Findings Of Fact In November 1986, Sport Products received approval of its application with American Honda to establish a Honda motorcycle, all terrain vehicle (ATV), and motor scooter dealership in Fort Lauderdale, Florida. By application dated December 2, 1986, Sport Products applied to the Department for a motor vehicle dealer license to establish its dealership at 1030 West Sunrise Boulevard, Fort Lauderdale, Florida. The application of Sport Products was protested by Stanmar and Honda West, existing dealers in Broward County. Stanmar's dealership is located near the intersection of Copans and Powerline Roads, Pompano Beach, Florida. As sited, Stanmar is located approximately 9.5 miles due north of the proposed dealership. Honda West's dealership is located at the intersection of University Drive and Stirling Road, Davie, Florida. As sited, Honda West is located a straightline distance of approximately 9 miles southwest, but a substantially greater distance over any available route of travel, from the proposed dealership. 1/ Replacement Dealer Or New Dealer Point? The proposed site for the Sport Product dealership, 1030 West Sunrise Boulevard, Fort Lauderdale, Florida, is the same location previously occupied by another Honda dealer, Satnam Enterprises, Inc. (Satnam). Satnam conducted business at that location from 1979 until late December 1985, when it ceased doing business. Satnam's dealership agreements with American Honda were terminated on January 22, 1986. Upon termination of Satnam's dealership, American Honda immediately began its search for a replacement dealer in Fort Lauderdale. Typically, it takes from six months to one year to advertise open dealership points, evaluate applications, and select a replacement dealer. In this case, the replacement dealer, Sport Products, was located and approved within one year. If licensed, Sport Products would resurrect the third Honda motorcycle, all terrain vehicle (ATV) and motor scooter dealership in Broward County since the demise of Satnam. The issue of American Honda's right to establish a third Honda dealership in Broward County was previously addressed in the matter of Satnam Enterprises, Inc., d/b/a Honda of Fort Lauderdale, et al. v. S.G. Silverman, et al., DOAH Case No. 85- 0836. In that case, Satnam and Honda West protested Stan Silverman's (Stanmar's) proposal to establish a third dealership in Broward County at the intersection of Copans and Powerline Roads, Pompano Beach, Florida. The case proceeded to hearing on September 11 and 12, 1985, and the hearing officer entered his recommended order on November 13, 1985. The Department's final order, which adopted the recommended order in toto, was entered December 30, 1985, and found that Broward County was the relevant market area, community or territory to be considered and that American Honda was inadequately represented in that area by the two existing dealers. Subsequently, Stanmar received its dealer's license. 2/ As appears more fully from the findings of fact which address the adequacy of the existing two dealers representation of Honda in Broward County, infra, there have been no changes in circumstance that would warrant a departure from the final order rendered in Satnam Enterprises, Inc., d/b/a Honda of Fort Lauderdale, et al. v. S.G. Silverman, et al., supra. The need for three dealership points having been established in that case, it is concluded that the subject application is for a replacement dealership and not a new dealership point. Adequacy Of Existing Dealer Representation Broward County is the relevant market area, community or territory under consideration in this case. The proof establishes that American Honda is not being adequately represented in Broward County. This is evidenced by the following: As of November 1986, R.L. Polk & Co. reported that Honda's market share in the entire State of Florida was 51.06 percent, while Honda's market share in Broward County was 26.65 percent. Simply stated, this means that whereas throughout the State of Florida 51 of every 100 motorcycles and motorscooters sold was a Honda vehicle, only 27 of every 100 sold in Broward County was a Honda vehicle. 3/ By comparison, at the time of Case No. 85-0836, supra, which concluded that a third dealership in Broward County was needed, Honda's market share for Broward County was 48.07 percent, whereas its state- wide share was 55.73 percent. The R.L. Polk Reports demonstrate that Honda's market share in Broward County has been steadily erroding over the past five years. Currently, there are 52 Honda dealerships in the State of Florida. Since the population for the entire state was estimated in 1986 to be 11,668,638 people, there is currently one Honda dealer for every 224,397 people in the State of Florida. There are now only two Honda dealers in Broward County, which had an estimated population in 1986 of 1,203,210 people. This equates to a dealership per population ration of one dealership for every 603,605 people. With the re-establishment of the third dealership in Broward County, that ratio would be reduced to one dealership for every 401.070 people in Broward County, whereas the state ratio, calculated with the additional dealership, would then be one dealership for every 220,163 people. Clearly, the dealership per population ratio in Broward County far exceeds the state-wide ratio, and would continue to greatly exceed the state- wide ratio even if Sport Products is licensed. Since 1982, there have been an increasing number of Broward County residents who have gone outside Broward County to purchase their Honda vehicles. In contrast, a significantly lesser number of customers from outside Broward County have traveled into Broward County to purchase their vehicles. In 1984, one Honda vehicle was sold in the State of Florida for every 367 people within the state. In Broward County for 1984, that figure was one vehicle for every 503 people. In 1985, whereas one Honda vehicle was sold throughout the state for every 402 people, that figure in Broward County was one Honda vehicle for every 702 people. In 1986, whereas one Honda vehicle was sold throughout the state for every 516 people, that figure in Broward County had plummeted to one Honda vehicle sold for every 1,133 people. If the ratio of sales to population in Broward County had been the same as the state-wide ratio in 1986, 2,332 American Honda units would have been sold. In fact, the two existing Broward County dealers sold 638 units, while non-Broward County dealers sold 424 units to Broward County residents. Consequently, there was an estimated unmet sales potential of 1,270 units for 1986. Even if sales by Stanmar for 1986 are doubled (in essence, providing Stanmar with 14 months of sales to account for the fact that it started in business in June 1986), the unmet sales potential in Broward County still exceeds 1,000 units, which is more than sufficient to support the proposed dealership and still leave substantial room for sales increases by the two existing dealers. The foregoing sales projection figures are based upon emperical data showing the sales per population of Broward County residents, and is therefore intrinsically credible. Further, such projections have been validated. Hence, the evidence establishes not only the reasonableness of the projections calculated by Honda's expert, Dr. Ford, but also the inadequacy of current representation. The evidence establishing inadequacy of representation was particularly acute with respect to American Honda's motor scooter product line. Whereas in the state and throughout the nation more than 7 out of every 10 motor scooters sold is a Honda vehicle, in Broward County, less than 3 out of every 10 motor scooters sold is a Honda vehicle. This situation is particularly significant in that the motor scooter product line, which was introduced by American Honda in 1983, is very important to American Honda, since it is intended to be marketed to persons outside the traditional motorcycle market. Through such marketing, American Honda should be able to introduce a new segment of the population to its product line, and thereby increase its consumer base. Broward County is a good motor scooter market, as it is blessed with year-round favorable weather, many beach communities, and an emphasis on recreation. In addition, in the Fort Lauderdale area, there are a number of low income households. Low income areas are fertile markets for the motor scooter product line. Notwithstanding these factors favoring the sale of the Honda motor scooter product line, the existing Broward County dealers are either unwilling or unable to adequately represent that product line in this community, particularly in the Fort Lauderdale area. For example, neither of the protesting dealers participated significantly in a recent promotion conducted by American Honda with respect to the lower priced model motor scooter, notwithstanding the fact that a representative from American Honda visited both dealers to explain the program and its benefits, and to recommend that the dealers participate. It appears that Honda West considers itself too far removed from what it considers the primary market for the motor scooter, and Stanmar considers itself unable to compete with the local Yamaha motor scooter dealer. Further, the evidence established that the motor scooter purchaser is more likely to be a localized shopper, such that the physical separation of the two protesting dealers from the greater Fort Lauderdale area is a significant factor contributing to the inability of those dealers adequately to represent American Honda's motor scooter product line. Failure of a dealer to adequately represent a particular product line is tantamount to inadequate representation of the manufacturer or distributor. The population in Broward County has shown tremendous growth, as has Florida, and is projected to continue that growth through at least the year 2020. Significantly, the east central sector of Broward County, in which the proposed dealership would be established, is the most densely populated sector of Broward County, and is likewise projected to increase its population through the year 2020. Substantial growth is also projected for the southwest and southeast sectors, in which Honda West's dealership is located, and in the northwest and northeast sectors, in which Stanmar's dealership is located. Accordingly, it is anticipated that there will be an increasing need for the third Broward County dealership in the future. Broward County is an economically viable market, ranking second among all counties in such things as total and per capita Effective Buying Income, Buying Power Index, and total per capita Retail Sales. Additionally, Broward County has shown substantial growth in these figures through 1986. These are the economic indices typically used to gauge the vitality of a market. The protesting dealers did not dispute the deficient market share for Honda products in Broward County, but attempted to rationalize the disparity by citing to a number of factors. One such factor was certain adverse publicity associated with the previous Fort Lauderdale Honda dealership. Such evidence was, however, unpersuasive. First, protestants offered no proof that a nexus existed between the previous dealer's reputation and the inadequate market share. Second, the proof established that the previous dealer was a Honda- Yamaha-Suzuki dealer and, consequently, any adverse impact would have afflicted those product lines also. Other factors cited by the protesting dealers in an attempt to explain or rationalize Honda's poor market penetration in Broward County included the timing of product releases by the manufacturer, pricing policies, the quantity and models available for dealers to sell, insurance rates, the lack of off-road riding areas, and safety concerns regarding the 3-wheeled ATVs. Such factors are, however, unpersuasive in explaining Honda's lack of penetration into the Broward County market. To the extent such factors existed, they would have affected either all brand vehicles equally, or at least all Honda dealers equally if the factor was peculiar to a specific Honda product. Other evidence presented by the protesting dealers, such as Mr. Silverman's contention that an American Honda representative told him that the Fort Lauderdale dealership would not be replaced, is not only inherently improbable, but was rebutted by credible proof. That proof established that American Honda consistently advised Mr. Silverman that the Fort Lauderdale dealership would be re-established, and that Mr. Silverman's only concern was that it not be located any closer to his dealership than previously sited. Finally, protestants suggest that Honda's poor performance in the Broward market in 1986 can be explained by the fact that following Satnam's closure in December 1985, there was only one Honda dealer, Honda West, for Broward County until Stanmar opened in June 1986. While such dealer turnover and lack of representation could have affected Honda's performance in 1986, it does nothing to explain Honda's consistently poor market penetration in the preceding years. Consequently, protestants' assertion does not detract from the conclusion that American Honda is not adequately represented in Broward County, and more particularly in Fort Lauderdale. "Market share" and "sales penetration" are reliable measures of dealer representation. "Market share" measures a manufacturer's percentage of a given market based upon registration data obtained by R.L. Polk from the various states, and recorded monthly on a county-by-county, state-by-state, and national basis. All terrain vehicle sales are not reflected in R.L. Polk data for the State of Florida since they are not used on the roads and highways and therefore are not registered in the state. "Sales penetration" measures actual unit sales compared with total sales potential using manufacturer warranty data, whether or not the vehicle is registered.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Highway Safety and Motor Vehicles process Sport Products' application for a motor vehicle dealer license, and that the protests of Stanmar, Inc. and International Cycle, Inc. be dismissed. DONE AND ORDERED this 17th day of April, 1987, in Tallahassee, Florida. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of April, 1987.
Findings Of Fact Respondent, Mechanical Services of West Palm Beach, Inc. (Mechanical Services), is an existing Suzuki motorcycle dealership located in Palm Beach County, Florida. Respondent, Deerfield Suzuki, Inc. (Deerfield Suzuki), is an existing Suzuki motorcycle dealership located at 4141 North Federal Highway, Pompano Beach, Broward County, Florida. Petitioner, Fun Stream Recreation, Inc. d/b/a Delray Kawasaki (Delray Kawasaki) is an existing dealer for Kawasaki motorcycles and is located at 505 N.E. 5th Avenue, Delray Beach, Palm Beach County, Florida. Delray Kawasaki is the proposed Suzuki dealership. Petitioner, American Suzuki Motor Corporation (American Suzuki) is the licensee which intends to establish a new Suzuki dealership at Delray Kawasaki. Deerfield Suzuki and American Suzuki have stipulated that Deerfield Suzuki is located within 12.5 miles of the location of the proposed dealership. Palm Beach County, Florida, has a population in excess of 300,000. Based on information from the Bureau of Economic and Business Research, University of Florida, Palm Beach County's population was estimated to be 937,190 as of April 1, 1994. No evidence was presented to establish that Mechanical Services was located within 12.5 miles of the location of the proposed dealership or that during the 36 month period before the filing of the application for the proposed dealership that Mechanical Services made 25 percent of its retail sales of new vehicles to persons whose registered household addresses were located within a radius of 12.5 miles of the location of the proposed dealership. COMMUNITY OR TERRITORY Neither Deerfield Suzuki nor Mechanical Services has an agreement with American Suzuki which geographically defines the sales territory for the dealerships. The majority of Suzuki sales by Mechanical Services are in Palm Beach County. Deerfield Suzuki derives the majority of its Suzuki sales from Broward County residents. The majority of Kawasaki sales from the proposed Suzuki dealership, Delray Kawasaki, are made to customers in Palm Beach County. American Suzuki contends that Palm Beach County is the community or territory which should be considered in determining whether there is adequate representation in the community or territory of the proposed dealership. Deerfield Suzuki presented no evidence to indicate that the community or territory should be an area other than Palm Beach County. Based on the evidence presented, the relevant community or territory is defined as Palm Beach County, Florida. IMPACT OF THE ESTABLISHMENT OF THE PROPOSED DEALERSHIP During 1992, Deerfield Suzuki made 49 Suzuki sales to customers within a 12.5 mile radius of the proposed dealership. These sales represented 38 percent of Deerfield Suzuki's total retail sales for 1992. Deerfield Suzuki made 31 Suzuki sales in 1993 to customers within a 12.5 mile radius of the proposed dealership. These sales accounted for 32 percent of Deerfield Suzuki's total Suzuki retail sales for 1993. Deerfield Suzuki derived 32 percent of its total Suzuki retail sales in 1994 from customers within a 12.5 mile radius of the proposed dealership, by making 34 sales. Peter A. Barskis, President of Deerfield Suzuki, anticipates that the establishment of the proposed dealership will lessen the number of sales that Deerfield is currently making in the Boca Raton and Delray Beach area. Mr. Barskis did not present any evidence to indicate to what extent Deerfield Suzuki's market share in those areas would be diminished and to what extent it would have a financial impact on Deerfield Suzuki. INVESTMENTS MADE AND OBLIGATIONS INCURRED BY CURRENT DEALERSHIPS The only evidence presented with regard to the facilities of the exiting dealers pertained to Mechanical Services which sought and received permission from American Suzuki to relocate Suzuki into its existing facility. Mechanical Services represented to American Suzuki that it would construct an additional facility in order to properly represent Suzuki. To date, Mechanical Services has not constructed an additional facility. REASONABLY EXPECTED MARKET PENETRATION Market penetration is the percentage of Suzuki products sold compared to the total industry, regardless of the dealer which sold the product. In the motorcycle industry, registration and sales information are compiled by R.L. Polk and Co. (Polk) and since January 1994, by the Motorcycle Industry Council (MIC). Polk data reflects only motorcycles which are registered with the states for use on the highways. Most all terrain vehicles (ATV's) are not registered with the state of Florida. Polk reports registrations of motor scooters which are registered for street use; however, Suzuki does not compete in the motor scooter market. Thus, data from Polk is only utilized for the "2- wheel motorcycle" or "street-legal" motorcycle category. MIC data, available only since the beginning of 1994, reports all sales of vehicles from the major motorcycle brands, regardless of whether the vehicles are registered for street use. Based on the Polk data, Suzuki received the following market share of the motorcycle market for 1990-1994: 1990 1991 1992 1993 1994 National 15.01 16.34 15.92 14.81 13.37 Florida 12.78 14.30 14.62 12.59 11.38 Broward County 10.32 16.08 16.97 13.17 11.48 Palm Beach County 16.33 15.85 11.52 9.57 8.81 Based on the MIC data, Suzuki received the following market share for 1994: National 13.44 Florida 14.29 Broward County 15.84 Palm Beach County 10.98 Broward County is adjacent to Palm Beach County. Based on information from the Bureau of Economic and Business Research, University of Florida, Broward County's population was estimated to be 1,340,220 as of April 1, 1994. Suzuki does not have dealers in some areas of Florida where its competitors do. Such areas include St. Augustine, Key West, and Gainesville. Based on the evidence presented, Broward County is an appropriate standard to use in determining adequacy of representation in Palm Beach County. There is adequate representation of Suzuki in Broward County. In 1994 there were a total of 1,394 motorcycle type vehicles sold in Palm Beach County. Using Broward County's market penetration of 15.84 percent as a standard, it would be reasonable to have expected 221 Suzuki sales. The actual sales made were 153. Thus, 68 of the expected sales were lost to Suzuki's competitors. If you look at Broward County as a standard based on population for 1994, there were 41 sales in Palm Beach County that were lost to Suzuki's competitors. There were 278 Suzuki sales in Broward County in 1994. Based on Broward County's population of 1,340,220, the ratio of population to Suzuki sales is 4821/1. Based on Palm Beach County's population of 937,190, it would be reasonable to have expected 194 Suzuki sales in 1994. However, the actual sales were 153. ACTIONS BY LICENSEE RELATING TO OPPORTUNITY FOR GROWTH, EXPANSION AND RELOCATION FOR EXISTING DEALERS In 1990, Deerfield Suzuki sought and received permission from American Suzuki to relocate from its prior location in Deerfield Beach to its current location in Pompano Beach which is three miles south of its previous location. In December 1992, Mechanical Services sought and gained approval from American Suzuki to transfer a franchise previously held by another dealership. As a result of this transfer the Suzuki dealership was relocated one mile north or further away from Delray Beach. Deerfield has requested American Suzuki to supply it with vehicles in excess of its allocation and American Suzuki has done so. From 1991 to 1995, American Suzuki has discontinued some models, however, the models were discontinued for either product liability reasons or in the normal change of models carried on by all manufacturers on a periodic basis. American Suzuki has also added models during this time period. In 1990 and 1991, American Suzuki did spring advertising promotions in Palm Beach County. In 1991 and 1992, American Suzuki did spring advertising promotions in Broward County which lasted approximately two months each. In 1992, 1993, 1994, and 1995, American Suzuki did a Miami Grand Prix advertising promotion in Broward County, which lasted one week each year. DISTANCE BETWEEN EXISTING DEALERS AND PROPOSED DEALER The driving distance between Mechanical Services and Delray Kawasaki, the proposed dealership, is 22.2 miles, and the travel time between the two dealers is 31 minutes. The driving distance between Deerfield Suzuki and Delray Kawasaki is 18.1 miles and the travel time is 24 minutes. ADEQUACY OF INTERBRAND AND INTRABRAND COMPETITION AND CONVENIENCE OF CONSUMER CARE In 1994, there were three Suzuki dealers, two Honda dealers, three Yamaha dealers, and two Kawasaki dealers in Broward County. In 1994, Palm Beach County had one Suzuki dealership, two Honda dealerships, one Yamaha dealership, and two Kawasaki dealerships. One Kawasaki dealership is located in Delray Beach and one Honda dealership is located in the southern portion of Palm Beach County in Boca Raton. The remaining dealerships are located in the northern portion of Palm Beach County. When the number of Suzuki sales in the Delray Beach area made by Mechanical Services and Deerfield Suzuki are compared to the Kawasaki sales in that area, it is obvious that there is a lack of interbrand competition in that area. See Suzuki Exhibits 2, 3, and 4. The distance between Mechanical Services and Deerfield Suzuki does not promote intrabrand competition. For example a customer in West Palm Beach could shop for a Suzuki at Mechanical Services , but then would have to travel almost an hour south to Broward County, or a substantial distance north to Martin County, to comparison-shop for a better price, service, and selection. ECONOMIC AND MARKETING CONDITIONS In terms of future growth, Palm Beach County is projected to continue its substantial growth, in terms of population, through 2020. The total motorcycle market, as reflected in Polk registrations for Palm Beach County, has increased consistently since 1991. In 1991, the total motorcycle registrations were 568; in 1992, 712; in 1993, 857; and in 1994, 863. On a national level, although total motorcycle industry registrations reached a low point of 183,679 in 1991, this figure has steadily increased to 187,989 in 1992; 214,618 in 1993; and 234,337 in 1994. In terms of future growth of the motorcycle industry nationwide, this increase is forecasted to continue at least through 1998. There has been a decline in the national market share for Suzuki from 1992 through 1994. However, there has been a greater decline in the market share in Palm Beach County for the same time period. The economic growth and marketing data demonstrate that the addition of a Suzuki dealership in Delray Beach is justified by the growth of population and the motorcycle market. PERFORMANCE OF THE DEALER NETWORK Based on the performance of the existing dealer network for Palm Beach County using Polk data, the efficiency percentage of sales penetration in Palm Beach County for 1990-1994 as compared to the national and state penetration was as follows: 1990 1991 1992 1993 1994 National 108.8 97.0 72.4 64.6 65.9 Florida 127.7 110.8 78.8 76.0 77.4 Using the MIC data for 1994, the existing dealer network's efficiency as compared to the national market penetration was 81.6 percent and as compared to the Florida market penetration was 76.8 percent. In comparison, the efficiency percentage of performance of the dealer network in adjacent Broward county for 1990-1994 based on Polk data was as follows: 1990 1991 1992 1993 1994 National 68.8 98.4 106.6 88.9 85.9 Florida 80.8 112.4 116.1 104.6 100.9 Based on MIC data the efficiency of performance for Broward County for 1994 was 118 percent as compared to the national market penetration and 111 percent as compared to the Florida market penetration.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered dismissing the protest of Mechanical Services for lack of standing and granting the application to establish a Suzuki motorcycle dealership at Delray Kawasaki, 505 N.E. 5th Avenue, Delray Beach, Florida. DONE AND ENTERED this 10th day of August, 1995, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings 10th day of August, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-6991 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. Paragraphs 1-3: Accepted in substance. Paragraph 4: Rejected as constituting a conclusion of law. Paragraph 5: The first sentence is rejected as constituting a conclusion of law. The second sentence is accepted. Paragraphs 6-17 : Accepted in substance. Paragraphs 18-19: Rejected as constituting argument. Paragraph 20: Accepted in substance as it relates to Broward County but rejected as to Dade County as irrelevant. Paragraphs 21-23: Rejected as subordinate to the facts found. Paragraph 24: Rejected to the extent that Deerfield Suzuki argues that the appropriate standard is the national average. Paragraph 25: Rejected as constituting argument. Paragraph 26: The first sentence is accepted in substance except as to the two weeks. The evidence established the duration was one week. The last sentence is rejected as constituting argument. Paragraph 27: The first sentence is accepted in substance. The first half of the second sentence is accepted in substance and the remainder is rejected as irrelevant. Paragraphs 28-33: Accepted in substance. Paragraph 34: Rejected as unnecessary. Paragraphs 35-39: Accepted in substance. Paragraph 40: The first sentence is rejected as unnecessary. The second sentence is accepted in substance. Paragraphs 41-42: Rejected as constituting argument. Paragraph 43: Accepted in substance. Paragraph 44: Rejected as constituting argument. Paragraphs 45-51: Accepted in substance. Paragraph 52: Rejected as constituting argument. Paragraphs 53-54: Accepted in substance. Paragraph 55: Rejected as constituting argument. Paragraphs 56-60: Accepted in substance. Paragraph 61: Accepted. Respondent Deerfield Suzuki's Proposed Findings of Fact. (Deerfield Suzuki did not delineate findings of fact and conclusions of law.) Paragraph 1: The first, second and third sentences are rejected as constituting argument. The last sentence is rejected as not based on the greater weight of the evidence and as irrelevant because the Palm Beach County averages also fell below the national averages from 1991-1994. Paragraph 2: The first sentence is accepted in substance. The second and third sentences are rejected as not supported by the greater weight of the evidence. The fourth sentence is rejected as subordinate to the facts found because since 1991 Palm Beach County's average has been lower than the national, Florida, and Broward County averages. The fifth and sixth sentences are accepted in substance. The seventh sentence is rejected as constituting argument. The eighth sentence is rejected as subordinate to the facts found. The ninth sentence is rejected as constituting argument. The tenth sentence is accepted in substance. Paragraph 3: The last sentence is rejected as constituting argument. The remainder is accepted in substance. Paragraph 4: Rejected as not supported by the greater weight of the evidence. COPIES FURNISHED: John Logsdon Cycles of Palm Beach 2353 North Military Trail West Palm Beach, Florida 33409 Dean Bunch, Esquire Cabaniss, Burke & Wagner 909 East Park Avenue Tallahassee, Florida 32301 Mr. Peter A. Barskis, President Deerfield Suzuki, Inc. 4141 North Federal Highway Pompano Beach, Florida 33064 Mike Alderman, Esquire Assistant General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A432 Tallahassee, Florida 32399-0504 Charles J. Brantley, Director Division of Motor Vehicles Room B439, Neil Kirkman Building Tallahassee, Florida 32399-0500 Enoch Jon Whitney General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0500
Findings Of Fact Petitioner, Dean's Kawasaki, Inc., d/b/a Dean's Honda-Kawasaki-Suzuki (Dean's), is an authorized dealer for Suzuki brand motorcycles, all terrain vehicles (ATV's) and generators in Vero Beach, Indian River County, Florida. Dean's is also an authorized dealer for similar Honda and Kawasaki products. Lorre Dean Mays is the president and owner of Dean's. Mr. Mays purchased the dealership, then known as Suzuki of Vero Beach, on July 31, 1981, for approximately $80,000. The purchase price reflected consideration of all assets of the business, except motorcycles, 1/ and included $7,238 of Suzuki parts and accessories and $5,690 of other accessories. Dean's currently has approximately $8,000 worth of Suzuki parts and accessories in inventory. At the time of its acquisition, the Vero Beach dealership sold exclusively Suzuki products and had been, for the year preceding July 1981, one of the top one hundred sales producers in the United States. At hearing, Mr. Mays claimed to have won this award from Suzuki, however, the evidence is clear that such award was not attributable to Mr. Mays' efforts in the dealership. While the award was given to the dealership, it was based on the dealership's performance prior to its purchase by Mr. Mays. Although not an award winning dealer, there is no suggestion that Dean's performance prior to the 1985 model year (October 1, 1984, through September 30, 1985) was anything short of satisfactory. On February 12, 1985, Suzuki's district sales manager, Charles Barrett, made his semi-annual visit to Dean's. During the course of that 31 hour visit, Mr. Barrett inventoried Dean's product lines and reviewed, with Mr. Mays, Dean's sales figures. Mr. Barrett's inspection revealed that Dean's had in stock 19 Suzuki units (11 old model motorcycles, 4 current model motorcycles, and 4 current model ATV's), and no Suzuki units on order. Comparatively, Dean's had on hand 20 Kawasaki units and 100 Honda units. Dean's Suzuki sales figures and market share for Indian River County were substantially below those of the previous year. Since the commencement of the 1985 model year on October 1, 1984, Dean's had sold only 7 Suzuki units, 2/ compared with 45 units the previous year. During the same time period, Dean's had sold 25 Kawasaki units and 150 Honda units. Nationally, Kawasaki and Suzuki enjoy about the same percentage of the market. At the conclusion of his visit, Mr. Barrett advised Mr. Mays, orally and in writing, that Dean's sale of two wheel products was poor, that better sales efforts needed to be made, and that more Suzuki units needed to be ordered and stocked. Mr. Barrett recommended that Dean's place an order for twenty 1985 model motorcycles, which would represent sixteen different models in Suzuki's current product line, as well as an advance order for fourteen 1986 model motorcycles. As of September 1985, Suzuki's records reflect that Dean's had not ordered any Suzuki units, and had made only one additional sale of a Suzuki product. At the time of hearing, Dean's had only two Suzuki units in stack. By letter of September 23, 1985, Respondent, Suzuki, notified Dean's that its dealer agreement was cancelled. The letter of termination provided in pertinent part: This action is being taken based on the following: You have failed to maintain a sales volume which is comparable to other similarly situated dealers within your region. You have failed to maintain a sufficient level of Suzuki inventory to adequately represent the line of Suzuki products. You have failed to use Suzuki advertising programs to promote Suzuki products in your sales area. Dean's timely filed a verified complaint with Respondent, Department of Highway Safety and Motor Vehicles (Department), alleging that its sales volume exceeded that of similarly situated dealers, that it maintained a sufficient inventory to supply its region, that it had participated in all Suzuki promotions available to it, and that the proposed cancellation was an unfair cancellation under Section 320.641, Florida Statutes. To compare Dean's sales performance with "similarly located Suzuki dealers in comparable trade areas," Suzuki identified its dealers situated in Florida counties with similar populations and similar total industry sales. During the period from December 31, 1984, through October 1, 1985, sales of Suzuki products by Dean's (Indian River County), compared with the dealerships in the other counties, were as follows: Citrus County 62 Clay County 112 Hernando County 13 Indian River County 5 Martin County 59 Monroe County 18 Osceola County 40 Putnam County 36 St. Johns County 17 While Dean questioned whether some of the counties selected by Suzuki were truly comparable to Indian River County, it offered no proof that would detract from the probative value of Suzuki's comparison. The sale of five Suzuki units in a nine-month period was significantly below that of similarly located Suzuki dealers, and Dean's did not suggest or attempt to show otherwise. Rather, Dean's sought to show that its sales performance was greater than that reflected by Suzuki's records because Dean's registered all purchases and sales through Mr. May's Okeechobee County dealership. In 1984 Mr. Mays had acquired Suzuki of Okeechobee. He avers that upon its acquisition he undertook to "improve" the Okeechobee franchise by purchasing for both franchises, and registering sales for both franchises, under his Okeechobee dealership number. According to Mr. Mays, he adopted this approach to "establish" the Okeechobee dealership and, thereby, assure its "allocation" of Suzuki products. Mr. Mays' testimony is not credited. 3/ During the 1985 and 1986 model years, there was no shortage of Suzuki products and Suzuki had no "allocation" policy. Mr. Mays was specifically advised by Mr. Barrett on February 12, 1985, that the Vero Beach dealership had a poor sales record and that it needed to stock more units to promote the Suzuki line. The evidence establishes that Dean's did not improve its sales record and that it did not stock for display, demonstration, or sale an inventory adequate to promote Suzuki's product line. 4/ The proof is consistent with Mr. Mays' concession that over the last two years he did not pay as much attention to his business as he should have paid. Consistent with its low inventory and poor sales performance, Dean's participated in little or none of Suzuki's cooperative advertising programs during the 1985 model year, nor did it otherwise specifically support the Suzuki product line through newspaper or billboard advertising. 5/ Dean's advertising efforts were restricted to the expenditure of $2,000 to promote Honda-Kawasaki- Suzuki at three fairs and radio "live remotes," the "sponsorship" of a Suzuki ATV racer, and occasional seasonal displays of a Suzuki product at a local shopping mall. 6/ The dealership agreement executed by Dean's and Suzuki on December 5, 1984, provides in pertinent part: PURPOSE * * * Suzuki expects, and Dealer in executing this agreement acknowledges, that Dealer will actively, aggressively and honestly promote the sale of Suzuki products to retail customers . . . To achieve the purposes set forth above and the mutual obligations of the parties to each other, it is agreed as follows: Dealer's Responsibility Subject to the terms and conditions hereof, Suzuki will sell Suzuki products to Dealer and Dealer will use its best efforts to sell Suzuki products at retail . . . * * * GENERALS CONDITIONS * * * Dealer Sales Responsibility. Dealer will maintain annual sales volume mutually agreed upon each year by Suzuki and Dealer. Dealer will establish a target growth factor which it will strive to achieve through aggressive marketing and promotion of Suzuki products. Dealer agrees that the best method of measuring its market area share is by comparison of its Suzuki sales against the national, state, county and local area Suzuki sales percentages in the motorcycle industry7 as determined by a recognized reporting organization. Dealer also agrees that comparison of its sales to similarly located Suzuki dealers in comparable trade areas is a proper criteria to measure its sales performance. Inventory Responsibility. Dealer must maintain the level of Suzuki motorcycle inventory recommended by Suzuki . . . * * * 2.10 Inventories. Dealer shall main- tain at all times a minimum inventory of Suzuki motorcycles for display, demonstration and sale. A minimum inventory is the quantity, and models, necessary for a sixty- day supply, based on the current Dealer sales plan but subject to availability. * * * 8.1 Advertising Suzuki Products. Dealer acknowledges his responsibility to use advertising programs to promote Suzuki products in his sales area. * * * 8.4 Cooperative Advertising Program. Dealer will participate in Suzuki's cooperative advertising program in accordance with Suzuki's Co-op Policy and advertising bulletins published from time to time. * * * Termination Written Notice. If Dealer does not conduct its business in accordance with the requirements set forth herein, Suzuki may terminate this agreement by giving to Dealer written notice of termination. * * * 9.3 Sixty Days Written Notice. Suzuki may terminate this agreement with sixty (60) days written notice after the occurrence of any of the following events: (1) Failure of the Dealer to maintain the sales volume established for the dealership by mutual agreement of Suzuki and Dealer. * * * (6) Failure to carry an adequate inventory of Suzuki motorcycles and genuine Suzuki parts. The dealership agreement expressly requires that Dean's maintain an annual sales volume mutually agreed upon between the parties. In this case there was no such agreement nor evidence of any attempt to reach such an agreement. Absent such proof, cancellation of Dean's dealership agreement because of "inadequate sales" would be contrary to the dealer agreement and unfair. With respect to inventory, section 2.10 of the agreement provides that Dealer shall maintain at all times a minimum inventory of Suzuki motorcycles for display, demonstration and sale. A minimum inventory is the quantity, and models, necessary for a sixty-day supply, based on the current Dealer sales plan . . . Because it had no "Dealer sales plan," Dean's asserts it is not in violation of the agreement's inventory requirements, and therefore, cancellation would be unfair. Dean's assertion is unpersuasive. While section 2.10 of the dealership agreement does establish a minimum level of inventory based on a "Dealer sales plan," it does not preclude Suzuki from requiring, pursuant to section 2.8, that a dealer maintain a higher or more diverse inventory to promote Suzuki's product line. Absent a showing that the level of inventory recommended by Suzuki was unreasonable, cancellation of the dealership agreement for failure to maintain such an inventory level is not unfair. 7/
The Issue The Petitioner, P & M Transit Company, Inc., d/b/a Jim Walker's Yamaha (hereinafter "Walker") filed an application to relocate its Yamaha dealership. A protest to the application was filed by the Respondent, Suzuki of Hamilton, Inc., d/b/a Daytona Yamaha, U.S.A. (hereinafter "Hamilton"). The basic issue in this case is whether the Walker application should be denied. Underlying issues are (a) whether Section 320.642, Florida Statutes (1987), applies to relocations of existing dealerships and, if so, (b) whether the existing dealers ". . . are providing adequate representation in the community or territory. . . ." (The parties stipulated that there is no issue in this case regarding breach of the dealer agreement by a dealer.) At the hearing, Yamaha Motor Corporation, U.S.A. (hereinafter "Yamaha"), presented the testimony of John Donaldson, an expert in the area of motorcycle dealer network analysis, and offered exhibits 1 through 21, all of which were received into evidence. Hamilton presented the testimony of Alec Mobbs and offered into evidence exhibits A through G. The transcript of the hearing was filed on January 4, 1989, and thereafter Yamaha and Hamilton filed timely proposed recommended orders containing proposed findings of fact and conclusions of law. The parties' proposals have been carefully considered during the formulation of this recommended order. All findings of fact proposed by the parties are specifically addressed in the attached appendix.
Findings Of Fact Based on the evidence received at the hearing, I make the following findings of fact: Petitioner Walker filed an application seeking to relocate its Yamaha motorcycle dealership from 1147 "B" North Dixie Freeway, New Smyrna Beach, Florida 32069, to the location of its Honda-Suzuki Store at 2385 South Ridgewood Avenue, South Daytona, Florida 32019. The new Yamaha location would be approximately nine miles north of the original location and within six miles of Respondent Hamilton's existing dealership. The traffic in the six miles between the proposed new Walker location and the existing Hamilton location is much more dense than the traffic in the nine miles south of the proposed location. The population of Volusia County is separated from the surrounding counties on the north and south, such as to constitute it as a separate community or territory. For purposes of the applicable statutory provisions, the geographic boundaries of the subject "territory or community" are the same as the geographic boundaries of Volusia County. The proposed relocation of Walker is from one point in a territory or community in which he is presently located to another point in that same territory or community. The motorcycle industry is in a decline. Florida currently ranks eighth in the nation in motorcycle sales, which is down from its previous ranking of sixth. Hamilton, the protesting dealer, has owned and operated a successful Yamaha dealership at 324 Eleventh Street, Holly Hill, Florida 32017, since 1983. The dealership is well marked and easily accessible. Although the majority of Hamilton's sales are made to customers who live within five miles of the dealership location, Hamilton considers its market area to be Volusia County. Eleven motorcycle dealerships are currently located in the county. Volusia County's population in 1982-83 was 281,512. In 1987-88 the total was 337,909, for a growth rate of 20 percent. This growth rate is significantly less than Florida as a whole. The typical motorcycle purchaser is aged eighteen to thirty-four. The population of eighteen to thirty-four year olds in Volusia County grew only 16 percent between 1982 and 1988, and, as a percentage of the total population, that age group declined from 25 percent to 24 percent. Hamilton has actively cultivated all of Volusia County as a sales market area since 1983. It spends an average of $17,500 a year advertising on the radio, in newspapers, yellow pages, and participating in various exhibits and mall shows. Hamilton's efforts have been successful. The dealership was a financial disaster when purchased by Hamilton in 1983. But after its first year of operation the dealership showed a profit. The dealership continues to show a profit in the face of a declining industry and a declining market population. Hamilton has over $100,000 invested in his business. Hamilton's store consists of 10,000 square feet in which only Yamaha products are marketed. This is approximately 4,000 square feet larger than the average store. The dealer employs two sales people and three mechanics. Walker has 10,000 square feet for two brands, Honda and Suzuki. If the relocation is permitted, three brands would be housed in the same amount of space Hamilton has for Yamaha alone. Since 1983, Hamilton has probably accounted for the majority of Yamaha sales in Volusia County. In 1983 it sold 163. In 1984 it sold 207. In 1985 it sold 186. In 1986 it sold 139 and in 1987 it sold 122. By the beginning of December 1988, with ten more selling days remaining it had already sold the same as last year's total. Eighty-four percent of all of Hamilton's sales during the last five years were made to customers who lived within a five mile radius of the dealership. In the last two years, 86 percent of total sales were made in the same area. If another dealer were permitted to locate within that radius, the number of sales that Hamilton could reasonably expect to make would probably significantly decrease. Walker's proposed relocation is in the center of the southern half of the majority of Hamilton's sales. Hamilton is an award winning dealer. Yamaha introduced its pacesetter awards program in 1985. There are separate awards for service, parts and accessories, and sales. A dealer receiving all three awards in the same year is named a pacesetter. In 1985, Hamilton won the pacesetter award. In 1986, 1987, and 1988 it won the parts and accessories, and service awards. Hamilton won the service award in spite of intense competition from 20 motorcycle businesses in the Volusia County area. Yamaha has requested Hamilton to perform service warranty work on machines sold by Walker. Hamilton is 17 points above national average in customer service, and at 155 percent of the target sales figures for parts and accessories. Hamilton was chosen by Yamaha as one of only ten dealers in the United States to test market a line of Yamaha clothing. Yamaha attempts to measure the adequacy of sales performance by determining market penetration. Market penetration is determined by adding the total number of motorcycle registrations to the total number of scooter registrations and dividing that total into the total number of Yamaha motorcycle registrations plus the total registrations of Yamaha scooters. All terrain vehicles, ATVs, and motorcross (off road competition dirt) bikes are not included in Yamaha's computation because they are not registered with Florida's Department of Highway Safety and Motor Vehicles. The registration data that Yamaha relies on is compiled by the R.L. Polk Company. Polk purchases the data with which to compile the reports from various state motor vehicle agencies. Polk's reports are based only on vehicle registrations. Therefore the data is not an accurate reflection of sales performance in Florida because ATVs and motorcross bikes are not registered with the State. In addition, registrations reflect only where the motorcycle purchaser lives, not where the unit was purchased. In other words, if a person who lives in Orlando bought a Yamaha in Daytona, that motorcycle registration would show up in a Polk report as an Orlando registration. It is difficult, if not impossible, to accurately evaluate a dealer's sales performance, or representation of its manufacturer, using the Polk data. It is unreasonable to judge Hamilton's representation of Yamaha on a formula based solely on motorcycles and scooters because unregistered vehicles are a large part of Hamilton's sales. Use of registration data also sometimes yields absurd results. For example, Yamaha based their market share of Volusia County for 1985 on 181 vehicles. Hamilton alone sole 186 units that year. Yamaha dealers have had difficulty ordering and maintaining a sufficient supply of machines to sell. Yamaha allocates a certain number of units to each dealer. The allocations are small and made up of mixtures of units that are difficult to sell. On occasion Yamaha has not been able to fill even an allocated order. The manufacturer has also instituted package sales which place small single line dealers such as Hamilton at a distinct disadvantage in the market area. Because of this packaging system, Hamilton was unable to sell any competition machines, a segment of its beach market, in 1988. Overall, there are fewer Yamaha machines available for dealers to buy and retail. The evidence suggests that Florida's "Space Coast" does not purchase motorcycles at a rate commensurate with the rest of the state. In 1985, 1986, and 1987, the only years for which comparable data was introduced, the counties surrounding Volusia (Flagler, Seminole, St. Johns, Orange, Lake, and Putnam) had market percentages below the Florida and national average. Nevertheless, the Florida Yamaha average for 1987 (21.11 percent) was almost achieved in the zip code area in which Hamilton is located. In that area, Yamaha achieved 20.58 percent by registering 14 scooters and motorcycles out of 68 total. Yamaha has never expressed any dissatisfaction with Hamilton's sales performance or representation of the manufacturer. Hamilton was never told to make any changes in its business and never had any indication that it was providing less than adequate sales representation.
Recommendation For all of the foregoing reasons, it is recommended that the Department of Highway Safety and Motor Vehicles enter a final order in this case denying the application of P & M Transit Company, Inc. d/b/a Jim Walker's Yamaha, to relocate its dealership premises. DONE and ENTERED this 6th day of April 1989, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of April 1989. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 88-3519 The following are my specific rulings on all proposed findings of fact submitted by the parties. Findings proposed by Petitioner, Hamilton: Paragraphs 1 through 10: Accepted. Paragraph 11: Accepted in substance. Paragraphs 12 through 16: Accepted. Paragraph 17: Rejected as constituting primarily argument rather than proposed findings of fact. Paragraphs 18 and 19: Rejected as admittedly inaccurate. Paragraph 20: Rejected as constituting inferences which are not warranted by the evidence; there is insufficient evidence in the record upon which to base the proposed opinion. Paragraphs 22 through 24: Accepted. Findings proposed by Respondent, Yamaha: Paragraphs 1 through 4: Accepted. Paragraphs 5 and 6: Rejected as constituting a discussion of statutory interpretation rather than proposed findings of fact. Paragraph 7: Accepted in substance. Paragraph 8: First sentence accepted. The remainder is rejected as subordinate and unnecessary details. Paragraph 9: Rejected as subordinate and unnecessary details. Paragraphs 10 and 11: Rejected in part as subordinate and unnecessary details and in part as constituting inferences not warranted by the evidence. Paragraphs 12 and 13: Rejected as subordinate and unnecessary details. Paragraph 14: Accepted in substance. Paragraphs 15 and 16: Accepted in substance. Paragraph 17 and 18: Rejected as subordinate and unnecessary details. Paragraphs 19 through 23. Rejected as based on inferences not warranted by the evidence; the Polk data standing alone is simply not a persuasive basis upon which to reach conclusions regarding the scope of the area within which the existing dealers enjoy a "geographic advantage." Paragraph 24: First four lines rejected as based on inferences not warranted by the evidence. Last three lines accepted in substance. Paragraphs 25 and 26: Rejected as contrary to the greater weight of the evidence and as not supported by persuasive competent substantial evidence. Paragraph 27: Rejected as constituting a statement of legal principles rather than proposed findings of fact. Paragraph 28: Rejected as constituting inferences not warranted by the evidence and not supported by competent substantial evidence. Paragraph 29: Rejected as subordinate and unnecessary details; also irrelevant. Paragraph 30: Rejected as constituting inferences not warranted by the evidence. Further, the reasonableness of the proposed standard, without more, is questionable in view of the fact that by simple logic half of the dealers nationwide are performing below the national average. Paragraph 31: Accepted in substance. Paragraph 32: First sentence rejected for same reason as rejection of Paragraph 30. Remainder rejected because the Polk data is not a persuasive basis upon which to draw conclusions regarding market penetration. Paragraphs 33 through 38: Rejected because the Polk data is not a persuasive basis upon which to draw conclusions regarding market penetration. Paragraph 39: First sentence is rejected as irrelevant. Last sentence is rejected as constituting an inference not warranted by the evidence and not supported by competent substantial evidence. Paragraph 40: First sentence is rejected as constituting a legal conclusion not warranted by the evidence. Last sentence rejected as redundant. Paragraph 41: Rejected as constituting argument rather than findings of fact. Paragraphs 42 through 48: Rejected as irrelevant. Paragraphs 49 and 50: Rejected as subordinate and unnecessary details. Paragraph 51: Rejected as constituting subordinate, unnecessary, and irrelevant details. Paragraph 52: Rejected as subordinate, unnecessary, and irrelevant details that are closer to argument than to proposed findings of fact. Paragraphs 53 through 56: Rejected as constituting argument about the evidence rather than proposed findings of fact. COPIES FURNISHED: Dean Bunch, Esquire Rumberger, Kirk, Caldwell, Cabaniss, Burke & Wechsler 101 North Monroe Street Suite 900 Tallahassee, Florida 32301 Linda McMullen, Esquire McFarlain, Sternstein, Wiley & Cassedy 600 First Florida Bank Bldg. Tallahassee, Florida 32301 Michael J. Alderman, Esquire Office of General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Bldg. Tallahassee, Florida 32399-0500 Enoch J. Whitney, Esquire General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Bldg. Tallahassee, Florida 32399-0500 Charles J. Brantley, Director Division of Motor Vehicles Room B-439, Neil Kirkman Bldg. Tallahassee, Florida 32399-0500 =================================================================
The Issue The issue here presented concerns the attempted cancellation of the dealer franchise held by Ken's Kawasaki, Inc., petitioner, to sell Kawasaki motorcycles; specifically, Kawasaki Motors Corp, U.S.A., is taking action which would bring about the cancellation of Petitioner's motorcycle franchise. The alleged authority for considering the propriety of this action is as found in Section 320.641, Florida Statutes (1979).
Findings Of Fact The Petitioner, Ken's Kawasaki, lic., is a licensed-franchised Kawasaki motorcycle dealer in Gainesville, Alachua County, Florida. Its dealer license is as authorized by the State of Florida, Department of Highway Safety and Motor Vehicles, Division of Motor Vehicles, and its franchise is as issued by the Respondent, Kawasaki Motors Corp, U.S.A. The dispute arises following action on January 31, 1980, when the Respondent sent a letter to the petitioner indicating that the Sales and Service Agreement (franchise) between the parties would be terminated effective April 30, 1980. The reason for this termination, as expressed in the correspondence directed to the Petitioner, was the belief held by the Respondent that the terms and conditions of the aforementioned Sales and Service Agreement, in particular paragraph 26, subsection 4, allowed for the termination or cancellation if there was a "discontinuance if the operation of dealer's business for a period of five (5) consecutive days unless such discontinuance is the result of a national disaster," which term was felt to have occurred. In response to this notification of cancellation, the Petitioner through one of its owners filed a verified complaint before the State of Florida, Department of Highway Safety and Motor Vehicles, Division of Motor Vehicles. This complaint was referred to the State of Florida, Division of Administrative Hearings, for consideration pursuant to Section 120.57(1), Florida Statutes, and the hearing was conducted on October 1 and 2, 1980, in Gainesville, Florida. (The procedural conduct of that hearing is as set forth in the transcript of the hearing.) The history of the Petitioner's franchise with Respondent began on February 3, 1978, with the acceptance by those parties of a Kawasaki 1978 Model Year Authorized Dealer's Sales and Service Agreement. This agreement terminated on September 30, 1978. This franchise was then extended to include the period December 31, 1981, in keeping with a Kawasaki Authorized Dealer's Sales and Service Agreement which was executed on January 29, 1979, and this is the agreement which was in effect at the time of the entry of the termination letter dated January 31, 1980. In the spring of 1979, Kenneth Meyers, a principal in the Petitioner's corporation, informed Jimmy Capps, who was the District Manager for the Respondent in the Georgia - and Florida area, that the Petitioner intended to sell Ken's Kawasaki, Inc., motorcycle business. In pursuit of its decision to sell, the petitioner listed its business with a number of real estate agencies in the Gainesville, Florida, area. Among those brokers was Sherwood Commercial Brokers and within that brokerage firm Walter E. Murphree, Jr., was a principal. In September, 1979, the brokerage firm referred George O. Hack to Meyers as a prospective purchaser of the Petitioner's motorcycle business. During the same month, on September 13, 1979, District Manager Capps visited the petitioner's business location to discuss with the Petitioner the fact that the dealership was "out of trust". ("Out of trust" means that the inventory of the dealership subject to a floor plan financing arrangement, has been sold without obtaining the title documents held as security for the floor plan financing and without accounting for the proceeds, and was therefore in violation of the financing arrangement.) In this instance, some of the motorcycles that had been financed by the Respondent through a floor plan had been sold "out of trust". Again in September, 1979, Meyers contacted Capps in Atlanta, Georgia, and indicated that George O. Hack, James W. Opp, and Walter E. Murphree, Jr., had shown an interest in acquiring the petitioner's business. This contact occurred subsequent to the entry between the Petitioner and Hack, Opp and Murphree as principals in Gainesville Motorcycle Corporation, Inc., into an arrangement referred to as a "Contract for Purchase and Sale of Assets" of the Petitioner corporation. None of the principals in Gainesville Motorcycle had held any position with the petitioner prior to this contract agreement. To effectuate the purpose of transferring the franchise from the petitioner to Gainesville Motorcycle Corporation, Inc., an arrangement was made by Hack to have a meeting with Capps to discuss the acceptance by the Respondent Gainesville Motorcycle Corporation, Inc., as franchisee of the Respondent. This meeting was held on October 22, 1979, in Gainesville, Florida. In the course of the meeting, a discussion was held on the requirements of the Respondent which must be met before the prospective franchisee would be accepted. This included the necessity to execute an application provided by the Respondent and the necessity to demonstrate the financial liquidity of Gainesville Motorcycle Corporation, Inc., in the person of its principals, by having them provide sound financial statements to the Respondent. One of the principals of Gainesville Motorcycle Corporation, Inc., Hack, owned and operated a Yamaha dealership in Gainesville, Florida, and this was a matter of which Capps either knew about prior to the meeting or learned of in the course of the meeting. In dealing with this subject as it related to the possibility that two motorcycle lines would be sold from one store, Capps made known that the acceptability of his circumstance would be dependent on the expectation by the Respondent that the Kawasaki line of product would be promoted on an equal basis with the existing Yamaha line. The idea of selling other manufacturers' motorcycles from the same store in which the Kawasaki product line was being offered is not foreign to the Respondent. The arrangement for the sale of two product lines from one store, to include the Kawasaki line, is acceptable, subject only to equal treatment in the promotion and sales of the Kawasaki product line when contrasted with that of the competing motorcycle product. Sometime in late October, 1979, Hack forwarded three financial statements for the principals Hack, Opp and Murphree to the Respondent in Atlanta, Georgia, together with an application for franchise in the name "Gainesvi1le Motorcycle Corporation". (This application of Gainesville Motorcycle Corporation was not presented as evidence in the hearing.) After receiving the material from the Gainesville Motorcycle Corporation and its principals, a decision was made by the Respondent not to approve their request for franchise and this decision was based upon the unacceptable financial position of those principals. The decision not to accept was communicated by letters addressed to those three principals, dated November 2, 1979. Subsequent to the receipt of the letters, Hack contacted the Respondent to ascertain if it was a possibility that other materials could be submitted in support of the application which would cause the Respondent to change its position on the franchise question. Hack was told that the Respondent would evaluate additional information if it was presented. On November 5, 1979, William A. Parsons, attorney representing the Petitioner, wrote to the Respondent to advise the Respondent that a closing on the pending sale of the Petitioner's business was scheduled for November 19, 1979, and in particular, requesting information from the Respondent. In response to Parsons's correspondence, the Respondent wrote to him on November 8, 1979, and advised Parsons that the sale of the franchise to Hack, Opp, Murphree or anyone in general had not been approved at that time. On November 8, 1979, another dealer visit was made by Capps to the petitioner's location. Further discussion was held between Capps and Meyers on the reason for disapproval of the Gainesville Motorcycle group's reguest for franchise, and Capps also determined in the course of that visit that some of the other floor plan financers of the petitioner, namely, ITT Diversified Credit, had removed one of the Petitioner's motorcycles and other items associated with the business; the effect of that action by ITT being to place the Petitioner in the position of no longer having available inventory in motorcycles to be sold. On November 17, 1979, the petitioner closed the doors to its Kawasaki motorcycle store for the purpose of taking inventory and had not reopened at the time of the hearing in this cause, October 1 and 2, 1980. At no time since the November 17, 1979, date has the Petitioner been engaged as a Kawasaki dealer. Notwithstanding the communication through the letter of November 8, 1979, from the Respondent to attorney Parsons indicating that the Hack, Opp, and Murphree group had not been approved as a Kawasaki franchise dealer, the parties to the purchase contract went to the closing scheduled for November 19, 1979, and on that date through a telephone call directed to officials within the Respondent corporation in Atlanta, Georgia, the parties to the closing were informed that the Hack group had not been approved as prospective franchisees to sell Kawasaki motorcycles, in substitution for the Petitioner corporation. In late November, 1979, Meyers contacted Gary Warren, who operated a Suzuki motorcycle dealership in Gainesville, Florida, to determine if Warren was interested in buying the petitioner's business. Warren thereafter determined to make an application to the Respondent to be granted the Kawasaki franchise for Gainesville, Florida, and agreed with Meyers that he would discuss the possibility of purchasing some of the merchandise items held by Ken's Kawasaki. On November 30, 1979, the Respondent forwarded the necessary material to Warren for Warren to make an application to be the Kawasaki franchise dealer. On December 1, 1979, Hack, Opp and Murphree entered into an arrangement with the Petitioner's landlord by which these parties agreed to lease, with the option to buy, those premises which were then occupied by the Petitioner, on the condition that the new group pay those arrearages in rent then owed by the Petitioner to the landlord. After reviewing Warren's application to become a Kawasaki dealer, Warren was informed that he had been approved. This approval was made known in late December, 1979. Also in late December, 1979, Hack informed Capps that the Yamaha dealership would be moved Petitioner's premises around Christmas of that year. Capps came to Gainesville on January 23, 1980, to enter into a mutual commitment agreement leading to the completion of arrangement s to establish Warren as the local Kawasaki dealer. (During that same trip, Capps went to the location of the Petitioner's dealership and discovered that the Yamaha dealership was in place at that location and there were no signs indicating that the Kawasaki dealership was still in operation at that locale. On that date, the mutual commitment agreement was executed and in provisions of that document was an agreement that Warren would buy his parts kit, accessory kit, and special tools from the Petitioner and that the dealership would operate as "Suzuki- Kawasaki of Gainesville". In pursuit of the agreement to purchase the parts kit, accessory kit and special tools from tie petitioner, discussion was held between Meyers and Warren. Prior to the discussion, Warren had been solicited by ITT Diversified Credit to buy certain products which they had removed from the Petitioner's business. In addition, the petitioner's landlord took Warren to a storage facility where some of the Petitioner's parts and accessories had been stored. Warren was concerned about the Petitioner's merchandise and for that reason asked Meyers to provide bills of sale and to conduct an inventory prior to any purchase by Warren. No bills of sale were forthcoming and Meyers having placed the value of the goods above their fair market value, Warren declined to purchase any of the items owned by the Petitioner in association with its Kawasaki dealership. After receipt of the January 31, 1980, letter or termination end prior to filing his protest to the the cancellation on April 26, 1980, meetings were held between Meyers and the principals of Gainesville Motorcycle Corporation on the subject of filing the protest and after discussion the decision was made to have Hack, on behalf of Gainesville Motorcycle Corporation, finance the protest with the expectation that the Gainesville Motorcycle Corporation would gain the award of the Kawasaki motorcycle franchise through the present action. It is not the intention of Kenneth Meyers to continue to operate the Kawasaki motorcycle business in keeping with his existing franchise issued by the Respondent and Meyers, in making this statement, is authorized to speak for the Petitioner. At present, Kawasaki motorcycles are not being sold from any Kawasaki dealership located in Gainesville, Florida, and this has been the case since November 17, 1979. This lack of sales has not been the result of the Respondent failing to deliver products to the Petitioner. There was no showing in the course of the hearing that the Respondent failed to fairly evaluate the applications of Gainesville Motorcycle Corporation and Gary Warren, prior to determining to accept Warren as the replacement dealer for the Petitioner.
Recommendation Based upon the full consideration of the facts found therein and the Conclusions of Law reached it is RECOMMENDED that the Petitioner, Ken's Kawaski, Inc.'s complaint for unfair cancellation of its dealer franchise agreement be DISMISSED and the cancellation of the Petitioner's franchise agreement with Respondent, Kawasaki Motors Corp, U.S.A., be UPHELD. 1/ DONE AND ENTERED this 3rd day of November 1980, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of November, 1980.
