STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RON TUCKER CYCLES, INC., ) d/b/a RON TURNER CYCLES NORTH ) and YAMAHA MOTOR CORP., USA., )

)

Petitioner, )

)

vs. ) CASE NO. 82-2852

) YAMAHA WEST and STATE OF FLORIDA ) DEPARTMENT OF HIGHWAY SAFETY ) AND MOTOR VEHICLES, DIVISION OF ) MOTOR VEHICLES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Charles C. Adams, held a formal hearing in this case on January 27, 1983, in Jacksonville, Florida. 1/

For Petitioners: Haywood M. Ball, Esquire

Ulmer, Murchison, Ashby, Taylor & Corrigan

1600 Atlantic Bank Building Post Office Box 479 Jacksonville, Florida 32201

Russell D. Jura, Esquire

Yamaha Motor Corporation, U.S.A. Post Office Box 6555

Cypress, California 90630

For Respondent, John C. Revis, Esquire

Yamaha West: 420 North Halifax Drive, Suite 4-A

Daytona Beach, Florida 32218 ISSUE

The issue is whether Respondent, State of Florida, Department of Highway Safety and Motor Vehicles, Division of Motor Vehicles, should grant Petitioner's, Ron Turner Cycles, Inc., d/b/a Ron Turner Cycles North, application for a motor vehicle dealer license under Section 320.642, Florida Statutes (1981), on the ground that existing Yamaha motorcycle dealers in Duval County, Florida, are providing inadequate representation in the territory or community involved. 2./

BACKGROUND

On September 22, 1982, Petitioner, Ron Turner Cycles, Inc., d/b/a Ron Turner Cycles North (hereinafter the "Applicant"), applied to the Respondent, State of Florida, Department of Highway Safety and Motor Vehicles, Division of Motor Vehicles (hereinafter the "Department"), for a motor vehicle dealer's license authorizing it to operate a Yamaha motorcycle dealership in Jacksonville, Florida, at 8940 Lem Turner Road.

On October 14, 1982, Respondent, Yamaha West (hereinafter the "Protestant"), an existing Yamaha dealership in Jacksonville, Florida, protested the licensing of another Yamaha dealership in Duval County, asserting that Petitioner, Yamaha Motor Corporation, U.S.A. (hereinafter "Yamaha"), was already adequately represented in the community or territory involved, and that another Yamaha dealer in Duval County would be detrimental to all concerned at the present time.

On October 18, 1982, the Department forwarded this case to the Division of Administrative Hearings (hereinafter the "DOAH") for the purpose of conducting the requested hearing. Hearing was thereafter set for January 26 and 27, 1983.

On January 13, 1983, the Protestant filed a Motion for Continuance of the final hearing. Petitioners filed objections to the motion, and oral arguments were presented to the Hearing Officer on January 19, 1983. The motion was denied on January 20, 1983. It was thereafter agreed by all parties that the hearing would be held on January 27, 1983, in Jacksonville, Florida.

At the final hearing, the Petitioners, Applicant and Yamaha, called as their witnesses: Ron Turner, Cathy Lamprecht, Robert Ewing and Dr. Joseph M. Perry, and offered Petitioners' Exhibits 3/ 1 through 15 into evidence, each of which was received. The Protestant called Gary Purcell as its witness and offered Respondent's Exhibits 3/ 1 through 5 into evidence, each of which was received.

At the close of the hearing, the parties requested and were granted the opportunity to file proposed findings of fact and conclusions of law within ten days from the date of filing of the hearing transcript with the DOAH. It was also agreed that the 30-day period for submittal of the recommended order to the Department would also begin from the date of filing of said transcript. The hearing transcript was filed on February 10, 1983, and the parties timely filed their post-hearing filings.

FINDINGS OF FACT

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

1. PARTIES

   
   

   1. The Applicant has applied to the Department for a motor vehicle dealer license authorizing it to operate a Yamaha franchise motorcycle dealership in Jacksonville, Duval County, Florida, at 8940 Lem Turner Road. (Testimony of Turner; P.E. 2.)

      
      

   2. Petitioner, Ron Turner Cycles, Inc. (hereinafter "Turner"), owns and operates a dual Yamaha/Suzuki motorcycle dealership in Jacksonville at 10263 Beach Boulevard. The Suzuki franchise for that location was acquired in 1976,

      and the Yamaha franchise followed in 1979. Turner has owned the exclusive Suzuki motorcycle franchise for Duval County since 1976. In addition to its dealership on Beach Boulevard, Turner owns and operates a Suzuki dealership located at 8940 Lem Turner Road, which opened in September of 1982.

      Petitioner's President, Ron Turner, has lived in Jacksonville for 39 years and has been in the motorcycle business for 20 years.

      
      

   3. The Protestant owns and operates an existing Yamaha motorcycle dealership in Jacksonville, located at 4949 Blanding Boulevard. The Protestant also owns Honda and Kawasaki motorcycle dealerships in Duval County, located on Blanding Boulevard. (Testimony of Purcell and Turner; P.E. 1.)

      
      

   4. The Applicant and the Protestant are the only existing Yamaha franchise dealers in Duval County. Yamaha has determined that a third franchise dealership should be located in the northside area of Jacksonville and has issued the Applicant a letter of intent dated July 30, 1982, indicating its willingness to enter into a Dealer Agreement with the Applicant to operate a Yamaha motorcycle dealership at 8940 Lem Turner Road, Jacksonville, Florida. (Testimony of Turner and Ewing; P.E. 1 and 3.)

      
      

   5. Yamaha is the national distributor for Yamaha brand motorcycles, parts and accessories in the United States. Its model issue for 1983 is constituted of 42 motorcycles ranging in retail price from $300.00 to $5,000.00. Yamaha offers various street machines, competition machines and dual-purpose motorcycles.

      
      

   6. The Department is an agency within the State of Florida with regulatory responsibility and authority, among those duties being the requirement to approve or disapprove the application for-new motorcycle dealer licenses in Florida sought by the prospective franchisees of the various motorcycle manufacturers and distributors.

      
      

2. TERRITORY INVOLVED

   
   

   1. Duval County is a large county with a population of approximately 571,003 based on the 1980 census, and has experienced a growth rate of 8 percent from 1970 to 1980, which represents an average annual rate of increase of 0.5 percent to 0.7 percent. During the next ten years, population growth and employment is expected to continue in a modest fashion. The City of Jacksonville encompasses the entire county except for the Beaches and Baldwin. Jacksonville is divided by the St. Johns River running north and south, and the various areas of the county are connected by major federal highways, Interstate 10, Interstate 295, Interstate 95, U.S. 1 and U.S. 90 (Beaver Street). (Testimony of Perry; P.E. 1.)

      
      

   2. Largely because of wide geographic separation between the population located east and west of the St. Johns River and in northern parts of the county, each area has developed distinct and identifiable marketing areas for general retail businesses. (Testimony of Perry; P.E. 1.)

      
      

   3. The area west of the St. Johns River (hereinafter "Southwest Jacksonville") may be described as that part of the city south of Beaver Street (U.S. Highway 90) to the county line and west of the St. Johns River to the Whitehouse area. The Jacksonville Naval Air Station and Cecil Field Naval Air Station are located in this market area. Using postal zip code areas, Southwest Jacksonville includes zip codes 32204, 32205, 32210/44, 32221 and 32222, and has

      a population of 58,643 people. (Testimony of Turner, Lamprecht and Perry; P.E. 11 and 12.)

      
      

   4. Four major franchise motorcycle dealerships are located in Southwest Jacksonville and the extreme northern part of adjacent Clay County. They are found on Blanding Boulevard. The brands are Honda, Yamaha, Suzuki and Kawasaki, three of which (Honda, Yamaha and Kawasaki) are owned by the Protestant's owner, Gary Purcell. (Testimony of Turner and Purcell; P.E. 1.)

      
      

   5. The area east of the St. Johns River (hereinafter "Southeast Jacksonville") may be described as that part of the city east of the St. Johns River including the Arlington-Fort Caroline and Southside areas. Numerous shopping centers, residential neighborhoods and Regency Square regional shopping center have developed to serve the population in this area. Using postal zip code areas, Southeast Jacksonville included zip codes 32207, 32211, 32216/24, 32217, 32223 and 32225, and has a population of 181,982 people. (Testimony of Turner, Lamprecht and Perry; P.E 9 and 10.)

      
      

   6. Four major franchise dealerships are located in Southeast Jacksonville: Honda (2), Kawasaki, and Turner's dual Yamaha/Suzuki dealership on Beach Boulevard. (Testimony of Turner; P.E. 1.)

      
      

   7. The market areas in the northern part of the city (hereinafter the "Northside") include most of the growing residential and commercial neighborhoods north of Beaver Street within a pie-shaped area lying between Interstate 95, U.S. 1, and zip code 32219 north of Cecil Field Naval Air Station. Using postal zip code areas, the Northside includes zip codes 32206, 32208, 32204, 32218 and 32219, and has a population of 143,308 people. (Testimony of Turner, Lamprecht and Perry; P.E. 1 and 15.)

      
      

   8. There are no major franchise motorcycle dealerships on the Northside, except for the Suzuki shop owned by Turner on Lem Turner Road. (Testimony of Turner.)

      
      

3. MARKET AREA INVOLVED

   
   

   1. Customers for the sales and service of new Yamaha motorcycles in Duval County are served primarily at two separate locations previously described as the Southwest Jacksonville and Southeast Jacksonville market areas. The Protestant serves the Southwest Jacksonville market area. Turner serves the Southeast Jacksonville market area. (Testimony of Lamprecht and Ewing; P.E. 8.)

      
      

   2. Two and one-half years ago, Yamaha made a preliminary determination that an additional dealership was needed in Jacksonville, but such action was postponed for two years while Yamaha's district sales managers worked with Turner and the Protestant to try and increase Yamaha's market share in Duval County. When the market penetration as a percentage of market share did not advance, Yamaha decided to open a third dealership in Duval County. (Testimony of Ewing.)

      
      

   3. July of 1982 was the date the decision to open the additional dealership was formalized. The Northside market area was selected as the location for the new dealership, based upon the fact that there were no other motorcycle dealerships in the northern part of Jacksonville and outlying areas adjacent to that part of Jacksonville. This area was also selected because the majority of people who buy Yamaha products are in the middle-to-low income range, and the Northside has that type population. (Testimony of Ewing.)

   4. An inverse relationship exists between the likelihood of selling a person a Yamaha motorcycle and the distance between the dealership and where the customer lives. Generally speaking, consumers shop in their neighborhoods for convenience, and if there is no Yamaha dealer, they will go to competitive brands if available, or not buy if required to drive 30 miles round-trip to purchase a Yamaha motorcycle. (Testimony of Turner and Lamprecht.)

      
      

   5. The distance between the Protestant's existing dealership on Blanding Boulevard and the Applicant's proposed dealership on Lem Turner Road in the Northside market area is 15 miles and takes approximately 20 to 25 minutes to travel, depending on traffic. The distance and time between the dealerships of the Protestant and Turner and Turner and the Applicant are also 15 miles, and 20 to 25 minutes. (Testimony of Turner; P.E. 1.)

      
      

4. ADEQUACY OF REPRESENTATION BY TURNER AND PROTESTANT IN THE NORTHSIDE MARKET AREA

   
   

   1. Market penetration relative to competitors is a standard tool for measuring the adequacy and performance of a motorcycle dealership. Market penetration is determined by Yamaha by use of: (1) R. L. Polk Company (hereinafter "Polk") motorcycle statistics based on state and county new motorcycle registrations, (2) Yamaha warranty registrations for its existing dealers categorized by dip code designation, and (3) population-per-dealer statistics. (Testimony of Lamprecht.)

      
      

   2. According to Polk, the four largest selling motorcycle brands in the United States are Honda, Yamaha, Kawasaki and Suzuki. The relative penetration of Yamaha during the year 1982, through October, in comparable market areas is as follows:

      
      

      UNITED STATES

      Honda - 42.3

      Yamaha - 23.2

      Suzuki - 14.8

      Kawasaki - 13.6

      
      

      SOUTHEASTERN REGION

      Honda - 50.1

      Yamaha - 20.0

      Suzuki - 13.5

      Kawasaki - 12.0

      
      

      DUVAL COUNTY

      Honda - 48.7

      Kawasaki - 18.7

      Yamaha - 16.4

      Suzuki - 10.9

      
      

      In both the United States and the Southeastern Region, Yamaha is number two in registrations, but in Duval County Yamaha has dropped to number three below Kawasaki. (Testimony of Lamprecht; P.E. 6.)

      
      

   3. During the past five years (1978 through October, 1982), Yamaha's market share of Polk registrations in Duval County has been well below both the Southeastern Region and the United States. In 1982, through the month of October, Yamaha's market shares in these areas of comparison were:

      United States 23.2

      Southeastern Region 20.0

      Duval County 16.4

      
      

      Yamaha's market penetration, or share of total import sales, of 16.4 percent in Duval County is 3.6 percent behind its penetration in the Southeastern Region of

      20 percent, and 6.8 percent behind its national market share of 23.2 percent. (Testimony of Lamprecht; P.E. 5.)

      
      

   4. Market penetration is also determined by Yamaha through population- per-dealer statistics. Based upon 1980 census figures, Yamaha has one dealer for every 139,155 people in the United States. In Duval County there are 287,350 people for each of Yamaha's two existing dealers, which is twice the national average. With three dealers in Duval County, the ratio would be one dealer for every 191,567 people, which is still substantially higher than Yamaha's national and regional penetration, and is an indication or explanation that Yamaha's market share in Duval County is lower than it is for the United States and the Southeastern Region because there are not enough dealers to serve the area. (Testimony of Lamprecht; P.E. 7.)

      
      

   5. Yamaha warranty registration records indicate that its dealers make most of their sales within the general area surrounding their dealerships. This is attributable to the shopping habits of customers; people prefer to purchase motorcycles and have them serviced from dealers which are convenient, close by, and readily accessible to where they live and work. In this case, the Protestant's sales experience is consistent with this customer preference. (Testimony of Lamprecht.)

      
      

   6. During the period from January 1, 1981, through August 31, 1982, Yamaha has determined that most of the Protestant's motorcycle sales occurred in the Southwest Jacksonville market area from the heavy concentration of population around its dealership. In 1982, through the month of August, the Protestant sold only three Yamaha motorcycles in the Northside market area out of a total of 140 Yamaha sales during that period, or 2.1 percent of its total sales. The Protestant's concentration of sales for the entire year 1981 showed the same pattern, and only 8.4 percent of its total sales were in the Northside market area. (Testimony of Lamprecht; P.E. 11 and 12.)

      
      

   7. Yamaha's warranty registration records show that during the year 1981, the Protestant sold 113 motorcycles in Southwest Jacksonville zip code areas which, spread over the total population in the area of 58,643, indicates a sales ratio of one motorcycle unit per 519 persons in the Southwest Jacksonville market area. (Testimony of Perry.)

      
      

   8. During the period from January 1, 1981, through August 31, 1982, Yamaha has determined that most of Turner's motorcycle sales occurred in the Southeast Jacksonville market area concentrated around its dealership. In 1982, through the month of August, Turner sold only ten Yamaha motorcycles in the Northside market area out of a total of 107 Yamaha sales during that period, or

      9.3 percent of its total sales. Turner's concentration of sales for the entire year 1981 showed the same pattern and market area. (Testimony of Lamprecht;

      P.E. 9 and 10.)

      
      

   9. Yamaha's warranty registration records show that during the year 1981, Turner sold 103 motorcycles in Southeast Jacksonville zip code areas which, spread over the total population in the area of 181,982, indicates a sales ratio

      of one motorcycle unit per 1,767 persons in the Southeast Jacksonville market area. (Testimony of Perry.)

      
      

   10. Yamaha's warranty registration records further show that during the year 1981, Turner and the Protestant sold only 39 motorcycles in Northside zip code areas which, spread over the total population in the area of over 140,000, indicates a sales ratio of one motorcycle unit per 3,675 persons in the Northside market area. (Testimony of Perry.)

       
       

   11. The Protestant and Turner are not reaching the potential motorcycle market in the northern part of the city and, as a result, Yamaha representation and market share in Duval County market is inadequate. (Testimony of Lamprecht and Ewing.)

       
       

5. ECONOMIC VIABILITY OF A NEW DEALERSHIP ON THE NORTHSIDE

1. Turner now operates an efficient and profitable Yamaha/Suzuki motorcycle dealership on Beach Boulevard, and its sales during October, November and December, 1982, have been the best the dealership has had in seven years. (Testimony of Turner and Ewing.)

   
   

2. Turner has been operating a Suzuki dealership on the Northside since September 1, 1982. Suzuki sales at that location through Christmas were within projections, and the business is operating on a break-even basis. Turner's Suzuki sales during this period were made primarily to customers living in the Northside zip code areas. (Testimony of Turner.)

   
   

3. The average motorcycle consumer is a male, age 18 to 34, blue-collar worker, in the lower-middle to middle class. The Yamaha line is designed to capture a market for all age consumers. (Testimony of Lamprecht and Ewing.)

   
   

4. The Northside has a population of over 140,000 persons, or 20 percent of the Duval County population. This population is essentially made up of middle or lower-middle income, blue-collar and clerical workers having a basic income of between $16,000 and $18,000 a year. This represents the backbone of the Duval County labor force and economy. The average family home in this area has a market price of approximately $30,000. All of these factors suggest that the Northside area has a good stable population of lower-middle income persons with purchasing power to buy motorcycles, and the area can be expected, like the rest of Duval County, to expand over the next ten years. (Testimony of Perry.)

   
   

5. Retail sales studies made by Yamaha in the Southeastern Region establish that through the last quarter of 1982 there has been no change in retail sales from 1981 to 1982. (Testimony of Lamprecht.)

   
   

6. Motorcycle registrations for Duval County for fiscal years 1977-1978 through 1980-1981 have shown a modest, stable increased trend consistent with the population growth, and such trend is expected to continue. (Testimony of Perry; P.E. 14.)

   
   

7. The location of a Yamaha dealership on the Northside at the proposed Lem Turner location will not operate to reduce sales on the part of the Protestant or Turner. The dealership located in a presently unrepresented area will assist Yamaha in further penetration of the Duval County market. By increasing the visibility of Yamaha generally, the additional facility will increase demand and brand awareness for all Yamaha dealers along, with a greater

   degree of competition in sales and service. While the Protestant and Turner can offer Yamaha motorcycles to potential customers in the Northside Area, they cannot stimulate such sales as well as a specific dealership in that location could.

   
   

   CONCLUSIONS OF LAW

   
   

8. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. See, Section 120.57(1), Florida Statutes (1981).

   
   

9. The standard for dealer license applications which must be satisfied when the licensure is protested by the manufacturer's presently licensed franchised motor vehicle dealer(s) is set forth in Section 320.642, Florida Statutes (1981). That provision states:

   
   

   Dealer licenses in areas previously served.--The department 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.

   
   

   As indicated before, there is no claim on the part of the manufacturer that the Protestant has failed to comply with the franchise agreement issued by Yamaha. Therefore, the question to be considered concerns the adequacy of the representation of the Yamaha product by the Protestant in the comn unitv or territory at issue here. In this instance, the community or territory sought to be served is constituted of North Jacksonville, as described in the facts. This is the identifiable plot where the Applicant would conduct its business and would place its sales and service emphasis. See, Bill Telley Chevrolet, Inc. v. Calvin, 322 So.2d 50 (Fla. 1st DCA 1975)

   
   

10. As borne out by the facts reported in this Recommended Order, North Jacksonville is not receiving "adequate representation" by the present Yamaha dealers. North Jacksonville is an identifiable, distinct and separate retail market, as distinguished from the Southeast and Southwest population centers of Jacksonville, which are being adequately represented by Turner and the Protestant, respectively. With the addition of a third dealer, Yamaha could be expected to gain a more representative market penetration in Duval County as compared to the United States and the Southeastern Region. The present disparity in market penetration evidences the fact that the manufacturer is not receiving "adequate representation." Finally, the grant of the license would not promote unfair treatment of the presently existing dealers, and the decision to place an additional franchise dealer in Duval County was not in furtherance or a design to penalize present dealers. See, Plantation Datsun, Inc. v. Calvin, 275 So.2d 26 (Fla. 1st DCA 1983). It is, therefore,

RECOMMENDED:

That a final order be entered which grants the license application of Ron Turner Cycles, Inc. d/b/a Ron Turner Cycles North.

DONE and ENTERED this 7th day of March, 1983, in Tallahassee, Florida.

CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 7th day of March, 1983.

ENDNOTES

1/ The parties in the person of counsel have submitted proposed recommended orders. Those proposals have been reviewed prior to the entry of this Recommended Order. To the extent that the proposals are consistent with this Recommended Order, they have been utilized. To the extent that the proposals are inconsistent with this Recommended Order, they are rejected.

2/ There was no contention in this cause that the Respondent Yamaha West had failed to comply with his license franchise agreement with Yamaha Motor Corporation, U.S.A. Consequently, that issue is not addressed in this Recommended Order.

3/ Petitioners' and Respondent's Exhibits will be referred to as "P.E. " and "R.E. ," respectively. The transcript will be referred to as "TR ."

COPIES FURNISHED:

Haywood M. Ball, Esquire Post Office Box 479

1600 Atlantic Bank Building Jacksonville, Florida 32201

Russell D. Jura, Esquire Yamaha Motor Corp., U.S.A. Post Office Box 6555 Cypress, California 90630

John C. Pevis, Esquire

420 North Halifax Drive Su4-A

Daytona Beach, Florida 32218

Docket for Case No: 82-002852

Orders for Case No: 82-002852