTANT requested a hearing if the DEPARTMENT did not share its view, or was in doubt on this issue.

On July 7, 1980, the DEPARTMENT forwarded this case to the Division of Administrative Hearings for the purpose of conducting the requested hearing. Hearing was thereafter set for September 19, 1980. On motion of the Petitioners, and without objection of the other parties, the hearing was continued, and reset for October 13, 1980.

At final hearing, the Petitioners, APPLICANT and KAWASAKI, called as their witnesses: Dahlon G. Ritchey and Merrill Sutton, and offered Petitioners' Exhibits 1/ 1 through 11 into evidence, each of which was received.

PROTESTANT called Robert R. Warfel and David B. Russell as its witnesses, and offered Respondent's Exhibits 1/ 1 through 3 into evidence, each of which was received.

At close of hearing, the parties requested and were granted the opportunity to file proposed findings of fact and conclusions of law within 14 days from filing of the hearing transcript. It was also agreed that the 30-day period for submittal of the recommended order would begin when their proposed findings were filed. On November 10, 1980, the parties timely submitted their posthearing filings.

FINDINGS OF FACT

Based upon the evidence presented at hearing, the following findings of fact are determined:

Applicant, Protestant, and Kawasaki

1. APPLICANT applied to the DEPARTMENT for a motor vehicle dealer license authorizing it to operate a KAWASAKI franchise motorcycle dealership in DeLand, Volusia County, at 1645 East New York Avenue. (P.E. 2.)

   
   

2. PROTESTANT owns and operates an existing KAWASAKI franchise motorcycle dealership in Daytona Beach, Volusia County, at 700 Ballough Road, and protests licensing of APPLICANT on the ground that the existing KAWASAKI dealer(s) are providing adequate representation in the DeLand area. PROTESTANT also owns two Honda motorcycle dealerships in the county, and the sole Suzuki dealership. (Testimony of Russell, Warfel, Prehearing Stipulation.)

   
   

3. KAWASAKI is the national distributor for Kawasaki brand motorcycles, parts, and accessories. PROTESTANT is the only existing KAWASAKI franchise dealer in Volusia County; Kawasaki has determined that a second franchised

   dealership should be located in DeLand, and has executed a franchise agreement with APPLICANT toward that end. (Testimony of Sutton; P.E. 1, 2, 5, 6.)

   
   

4. KAWASAKI and its franchised dealers, including APPLICANT and PROTESTANT, operate under agreements which grant dealers a non-exclusive right to sell and service KAWASAKI products within an "area of primary

   responsibility"--defined as territory falling within a five-mile radius from the dealer's location. The dealer agrees to aggressively develop and promote the sale of Kawasaki products and maintain a specified level of market penetration in his area of primary responsibility. However, the dealer is free to promote and sell KAWASAKI products outside that five-mile area, and KAWASAKI expressly reserves the right to sell its products to other dealers or persons, whether inside or outside the dealer's area of primary responsibility. In this case, the PROTESTANT's area of primary responsibility includes Daytona Beach, Daytona Beach Shores, South Daytona Beach, Holly Hill, and Ormond Beach, with an approximate population of 90,000. APPLICANT's proposed area of responsibility includes DeLand, Lake Helen, and part of Orange City, with an approximate population of 16,700. (Testimony of Sutton; P.E. 1, 2, 5, 6.)

   
   

   Territory Involved

   
   

5. Volusia County is a large county, over 33 miles wide and 42 miles in length, with a population of approximately 241,786. Daytona Beach, its largest city with 50,830 people, is located among a chain of interconnecting communities in the county's eastern coastal region: Ormond Beach, Holly Hill, Daytona Beach Shores, South Daytona, Port Orange, Ponce Inlet, New Smyrna Beach, and Edgewater. The county's population is split between these eastern coastal communities, and a group of communities located in the western part of the county: principally DeLand, Orange City, and Deltona. DeLand is the largest western community, with a population of 14,090. Both Daytona Beach and DeLand have experienced rapid population growth between 1970 and 1980: Daytona Beach, with a 12.1 percent increase, DeLand with a 21 percent increase. The eastern and western parts are separated by a broad, sparsely populated, central area. The eastern and western halves of the county are connected by two major federal highways, Interstate 4 and U.S. 92. The distance by car between PROTESTANT's existing dealership in Daytona Beach, and APPLICANT's proposed dealership in DeLand is 23 miles, and takes approximately 30 minutes to travel. Long distance telephone rates apply to telephone calls between the two cities. (Testimony of Warfel; P.E. 4, 6.)

   
   

6. Largely because of wide geographic separation between the population located in the eastern and western parts of the county, each part has developed distinct, and identifiable marketing areas for general retail businesses. General retail shopping patterns establish that the DeLand area has a retail business market separate and apart from Daytona Beach. Numerous motor vehicle manufacturers and distributors have self-sustaining franchise dealerships in DeLand, including Chrysler-AMC, Volkswagen, Chevrolet-Cadillac, Oldsmobile, Pontiac-Buick, Ford, and Chrysler. These manufacturers also maintain separate franchise dealerships in Daytona Beach. In addition, DeLand supports numerous franchised businesses unrelated to motor vehicles. (Testimony of Ritchey; P.E. 5, 6.)

   
   

7. PROTESTANT has aggressively and diligently developed and promoted the sale of Kawasaki products within its five-mile area of primary responsibility. In 1980, in numbers of motorcycles purchased from KAWASAKI for retail sale, PROTESTANT was in the top 15 of 200 Southern Region dealerships. Notwithstanding its geographical disadvantage, PROTESTANT has also actively

   promoted and sold products in the DeLand area, where it advertises by radio and telephone book yellow pages. Six franchise motorcycle dealerships are located in the eastern part of the county: Honda (2), Yamaha (2), Suzuki (1), and Kawasaki (1), while none are located in the DeLand, or western part, of the county. (Testimony of Sutton, Russell, Warfel; P.E. 5, 6.)

   
   

8. Initially, PROTESTANT agreed with KAWASAKI that a KAWASAKI dealership was needed in the DeLand area, and asked for the first opportunity to open one. Later, PROTESTANT concluded that a DeLand dealership would not be economically successful, and changed its position. (Testimony of Sutton, Russell, Warfel;

   P.E. 1.)

   
   

   Kawasaki Representation and Market Penetration

   
   

9. Market penetration relative to competitors is a standard tool for measuring the adequacy and performance of a motor vehicle dealership. In KAWASAKI franchise agreements, the parties agree that KAWASAKI may "expect" from the dealer a market penetration in its five-mile area of primary responsibility at least equal to KAWASAKI's national market penetration. Market penetration is ordinarily determined by use of R. L. Polk and Co., motor vehicle statistics based on new vehicle registrations categorized by zip code designation. (Testimony of Sutton, Warfel, Russell; P.E. 1, 2, 3, Tr. 30.)

   
   

10. The four largest selling motorcycles in the United States are Honda, Yamaha, Kawasaki, and Suzuki. The relative penetration of KAWASAKI during 1979 in comparable market areas is:

    
    

    AREA of C0MPARISON	HONDA	YAMAHA	KAWASAKI	SUZUKI
    United States	39.20	33.82	14.94	13.34
    Florida	. . .	. . .	17.03	. . .
    Volusia County	38.43	20.47	17.04	7.98
    Daytona Beach	38.48	19.34	20.31	0.40
    DeLand	38.89	20.47	13.19	13.89
    (Testimony of Sutton,	Warfel,	Russell;	P.E. 3.)

    
    

11. R. L. Polk statistical surveys, based on new motorcycle registrations by post office town, show that KAWASAKI holds approximately a 20 percent share of the market in the PROTESTANT's primary area of responsibility (territory within five-mile radius) as compared to an approximate 12 percent share of the DeLand-Orange City area market. KAWASAKI's market share is less in the DeLand area than the Daytona Beach area, while its competitors' shares are greater. PROTESTANT admits that it would not be doing an adequate job in the Daytona Beach area if the KAWASAKI market share fell from 20 percent to 12 percent-- KAWASAKI's share of the DeLand area market:

    
    

    [Counsel for Applicant]

    Q: "If your market share in Daytona went down from 20 percent in the Daytona Beach area, close by home, if it went down from 20 percent to 12 percent this year, would you think that you were doing an adequate job within Daytona?

    
    

    [Robert Warfel]

    A: No, sir." (Tr. 106.)

    
    

    The population of the DeLand area, defined by a five-mile radius from the proposed dealership, is approximately 27 percent of the population of the

    comparable Daytona Beach area; however, PROTESTANT's sales in the DeLand area account for only 8 percent of its sales within its area of primary responsibility and 10 percent of its total sales. (Testimony of Warfel, Sutton;

    P.E. 3.)

    
    

12. As a general rule, KAWASAKI dealers make 80 percent of their sales within their five-mile radius areas of primary responsibility. This is attributable to the shopping habits of customers: people prefer to purchase motorcycles from dealers which are convenient, close by, and readily accessible. In this case, PROTESTANT's sales experience is consistent with this customer preference--65 percent of its sales occur within its area of primary responsibility. In 1979, PROTESTANT sold 160 motorcycles within its Daytona Beach area of primary responsibility, and 19--10 percent of its sales--within the DeLand-Orange City area. Six additional sales were made by other KAWASAKI dealers to residents of Orange City residing outside of APPLICANT's proposed five-mile area of responsibility. If APPLICANT's proposed Kawasaki dealership is located in DeLand, KAWASAKI's representation and share of the DeLand area market would improve considerably. Even with a new dealership in DeLand, PROTESTANT expects to continue making substantial sales in that area.

    (Testimony of Sutton, Warfel; P.E. 5, 6.) Economic Viability of New Dealership in DeLand

13. The APPLICANT now operates a profitable motorcycle service and repair shop in DeLand, although it sells only accessories. If its existing business was supplemented by sales of a major brand motorcycle--such as KAWASAKI--it is reasonable to expect that its business would increase and continue to flourish. (Testimony of Sutton, Russell.)

    
    

    Adoption and Rejection of Parties' Proposed Findings of Fact

    
    

14. The parties' proposed findings of fact which are incorporated herein are adopted; in addition, PROTESTANT's proposed findings of fact Nos. 6, 7, 9, 10, 12, and 16 are adopted as supported by the evidence. However, PROTESTANT'S proposed finding of fact No. 11 is rejected as unsupported by the evidence. KAWASAKI presented evidence: (1) that the proposed dealership must make 50 motorcycle sales per year to operate profitably, assuming no income is received from other business operations (Tr. 57); (2) that sale of 65 percent of the units within the Proposed dealership's primary area of responsibility converts to 37.5 motorcycles per year, equivalent to a 26 percent market share of the total motorcycles (144 units) of all brands purchased in DeLand during 1979 (Tr. 58-61); and (3) that KAWASAKI has enjoyed market shares in excess of 26 percent in several urban areas: Jacksonville, 27 to 30 percent, and Tampa, 27 to 35 percent (Tr. 62). This constitutes substantial evidence that KAWASAKI has favorably evaluated the sales potential of the proposed new dealership in DeLand. Proposed finding of fact No. 13 is also rejected, as inconsistent with the evidence, infra, and finding of fact No. 13.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Section 120.57(1), Florida Statutes (1979).

    
    

16. Section 320.642, Florida Statutes (1979), establishes the following standards for acting on an application for a motor vehicle dealer license:

    "The department [of Highway Safety and Motor Vehicles] shall deny an application for a motor vehicle dealer license in any community or territory where the licensee's presently licensed franchised motor vehicle dealer or dealers have complied with licensee's agreements and are providing adequate representation in the community or territory for such licensee. The burden of proof in showing inadequate representation shall be on the licensee."

    
    

    Since no issue has been raised concerning whether KAWASAKI's present dealer or dealers have complied with their franchise agreements, the sole issue to be determined here is whether such dealer or dealers are providing "adequate representation" of KAWASAKI in the community or territory involved. A finding of "adequate representation" precludes, as a matter of law, the granting of a license to APPLICANT. See, Hess Marine, Inc. v. Calvin, 296 So.2d 114 (Fla. 1st DCA 1974).

    
    

17. For purposes of this case, the "adequate representation" standard must be applied to the principal territory or community which the APPLICANT seeks to serve: DeLand, and its adjacent communities in western Volusia County. The evidence establishes that this area constitutes an identifiable, distinct, and separate retail marketing area from Daytona Beach and the eastern population centers of Volusia County.

    
    

18. KAWASAKI and the APPLICANT have sustained the burden of proof placed upon them by Section 320.G42, Florida Statutes (1979). It is concluded that they have demonstrated that KAWASAKI's existing dealer or dealers are not providing adequate representation in the territory or community involved; the application for a motor vehicle dealer license should therefore be granted. KAWASAKI's sales in the territory involved are below its competitive market shares for the United States, Florida, Volusia County, and Daytona Beach. While PROTESTANT maintains a 20 percent Kawasaki penetration in the Daytona Beach area, its penetration falls to 12 percent in the DeLand area. KAWASAKI's competitors maintain higher market shares in the DeLand area than they maintain in the Daytona Beach area--while KAWASAKI's sales record is the reverse. While KAWASAKI maintains a satisfactory county-wide penetration, as compared to the national penetration, the evidence indicates that the DeLand area constitutes "an identifiable plot not yet cultivated, which could be expected to flourish if given the attention which the . . . [other areas of territory] in their turns received." Bill Kelley Chevrolet, Inc. v. Calvin, 322 So.2d 50, 51 (Fla. 1st DCA 1975). The lack of any major brand motorcycle dealership in the DeLand

    area--and the distance and inconvenience associated with commuting to the Daytona Beach area for sales and service--support a conclusion that the introduction of a new dealership is justified in terms of market potential. When such market potential exists, the purpose of Section 320.642 is not to frustrate, impede, or prevent new dealer competition. See, Bill Kelley, supra at 52.

    
    

19. Finally, if the purpose of Section 320.642 is to furnish dealers with some protection against unfair treatment by the manufacturer, Plantation Datsun, Inc. v. Calvin, 275 So.2d 26 (Fla. 1st DCA 1973), there is no evidence in this case that, in seeking to open a new dealership in DeLand, KAWASAKI has unfairly treated its existing dealers. PROTESTANT was first invited to open a DeLand dealership, but refused. The DeLand area accounts for only a relatively small

portion of PROTESTANT's sales business--10 percent. Moreover, even with the opening of a competing dealership, PROTESTANT expects to continue making substantial sales in DeLand.

RECOMMENDATION

Based upon the foregoing findings of fact and conclusions of law it is

RECOMMENDED:

That the application of Willis S. Brigham and Michael Wayne Hampton d/b/a Kawasaki of DeLand be GRANTED.

DONE and ENTERED this 10th day of December, 1980, in Tallahassee, Florida.

R. L. CALEEN, JR. Hearing Officer

Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 10th day of December, 1980.

ENDNOTE

1/ Petitioner's and Respondent's Exhibits will be referred to as "P.E. " and "R.E. ", respectively.

COPIES FURNISHED:

Peter J. Winders, Esquire Post Office Box 3239 Tampa, Florida 33601

Joseph C. Jacobs, Esquire and

Dean Bunch, Esquire Post Office Box 1170

Tallahassee, Florida 32302

=================================================================

AGENCY FINAL ORDER

=================================================================

BEFORE THE DIRECTOR OF THE DIVISION OF MOTOR VEHICLES DEPARTMENT OF HIGHWAY SAFETY AND MOTOR VEHICLES

STATE OF FLORIDA

KAWASAKI MOTORS CORP., U.S.A., and WILLIS S. BRIGHAM and MICHAEL WAYNE HAMPTON d/b/a KAWASAKI OF DELAND,

Petitioners,

vs. CASE NO. 80-1264

DAYTONA SPORTS CENTER, INC., and DEPARTMENT OF HIGHWAY SAFETY AND MOTOR VEHICLES,

Respondents.

/

FINAL ORDER

This cause came on for determination by the Director of the Division of Motor Vehicles of the State of Florida, Department of Highway Safety and Motor Vehicles, upon receipt of the Hearing Officer's Recommended Order on Jurisdiction on December 12, 1980. The Director, having reviewed the entire record, hereby enters his Final Order, and states:

The Recommended Order (a true and correct copy of which is attached hereto and made a part hereof) entered by the Hearing Officer on December 10, 1980, is hereby accepted and adopted by the Director, with the exception of the final sentence of Finding of Fact number 2, which is rejected in that it is not based on competent substantial evidence in the record. The Director substitutes the following in place of the rejected sentence:

"Mr. Russell, the primary owner of the protestant, Daytona Sports Center, Inc., owns one of the two Honda dealerships in the county, and the Suzuki dealership in the county."

Based upon the foregoing, it is ORDERED

That the application of Willis S. Brigham and Michael Wayne Hampton, d/b/a Kawasaki be and the same hereby is GRANTED.

DONE AND ORDERED this 23rd day of January, 1981, in Tallahassee, Leon County, Florida.

JOHN D. CALVIN, Director Division of Motor Vehicles Department of Highway Safety and Motor Vehicles

Neil Kirkman Building Tallahassee, Florida 32301

APPENDIX TO FINAL ORDER

In compliance with Section 120.59(2), Florida Statutes and Rule 28- 5.405(3), F.A.C., the Director makes the following rulings as to the Exceptions filed by the Protestant, Daytona Sports Center, Inc.

First Exception to Finding of Fact 2: denied for the reasons expressed by paragraph 1 of Response to Protestant's Exceptions to Findings of Facts, (a true and correct copy of which is attached hereto and made a part hereof; hereinafter "Response").

Second Exception to Finding of Fact 2: granted in Final Order.

Exception to Finding of Fact 4: denied for the reasons expressed by paragraph 3 of the Response.

Exception to Finding of Fact 5: denied for the reasons expressed in paragraph 4 of the Response.

Exception to Finding of Fact 6: denied for the reasons expressed in paragraph 5 of the Response.

First Exception to Finding of Fact 11: denied for the reasons expressed in paragraph 6 of the Response.

Second Exception to Finding of Fact 11: denied for the reasons expressed in paragraph 7 of the Response.

Third Exception to Finding of Fact 11: denied for the reasons expressed in paragraph 8 of the Response.

Exception to Finding of Fact 13: denied for the reasons expressed by paragraph 9 of the Response.

JOHN D. CALVIN, DIRECTOR

Division of Motor Vehicles Department of Highway Safety and Motor Vehicles

Neil Kirkman Building Tallahassee, Florida 32301

CERTIFICATE OF SERVICE

I DO HEREBY CERTIFY that a true and correct copy of the foregoing Final Order and Appendix has been forwarded by mail to Peter A. Knocke, Esquire, Post Office Drawer 190, Tallahassee, Florida 32302; Enoch J. Whitney, Esquire, General Counsel, DHSMV, Neil Kirkman Building, Tallahassee, Florida 32301; Jacob C. Jacobs, Esquire, 305 South Gadsden, Tallahassee, Florida 32301; Mr.

Willis S. Brigham, Kawasaki of Deland, 1654 East New York Avenue, Deland,

Florida 32720; and Kawasaki Motors Corp. U.S.A., 2009 East Edinger Avenue, Santa Ana, California 92705, this 23 day of January, 1981.

JOHN D. CALVIN, DIRECTOR

CERTIFICATE OF FILING

I DO HEREBY CERTIFY that the foregoing Final Order and Appendix has been placed in the official files of the Division of Motor Vehicles, Department of Highway Safety and Motor Vehicles, this 23 day of January, 1981.

HENRY C. NOXTINE, Supervisor Dealer License Section

COPIES FURNISHED:

R. L. Caleen, Jr., Esquire Hearing Officer

Docket for Case No: 80-001264

Orders for Case No: 80-001264