The Issue Whether Volkswagen of America, Inc., should be permitted to establish an additional franchised dealership in Broward County, Florida, as more specifically described in the written notice it provided the Department of Highway Safety and Motor Vehicles advising of its intention to establish such a dealership.
Findings Of Fact Based upon the evidence adduced at hearing and the record as a whole, the following findings of fact are made: VWoA is a Florida-licensed importer and distributor of Volkswagen (VW) vehicles. It is a wholly-owned subsidiary of Volkswagen AG (VAG). VAG, which is headquartered in Germany, manufactures VW- brand motor vehicles. On a worldwide basis, it produces more vehicles than any other manufacturer except Ford Motor Company and General Motors Corporation. VWoA distributes to its franchised dealerships in the United States and Canada VW vehicles manufactured by VAG. VWoA establishes annual planning volumes or sales objectives for each of its franchised dealerships (based upon the dealership's past sales performance and other pertinent factors). For the first quarter of each year, VWoA's allocation of vehicles to the dealership is based upon the established planning volume for that dealership. In determining the number of vehicles to allocate to a dealership during the remainder of the year, VWoA takes into consideration the dealership's to-date sales performance for the year in relation to VWoA's expectations (as reflected by the dealership's planning volume previously established for that year). VWoA's franchised dealerships (VW dealerships) in the United States are assigned to one of five regions, each headed by a VWoA regional team leader. VW dealerships in Florida are assigned to the Southeast Region. James Wolter has been the regional team leader for VWoA's Southeast Region since January 1, 1999. Each region, including the Southeast Region, is divided into districts, each headed by a VWoA area executive. The area (defined in terms of zip codes) around each dealership in a district in which the dealership is deemed to have a geographic advantage over other VW dealerships because of the dealership's proximity (in terms of distance by air) to consumers living in that area is referred to by VWoA as the dealership's Primary Area of Influence or PAI. Three digit numbers are used to designate each dealership's PAI. VW dealerships in southeast Florida, from Indian River County (to the north) to Dade County (to the south), are assigned to District 22. Charles Westly has been the area executive of District 22 since January 1, 1999. At present, there are 11 existing VW dealerships located in District 22: Vista Volkswagen, whose PAI is 012; Esserman International, whose PAI is 029; Vero Beach Motorsports, whose PAI is 031; South Motors, whose PAI is 041; Gunther Volkswagen, whose PAI is 073; Stuart Volkswagen, whose PAI is 087; Esserman Volkswagen, whose PAI is 095; Deel Volkswagen, whose PAI is 223; Borton Volkswagen, whose PAI is 237; Palm Beach Volkswagen, whose PAI is 241; and Schumacher Volkswagen, whose PAI is 242. Nine of these 11 dealerships are located in Dade, Broward, or Palm Beach Counties (which, collectively, are also known as the "Miami Metro"). The dealerships located in Dade County are Esserman International, South Motors, Esserman Volkswagen, and Deel Volkswagen. The dealerships located in Palm Beach County are Borton Volkswagen, Palm Beach Volkswagen, and Schumacher Volkswagen. Borton Volkswagen, which is operated by Borton, is located at 2201 North Federal Highway in Delray Beach in southeast Palm Beach County. Palm Beach Volkswagen and Schumacher Volkswagen are located to the north of Borton Volkswagen. The dealerships located in Broward County are Vista Volkswagen and Gunther Volkswagen. Although Broward County presently has fewer VW dealerships than either of the other two counties which comprise the Miami Metro, of the three Miami Metro counties, Broward County is (based on 1998 registration data) the largest market in terms of the sale of new automobiles (of all makes). Vista Volkswagen, which is operated by Vista (an entity owned by Charles Dascal, Larry Hoffman, and Richard Buttafuoco, who also have an ownership interest in the entity that operates South Motors) is located 17.2 miles south of Borton Volkswagen at 700 North Federal Highway in Pompano Beach in northeast Broward County. Vista also operates (out of separate facilities and using a separate sales and service staff) a BMW dealership at this location. Gunther Volkswagen is located 11.4 miles to the southwest of Vista Volkswagen at 1660 South State Road 7 (441) in the Fort Lauderdale/Plantation area. It is operated by Gunther Motor Company of Plantation, Inc. (Gunther Plantation), which prior to July 15, 1999, was known as Gunther Motor Company, and, which prior to 1991, was known as Gunther Volkswagen, Inc. Gunther Plantation also operates (out of separate facilities and using separate sales and service staff) Kia and Mazda dealerships on the 15-acre tract on which Gunther Volkswagen is located. Joseph F. Gunther, Jr. (Mr. Gunther) is the President of Gunther Plantation and its majority (51%) shareholder. The remaining 49% of the shares of the corporation are owned by Mr. Gunther's three sons, Joseph F. Gunther III (16%), John Casey Gunther (Casey Gunther) (16%), and Michael Gunther (17%). The elder Mr. Gunther has had an ownership interest in Gunther Plantation and has been actively involved in the operations of Gunther Volkswagen since 1970. In 1970, when Gunther Volkswagen opened (as the third VW dealership in Broward County), VWoA had annual sales in the United States of 569,292 units, which were made through a dealer network of 1,160 dealerships. 6/ Thereafter, as Japanese imports became increasingly popular, annual sales of new VWs (VW sales) in the United States declined. There was also a decline in the number of VW dealerships in the United States starting in 1973. (The number of VW dealerships in the United States peaked at 1,203 in 1972.) In 1993, VW sales in the United States were 49,533 units, fewer than had been made in any year since 1955. By that year, the nationwide VW dealership network was "pretty fragmented." It consisted of 639 dealerships (564 less than had been in operation in 1972), not all of which were at the "right" locations. In 1993, Dr. Ferdinand Piech (an engineer by profession) became the Chief Executive Officer of VAG. Under his leadership, VAG took measures that significantly improved the quality of the product it manufactured. At the same time, VWoA reorganized its management structure and began the task of rebuilding the VW dealership network in the United States by closing underperforming dealerships, relocating dealerships to better locations, and selectively adding new dealerships in markets where it was either not represented or not adequately represented. In the years subsequent to 1993, VW sales in the United States have rebounded significantly. In 1994, 1995, 1996, 1997, and 1998, VW sales in the United States were 97,043, 115,114, 135,907, 137,885, and 219,679 units, respectively. While VW sales in the United States have increased over this period of time, the number of United States VW dealerships has declined each year. At the end of 1998, there were 600 VW dealerships in the United States, 39 less than in 1993 and 603 less than in 1972. VWoA anticipates that VW sales in the United States will continue to rise. It has a sales objective of 306,000 units for 1999 and 348,000 units for 2000. There has also been, subsequent to 1993, a substantial increase in VW sales by dealerships in what is now District 22 (the District 22 area) and by dealerships in the Miami Metro. In 1993, 1994, 1995, 1996, 1997, and 1998, VW sales by dealerships in the District 22 area totaled 1,226, 2,448, 3,041, 3,913, 4,264, and 7,757 units, respectively, and VW sales by dealerships in the Miami Metro totaled 1,187, 2,351, 2,941, 3,816, 4,236, and 7,648 units, respectively. In the first six months of 1999, VW sales by dealerships in the District 22 area totaled 5,739 units, and VW sales by dealerships in the Miami Metro totaled 5,509 units. In 1998, Gunther Volkswagen sold more VWs than any other dealership in the United States. In terms of the total number of VW sales made during 1998, the other VW dealerships in the Miami Metro ranked 44th (South Motors), 56th (Esserman Volkswagen), 57th (Deel Volkswagen), 61st (Vista Volkswagen), 88th (Palm Beach Volkswagen), 100th (Schumacher Volkswagen), 105th (Borton Volkswagen), and 319th (Esserman International 7/) out of the 600 VW dealerships in the United States. Out of the 170 dealerships in VWoA's Southeast Region, the Miami Metro dealerships' sales rankings for 1998 were as follows: Gunther Volkswagen: 1st; South Motors: 10th; Esserman Volkswagen: 13th; Deel Volkswagen: 14th; Vista Volkswagen: 16th; Schumacher Volkswagen: 22nd; Borton Volkswagen: 24th; and Esserman International: 84th. For the first six months of 1999, three of the Miami Metro dealerships were among the top 50 VW dealerships in the United States in total VW sales. Gunther Volkswagen was number one, with 1,829 VW sales; South Motors was number 17, with 708 VW sales; and Vista Volkswagen was number 44, with 548 VW sales. The increases in VW sales in the District 22 area and the Miami Metro have occurred despite supply shortages of certain popular models with features desired by consumers that have resulted in dealerships creating "waiting lists" for these vehicles (a nationwide problem VWoA and VAG are taking measures to rectify 8/); the absence of a VW dealership in Martin County in 1997 and 1998; and having one less dealership in Broward County since the closing of Arnie Smith Volkswagen in or about July of 1995. Arnie Smith Volkswagen was located in an older facility in a deteriorating area on Sunrise Boulevard in Fort Lauderdale, approximately halfway between Gunther Volkswagen and Vista Volkswagen. In addition to being in a bad location, it suffered from management problems and high employee turnover. As a result, its VW sales were declining. (From January of 1995 through July of 1995, its VW sales were 63 units, 43 less than the number of VW sales it had made during the first seven months of the previous year.) Arnie Smith Volkswagen was bought out by VWoA and Gunther Plantation (which at the time was known as Gunther Motor Company). Vista was asked to participate in the buy-out, but declined to do so. The closing of Arnie Smith Volkswagen left VWoA with two dealerships in Broward County, neither of which was located in the rapidly growing western portion of the county. At the time of the closing of Arnie Smith Volkswagen, VWoA believed that the most prudent course of action was to keep the Broward County VW dealership count at two to allow the two remaining dealerships to "get some meat on their bones." These two dealerships, Gunther Volkswagen and Vista Volkswagen, did enjoy an increase in VW sales after the closing of Arnie Smith Volkswagen. In the first half of 1995, when Arnie Smith Volkswagen was still in business, Gunther Volkswagen and Vista Volkswagen had 571 and 121 VW sales, respectively. In the second half of 1995, when Arnie Smith Volkswagen was no longer selling VWs, Gunther Volkswagen and Vista Volkswagen had 664 and 160 VW sales, respectively. Gunther Volkswagen's VW sales in 1996, 1997, and 1998 were 1,657, 1,657, and 2,565 units, respectively. Vista Volkswagen's VW sales in 1996, 1997, and 1998 were 370, 515, and 722 units, respectively. By late 1996 to early 1997, VWoA determined that the time was right to establish another VW dealership in Broward County and bring its dealership count in the county to three (which is the same number of VW dealerships that VWoA had in the county from 1970 until Arnie Smith Volkswagen went out of business in or about July of 1995). After reviewing vehicle registration and sales data, which reflected that its principal competitors with dealerships in the Coconut Creek area of northwest Broward County were outperforming VWoA in that area, VWoA made the further determination that this third Broward County VW dealership should be located in the Coconut Creek area (which, in 1970, consisted of either swamp or farm land and today is one of the fastest growing areas in the nation, with a population having income characteristics that make it a "great spot to be selling . . . new vehicles"). There has been no showing that VWoA, at any time, attempted to coerce any of the existing VW dealers to consent to the establishment of such an additional VW dealership. After determining to establish an additional VW dealership in the Coconut Creek area, VWoA began looking for an operator for this additional dealership, and it also retained the services of a real estate company, the Core Company (which is now known as Travel Pro), to search for a suitable site in the Coconut Creek area for the dealership. Vista and Gunther Plantation were among the candidates VWoA considered to operate the dealership. VWoA had several conversations about the Coconut Creek market with Vista (which recognized that the Coconut Creek area was a "boom" area with considerable market potential). At no time during these conversations did Vista indicate that it was willing to operate full-scale VW dealerships in both Pompano Beach and the Coconut Creek area. After reviewing the qualifications and credentials of the candidates under consideration, VWoA, exercising reasonable and sound business judgment, determined that the principals of Gunther Plantation (which at the time was third in the nation in the number of VW sales) were best suited to operate the additional VW dealership in the Coconut Creek area. It then entered into negotiations with them. Thereafter, some time before March 18, 1998, Vista approached VWoA and proposed that it be allowed to either relocate its Pompano Beach VW dealership to the Coconut Creek area or operate a full-scale VW dealership in the Coconut Creek area, while maintaining a satellite VW dealership with limited sales, service, and parts facilities (as opposed to a full-scale VW dealership) in Pompano Beach. VWoA rejected both alternatives inasmuch as it had already selected an operator for the Coconut Creek area VW dealership. It does not appear that, in denying Vista the opportunity to operate a VW dealership in the Coconut Creek area, VWoA acted unreasonably; nor is there evidence that VWoA, in any other respect, acted in a manner that unreasonably denied Vista the opportunity to grow and expand its VW dealership. Notwithstanding VWoA's rejection of Vista's proposal, Vista still intends to proceed with plans to relocate its Pompano Beach BMW dealership to the Coconut Creek area, a move that would result in an increase in Vista's operating expenses. In middle to late 1997, VWoA acquired property in the Coconut Creek area for a VW dealership. The property is located on the northeast corner of State Road 7 (441) and Collum Road (Coconut Creek Site), which is in Vista Volkswagen's PAI. The Coconut Creek Site is in an area where existing dealerships representing other major brands (including brands against which the VW brand competes) are clustered. (Such clustering promotes inter-brand competition and makes it more convenient for consumers to shop for automobiles.) There are six such "automobile clusters" in Broward County and southern Palm Beach County, one each in the Delray Beach, the Pompano Beach, the Coconut Creek, the Plantation, the Ft. Lauderdale, and the Hollywood/Davie/Pembroke Pines areas. In 1997, these clusters generated the following new vehicle sales: Delray Beach area cluster: 22,270 units; Pompano Beach area cluster: 28,281 units; Coconut Creek area cluster: 29,602 units; Plantation area cluster: 24,225 units; Ft. Lauderdale area cluster: 16,968 units; and Hollywood/Davie/Pembroke Pines area cluster: 31,449 units. VWoA is presently represented in only three of these six "automobile clusters": the Plantation area cluster (where Gunther Volkswagen is located); the Pompano Beach area cluster (where Vista Volkswagen is located); and the Delray Beach area cluster (where Borton Volkswagen is located). The three existing VW dealerships closest to the Coconut Creek Site are Vista Volkswagen, which is 6.9 miles away, Gunther Volkswagen, which is 12.7 miles away, and Borton Volkswagen, which is 16.3 miles away. (There are existing dealerships in the Coconut Creek area representing brands other than VW (Chevrolet, Dodge, Ford, Lincoln Mercury, Mazda, Mitsubishi, and Toyota) that are 6.9 miles or less from their closest intrabrand competitor.) The driving time between the Coconut Creek Site and Gunther Volkswagen is anywhere between 26 and 40 to 45 minutes (depending on traffic). It takes from approximately 17 minutes to 30 to 35 minutes (depending on traffic) to drive from the Coconut Creek Site east to Vista Volkswagen. East-west movement in Broward County has become increasingly difficult over the years as the western portion of the county has become more densely populated. As a result, consumers in Broward County tend to move in a north-south, rather than an east-west, direction to make their vehicle purchases. On March 16, 1998, after a period of negotiation and the exchange of draft agreements, VWoA sent the following letter of understanding to Mr. Gunther and Casey Gunther: 9/ This letter will summarize our understanding of the actions to which you and Volkswagen of America, Inc. ("VWoA") are prepared to commit to establish a new, exclusive Volkswagen dealership for the Gunther organization ("Gunther") in Coconut Creek, FL. The following bullet points are a recap of our meeting on January 30, 1998, and include the following. In light of what we believe to be the potential growth in this market, it is the intent of VWoA to designate Coconut Creek as an open point and to construct a new dealership facility on the property owned by VWoA in Coconut Creek. While the building architecture will be based on the new Volkswagen Corporate Design guidelines, VWoA agrees to seek your input into the size of the building and land requirements needed to operate the dealership. The actual facility construction costs are estimated to be approximately $100 per square foot, but this may vary depending on local requirements and conditions. VWoA will defend its right to designate Coconut Creek as an open point in the event that another dealer in the market protests VWoA's action. Once the facility is completed, VWoA and Gunther will enter into a lease agreement for the land and building. The annual lease will be negotiated based on the cost to purchase the land used by the dealership, the final facility construction costs and local market value. Prior to entering into a new lease for the Coconut Creek dealership, Gunther will have purchased or entered into an intent to purchase from VWoA the existing Gunther Volkswagen, Inc. 10/ building and real property located in Ft. Lauderdale, FL. 11/ It is understood by both parties that it will take time to establish service and parts business at the new point in Coconut Creek, which business will be an integral part of the Volkswagen operations at that facility. The parties further understand that to establish that business will require sufficient New and Used Vehicle sales volumes to generate a gross profit reasonably sufficient to support the facility lease. Because this will be a new point, and because at this time there is not an established sales rate for the Coconut Creek market, VWoA agrees to establish annual new vehicle planning volumes in the following manner: At a minimum, an annual new vehicle planning volume will equal one percent (1%) of the national retail sales objective for the respective year. By way of example only, if the national new vehicle retail objective for a given year is 200,000 vehicles, the planning volume for Coconut Creek would be 2,000 vehicles. 12/ This method of calculating planning volumes will remain in effect for the first three years of operation of the new Coconut Creek point. After the third year, the dealership's new vehicle planning volume will be calculated in the same manner then used by VWoA to establish the planning volume for every Volkswagen dealer. After the first year of operation, the dealership's annual planning volume may be set at a level higher than the calculated 1% of national retail objective if supported by actual retail sales rates at the dealership. All requirements as delineated in the then current Volkswagen Dealer Agreement, Standard Provisions and Operating Standards shall apply to your appointment as a Volkswagen dealer in Coconut Creek. In the event that Gunther elects not to pursue this opportunity to operate an exclusive Volkswagen dealership in Coconut Creek, then Gunther (a) acknowledges VWoA's intent to designate Coconut Creek as an open point and (b) agrees to waive its right to protest the appointment of another dealer operator in Coconut Creek. As previously mentioned, this letter is intended to confirm issues we discussed in January. If you are in agreement with the above, please sign the attached copy of this letter and return it to me. Once we receive the executed copy, we will file the necessary documents with the city and state to obtain their approvals to move forward with our plans. This is an exciting opportunity for both Volkswagen and the Gunther organization, 13/ and we look forward to working closely with you as we get this project underway. Please feel free to give me a call if you have any questions. Mr. Gunther and Casey Gunther both signed this letter on March 25, 1998, indicating that they "concur[red]" with the representations made in the letter. VWoA customarily makes special arrangements concerning allocation of vehicles, like those set forth in the letter of understanding signed by Mr. Gunther and Casey Gunther, with dealers operating newly created VW dealerships to "get the dealership[s] going." This is a reasonable business practice. Following the execution of this letter of understanding, Debra L. Kingsbury, Esquire, VWoA's attorney, sent the following letter, dated April 2, 1998, to Ronald Reynolds, the Administrator of the Department's Dealer License Section: Dear Mr. Reynolds: Pursuant to the requirements of Florida Statutes, Section 320.642, notice is hereby given that Volkswagen of America, Inc. ("VWoA") intends to establish Gunther Motor Company as a dealership for the sale of Volkswagen vehicles at Block 89, Lots 22 and 23, Coconut Creek, Broward County, Florida 33073. This vacant property is on the northeast corner of State Rd. 441 and Collum Rd. VWoA intends to engage in business with Gunther as a dealership on or after April 1, 1999, assuming that no protest is filed. The dealer(s) of the same line-make vehicles in the county where the new dealership will be located and all counties adjoining that county are as follows: County Palm Beach County Borton Volkswagen 2201 N. Federal Highway Delray Beach, FL 33483 Palm Beach Volkswagen 6870 Okeechobee Blvd. West Palm Beach, FL 33415 Schumacher Automotive 3720 Northlake Blvd. Lake Park, FL 33403 Broward County Vista Volkswagen 700 N. Federal Highway Pompano, Beach, FL 33062 Gunther Volkswagen 1660 S. State Road 7 Ft. Lauderdale, FL 33317 Collier County A+ Car World 601 Airport Pulling Rd. Naples, FL 33942 Dade County Deel Volkswagen 3650 Bird Rd. Miami, FL 33133 South Motors of Dade County 16125 South Dixie Highway Miami, FL 33157 Esserman Volkswagen 16825 NW 57th Ave. Miami, FL 33055 The names and address of the dealer-operator and principal investors of Gunther Motor Company are: Dealer-Operator Joseph F. Gunther, Jr. Principal Investors Joseph F. Gunther, Jr. 1660 S. State Road 7 Ft. Lauderdale, FL 33317 If you have questions or require additional information, please do not hesitate to let me know. To the extent that Ms. Kingsbury's letter reflected that Joseph F. Gunther, Jr., would be the "dealer-operator" of the dealership VWoA proposed to establish in Coconut Creek, the letter was inconsistent with the representations made in the March 16, 1998, letter of understanding VWoA had sent to Mr. Gunther and Casey Gunther that the "dealer-operator" of this proposed dealership would be the entire "Gunther organization" (that is, the corporate entity which was owned by Mr. Gunther and his three sons, each of whom had an ownership interest in excess of 10%). 14/ By letter dated April 22, 1998, Mr. Reynolds notified Ms. Kingsbury that a "notice of publication to establish a franchise for Gunther Motor Company" was "published in the Florida Administrative Weekly on April 17, 1998." A copy of the "notice of publication" was enclosed, and it read as follows: Pursuant to Section 320.642, Florida Statutes, Volkswagen of America, Inc. ("VWoA"), intends to allow the establishment of Gunther Motor Company, as a dealership for the sale of Volkswagen vehicles, at Block 89, Lots 22 and 23. This vacant property is on the northeast corner of State Road 441 and Collum Road, Coconut Creek (Broward County), Florida 33073, on or after April 1, 1999. The name and address of the dealer operator(s) and principal investor(s) of Gunther Motor Company is Joseph F. Gunther, Jr., 1660 S. State Road 7, Fort Lauderdale, Florida 33317. The notice indicates an intent to establish the new point location in a county of more than 300,000 population, according to the latest population estimates of the University of Florida, Bureau of Economic and Business Research. Certain dealerships of the same line-make may have standing, pursuant to Section 320.642, Florida Statutes, to file a petition or complaint protesting the application. Written petitions or complaints must be received by the Department of Highway Safety and Motor Vehicles within 30 days of the date of the publication of this notice and must be submitted to: Mr. Ronald D. Reynolds, Administrator, Dealer License Section, Department of Highway Safety and Motor Vehicles, Room A-312, Neil Kirkman Building, 2900 Apalachee Parkway, Tallahassee, Florida 32399-0635. A copy of such petition or complaint must also be sent by U.S. Mail to: Debra L. Kingsbury, Attorney, Volkswagen of America, Inc., 3800 Hamlin Road, Auburn Hills, MI 48326. If no petitions or complaints are received within 30 days of the date of publication, a final order will be issued by the Department of Highway Safety and Motor Vehicles approving the establishment of the dealership, subject to the applicant's compliance with the provisions of Chapter 320, Florida Statutes. As noted above, in 1998, including the time when Ms. Kingsbury wrote to Mr. Reynolds and when the April 17, 1998, edition of the Florida Administrative Weekly was published, the corporate entity that is now known as Gunther Motor Company of Plantation, Inc., was known as Gunther Motor Company. It was not until July 15, 1999, that its name was changed to its present name. On that same day, July 15, 1999, a new Florida corporation, named Gunther Motor Company and having Mr. Gunther as its sole shareholder, was formed. If an additional VW dealership is established on the Coconut Creek Site (Proposed Dealership), it would be assigned a PAI consisting of zip codes that are now included in the PAIs of existing VW dealerships which are located further away from the centroids of these zip codes than is the Coconut Creek Site. (The Proposed Dealership's PAI will be referred to herein as the "Coconut Creek PAI.") In 1998, 782 new retail VWs were registered in what would have been the Coconut Creek PAI had the Proposed Dealership been in operation that year. (Only Gunther Volkswagen's PAI (with 1642) and Deel Volkswagen's PAI (with 942) had more than 782 new retail VW registrations that year.) Of these 782 vehicles, 327 were sold by Gunther Volkswagen (constituting approximately 13% of its VW sales), 219 were sold by Vista Volkswagen (constituting approximately 30% of its VW sales), and 113 were sold by Borton Volkswagen (constituting approximately 20% of its VW sales). VWoA takes the position in this proceeding that it is not adequately represented in the "community or territory" in which the Proposed Dealership is located. To evaluate the merits of this claim, it is first necessary to identify this "community or territory." VWoA and Vista agree, and the undersigned finds, that the relevant "community or territory" in the instant case (Comm/Terr) consists of the PAIs now assigned to Gunther Volkswagen and Vista Volkswagen (the two existing VW dealerships in Broward County) and to Borton Volkswagen (which is the southernmost VW dealership in Palm Beach County). In 1998, there was a total of 3,371 new retail VWs registered in the Comm/Terr. While there is no dispute regarding the identity of the relevant "community or territory" in the instant case, VWoA and Vista are not in agreement as to the standard that should be used to measure the performance of VWoA's dealership network in the Comm/Terr. Dealership network performance is generally assessed based upon the "market share" or "market penetration" (which are synonymous terms) achieved by the brand in the market in question during the applicable time period, compared to the "market share" or "market penetration" the brand was "reasonably expected" to achieve. ("Market share" or "market penetration" is expressed as a percentage, and it represents a brand's share of the total number of new vehicle registrations in the market.) A "reasonably expected" "market share" or "market penetration" for the VW brand in the Comm/Terr may be determined by: (a) selecting an appropriate comparison market area separate from the Comm/Terr (but preferably in the same local area) where the brand appears not to be inadequately represented; (b) ascertaining the brand’s "market share" or "market penetration" in that comparison market area; and (c) utilizing a process called "segmentation analysis" to account for any differences in consumer preferences and demographic characteristics that may exist between the comparison market area and the Comm/Terr. VWoA suggests, and the undersigned agrees, that it is reasonable and appropriate to assess VWoA's performance in the Comm/Terr by comparing it with VWoA's performance in the PAIs for Schumacher Volkswagen and Palm Beach Volkswagen (Palm Beach PAIs), as segment adjusted (Palm Beach Standard). 15/ The undersigned rejects Vista's contention that, to properly evaluate VWoA's performance in the Comm/Terr, VWoA's "market share" or "market penetration" in the Comm/Terr should be compared, not with the Palm Beach Standard, but "with [VWoA's] average penetration in the U.S. major metros, the Southeast major metros, and the Florida major metros" (Vista's Approach). Vista's Approach does not take into account, or make adjustments for, any consumer preferences, such as import bias, 16/ and demographic characteristics that may distinguish the Comm/Terr from the "average" "metro" market in the United States, in the southeastern United States, and in Florida. Moreover, Vista's Approach fails to take into consideration that VWoA has an incomplete national dealership network and is inadequately represented in various markets included in "the U.S. major metros, the Southeast major metros, and the Florida major metros." As a result, Vista's Approach yields a standard that, unlike the Palm Beach Standard, is too conservative to reflect a "reasonably expected" "market share" or "market penetration" for the Comm/Terr. Employing the Palm Beach Standard (as segment adjusted), the "reasonably expected" "market shares" or "market penetrations" in the Comm/Terr and the Coconut Creek PAI for the VW brand for the years 1995, 1996, 1997, and 1998 were as follows: Comm/Terr: 1995- 1.9%, 1996- 3.5%, 1997- 3.5%, and 1998- 6.2%; and Coconut Creek PAI: 1995- 1.8%, 1996- 3.5%, 1997- 3.4%, and 1998- 6.1%. The actual "market shares" or "market penetrations" in the Comm/Terr and the Coconut Creek PAI for the VW brand for these years were as follows: Comm/Terr: 1995- 2.2% (which was more than "reasonably expected"), 1996- 3.8% (which was more than "reasonably expected"), 1997-3.2% (which was less than "reasonably expected"), and 1998- 5.4% (which was less than "reasonably expected," but more than VWoA's "average penetration in the U.S. major metros [4.6%], the Southeast major metros [4.4%], and the Florida major metros [4.4%]"); and Coconut Creek PAI: 1995- 2.0% (which was more than "reasonably expected"), 1996- 3.2% (which was less than "reasonably expected"), 1997- 2.8% (which was less than "reasonably expected"), and 1998- 4.6% (which was less than "reasonably expected," but the same as "the average penetration in the U.S. major market metros" and more than the "average penetration in the . . . Southeast major metros, and the Florida major metros"). Accordingly, for every full year after 1996, VWoA's "market share" or "market penetration" in the Comm/Terr has been less than "reasonably expected," and for every full year after 1995, VWoA's "market share" or "market penetration" in the Coconut Creek PAI has been less than "reasonably expected." Comparing VWoA's actual versus its "reasonably expected" "market share" or "market penetration" in the Comm/Terr and the Coconut Creek PAI reveals the "retail registration effectiveness" of its dealership network in those markets. The "retail registration effectiveness" of VWoA's dealership network in the Comm/Terr in 1995, 1996, 1997, and 1998 was 119%, 108.1%, 93%, and 87.1%, respectively. The "retail registration effectiveness" of VWoA's dealership network in the Coconut Creek PAI during those years was 111.6%, 93.4%, 84%, and 76.3%, respectively. Accordingly, for every full year after 1995, the last year that VWoA was represented by four dealerships in the Comm/Terr, the "retail registration effectiveness" of VWoA's dealership network in the Comm/Terr and the Coconut Creek PAI has declined. During this period of decline in VWoA's "retail registration effectiveness" in the Comm/Terr and the Coconut Creek PAI, demographic factors in these markets, insofar as retail vehicle sales are concerned, have been favorable. In fact, such sales increased in absolute terms in the Comm/Terr in 1996, 1997, and 1998 (from 1,367 in 1995, to 1,715 in 1996, to 2,341 in 1997, to 3,902 in 1998), but not enough in 1997 and 1998 to meet reasonable expectations with respect to "market share" or "market penetration" (which measures a brand's performance relative to other brands). The likely cause of VWoA's recent "retail registration [in]effectiveness" in the Comm/Terr is the absence of an adequate number of VW dealerships located within its boundaries (which negatively impacts consumer convenience). There are 132 franchised dealerships (of all brands) in the Comm/Terr. Only three (or 2.3%) of these dealerships are VW dealerships. (The Comm/Terr has had only three VW dealerships since the closing of Arnie Smith Volkswagen in or about July of 1995.) In contrast, in the Palm Beach PAIs, 4% of the franchised dealerships are VW dealerships It does not appear that the recent "retail registration [in]effectiveness" in the Comm/Terr has been caused by the supply shortages of VW product (that have led to the creation of "waiting lists" for certain types of VW vehicles) inasmuch as there is no indication that such supply shortages existed only in the Comm/Terr and were not present elsewhere (including, most significantly, in the Palm Beach PAIs). Having identified the cause of VWoA's recent "retail registration [in]effectiveness" in the Comm/Terr as an insufficient number of VW dealerships, the solution to this problem is obvious: the addition of at least another VW dealership in the Comm/Terr. The Coconut Creek area cluster (where the Coconut Creek Site is located) is an appropriate location for this additional dealership. Relocating one of the existing VW dealerships in the Comm/Terr to the Coconut Creek area would not solve the "retail registration effectiveness" problem that VWoA is experiencing in the Comm/Terr inasmuch it would still leave VWoA with an inadequate share of the franchised dealerships in the Comm/Terr. The establishment of an additional VW dealership on the Coconut Creek site would benefit not only VWoA (by increasing its VW sales and enabling it to attain greater "market share" or "market penetration" in the Comm/Terr than it would with just three dealerships in the Comm/Terr). Consumers, particularly those in the Coconut Creek PAI (Coconut Creek consumers), would benefit as well. At present, with three VW dealerships in the Comm/Terr (none of which is located in the Coconut Creek area) Coconut Creek consumers, on the average, have to travel a further distance (8.6 miles) to buy new VWs (or to have their VWs serviced or repaired) than they do to purchase (or have serviced or repaired) vehicles of any of the 27 major brands that are represented in the Coconut Creek PAI. To purchase (or have serviced or repaired) vehicles manufactured by VAG's and VWoA's principal import competitors, Honda, Mitsubishi, Toyota, Mazda, and Nissan, these consumers have to travel, on the average, 4.1, 4.4, 4.4, 4.6, and 4.8 miles, respectively. If the Proposed Dealership is established on the Coconut Creek Site, Coconut Creek consumers would, on the average, be 4.6 miles away from a VW dealership. The establishment of the Proposed Dealership would not only reduce the distance Coconut Creek consumers, on the average, have to travel to get to a VW dealership, it would also increase the number of service stalls available in the Coconut Creek PAI to service and repair VW vehicles. These additional service stalls are badly needed. For example, consumers wanting to have their vehicles serviced or repaired at Gunther Volkswagen (which has 17 service stalls, four more than the number of stalls Vista Volkswagen has that are completely devoted to VW service and repair 17/), must wait, on average, a minimum of two weeks from the time they make an appointment before the dealership is able to service or repair their vehicles. If there is not an increase in the number of service stalls in the area, as VW sales rise, Coconut Creek PAI VW owners seeking to have their vehicles serviced will face even greater delays and resulting inconvenience. Consumers would also benefit from the increase in interbrand competition and intrabrand competition (among VW dealerships) that would occur as a result of the establishment of an additional VW dealership on the Coconut Creek Site. 18/ The benefits VWoA and consumers would derive from the establishment of the Proposed Dealership would not come at the expense of the existing VW dealers in the Comm/Terr, if these existing dealerships were to respond competitively to a new intrabrand competitor in the market. It is reasonable to anticipate that these dealerships would respond in such a competitive manner and that, among other things, they would increase their marketing efforts in the Comm/Terr. Such increased marketing efforts, along with the addition of a fourth VW dealership in the Comm/Terr, would produce an increased awareness of the VW brand, which, given the significant untapped potential of the brand in the Comm/Terr, would enable each of the existing dealerships, including Vista Volkswagen, to increase its VW sales. Indeed, even if the positive impact (of an additional VW dealership in the Comm/Terr) on consumer demand for the VW brand were disregarded, the opportunity (in terms of VW sales) presently available in the Comm/Terr (that is, the opportunity that the existing VW dealerships have not taken advantage of and therefore have "lost," hereinafter referred to as "lost opportunity" would be sufficient to support a fourth VW dealership in the Comm/Terr and, at the same time, allow the three existing VW dealerships to increase their VW sales in the Comm/Terr inasmuch as this "lost opportunity" in the Comm/Terr is significantly greater than the number of VW sales that it is reasonable to expect the Proposed Dealership would make to Comm/Terr consumers. Vista has made a significant investment ($3,311,971.00 as of October 1998) to perform its obligations under its dealer agreement with VWoA (with which it is in substantial compliance). The establishment of the Proposed Dealership, however, would not cause Vista to be deprived of a fair return on its investment, nor would it have "a significant and unfair negative financial impact on Vista," as Vista claims in its Proposed Recommended Order. While it is true that the size of Vista Volkswagen's PAI would be reduced by the addition of a VW dealership on the Coconut Creek Site, having a smaller PAI 20/ would not have any adverse impact on Vista's VW business if Vista were to respond in an effective, competitive manner 21/ and aggressively take advantage of the opportunity that would be available in the Comm/Terr as a whole 22/ (which, as noted above, would be sufficient to support four dealerships), with its efforts being focused upon the geographic areas closest to its dealership. There is no reason to believe that Vista would not be able to respond in such a fashion and offset any loss of Coconut Creek consumer business that it might suffer as a result of the establishment of the Proposed Dealership with an increase in business from consumers residing in its newly configured PAI and in other areas outside of the Coconut Creek PAI. There is no evidence that VWoA has unreasonably denied Vista opportunities for growth within the Miami Metro market. The establishment of the Proposed Dealership appears to be warranted and justified based upon present and anticipated economic and marketing conditions in the Comm/Terr.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Highway Safety and Motor Vehicles enter a final order approving the proposal/application of Volkswagen of America, Inc., to establish an additional dealership in the Coconut Creek area of Broward County. DONE AND ENTERED this 17th day of December, 1999, in Tallahassee, Leon County, Florida. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of December, 1999.
Conclusions This matter came before the Department for entry of a Final Order upon submission of an Order Closing File by June C. McKinney, Administrative Law Judge of the Division of Administrative Hearings, pursuant to Petitioner’s letter of withdrawal of protest of the establishment of AutoNation Dodge of Pembroke Pines, Inc., a copy of which is attached and incorporated by reference in this order. The Department hereby adopts the Order Closing File as its Final Order in this matter. Accordingly, it is hereby ORDERED and ADJUDGED that Respondent, AutoNation Dodge of Pembroke Pines, Inc. be granted a license for the sale and service of Chrysler passenger cars and light trucks (CHRY) 13601 Pines Boulevard, Pembroke Pines (Broward County), Florida 33027 upon Filed January 27, 2012 3:47 PM Division of Administrative Hearings compliance with all applicable requirements of section 320.27, Florida Statutes, and all applicable Department rules. DONE AND ORDERED this 2 q day of January, 2012, in Tallahassee, Leon County, Florida. Michael D. Le Assistant Deputy Director Division of Motorist Services Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A338 Tallahassee, Florida 32399 Filed with the Clerk of the Division of Motorist Services this _A\\__ day of January, 2012. Nalini Vinayak, Dealer Hicense Administrator NOTICE OF APPEAL RIGHTS Judicial review of this order may be had pursuant to section 120.68, Florida Statutes, in the District Court of Appeal for the First District, State of Florida, or in any other district court of appeal of this state in an appellate district where a party resides. In order to initiate such review, one copy of the notice of appeal must be filed with the Department and the other copy of the notice of appeal, together with the filing fee, must be filed with the court within thirty days of the filing date of this order as set out above, pursuant to Rules of Appellate Procedure. MDM/jde Copies furnished: Thomas H. Yardley, Esquire Law Office of Thomas H. Yardley 1970 Michigan Avenue, Building D Cocoa, Florida 32922 Phil Langley Chrysler Motors, LLC 10300 Boggy Creek Road Orlando, Florida 32824 R. Craig Spickard, Esquire Kurkin Forehand Brandes, LLP 800 North Calhoun Street, Suite 1B Tallahassee, Florida 32303 Dean Bunch, Esquire Nelson, Mullins, Riley and Scarborough LLP 3600 Maclay Boulevard South, Suite 202 Tallahassee, Florida 32312 June C. McKinney Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Nalini Vinayak Dealer License Administrator STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS MASSEY-YARDLEY CHRYSLER PLYMOUTH, INC., Petitioner, vs. Case No. 11-6491 CHRYSLER GROUP CARCO, LLC, AND AUTONATION DODGE OF PEMBROKE PINES, INC., Respondents.
The Issue The issue for determination in this proceeding is whether an additional Chevrolet dealership should be established in the Orlando, Florida area.
Findings Of Fact Petitioner, General Motors Corporation ("Chevrolet"), proposes to locate an additional dealer at 9400 State Road 434 South, Altamonte Springs, Seminole County, Florida. Petitioner, Classic Chevrolet Co., Inc. ("Classic"), is the owner and operator of the proposed dealership. Respondent, Don Mealey Chevrolet, Inc. ("Mealey") is located in Orlando, Florida, approximately six miles from the site of the proposed dealership. Respondent, Chevrolet World, Inc., d/b/a World Chevrolet Geo ("World"), is located in Orlando approximately 13 miles from the site of the proposed dealership. The proposed dealership is located within an area identified by Chevrolet as the Orlando multiple dealer area ("MDA"). The MDA is the area of primary responsibility ("APR") described in each contract between Chevrolet and the four existing dealers in the MDA. The four existing dealers in the MDA are Mealey, World, Ken Rummel Chevrolet-Geo ("Rummel"), and Roger Holler Chevrolet ("Holler"). Petitioners propose to establish Classic as a fifth Chevrolet dealership in the MDA. Relevant Community Or Territory This proceeding is governed by Section 320.642, Florida Statutes. 1/ Chapter 320 does not define the community or territory to be used in determining whether existing dealers adequately represent Chevrolet. 2/ The APR described in the contracts between Chevrolet and the existing dealers in the MDA is a material fact entitled to great weight. However, the APR is not determinative of the relevant community or territory. Fringe Areas Ten dealers have an APR adjacent to the MDA ("fringe areas"). The dealers in fringe areas are Seidle, Starling, Gannaway, Holiday, Bondesen, Eckler, Higgingbothom, Sorensen, Steele, and Blount. The issue of whether fringe areas should be included in the relevant community or territory is determined by all of the facts and circumstances surrounding the proposed dealership. 4/ The "cross-sell test" is one means of determining whether fringe areas should be included in the relevant community or territory. The cross-sell test measures sales by a fringe dealer to consumers in the MDA and sales by dealers in the MDA to consumers in the fringe areas. A fringe area satisfies the cross-sell test for inclusion in the relevant community or territory if more than 30 percent of sales by a fringe dealer are made to consumers in the MDA and if more than 30 percent of sales by dealers in the MDA are made to consumers in the fringe area. Only Seidle and Starling make more than 30 percent of their sales to consumers located in the MDA. Therefore, only Seidle and Starling satisfy the first part of the conjunctive requirements for the cross-sell test. Seidle is located in Clermont, Florida. Starling is located in Kissimmee, Florida. Only 19 percent of the consumers located in Kissimmee purchase Chevrolets from MDA dealers. Kissimmee does not satisfy the second requirement of the cross-sell test. Kissimmee is not in the relevant community or territory. More than 40 percent of consumers in Clermont purchase vehicles from MDA dealers. Clermont satisfies the second part of the conjunctive requirements for the cross-sell test. Clermont is not included in the relevant community or territory due to low sales volume by Seidle and ineffective performance by Seidle. Seidle sold only a nominal number of vehicles in 1993 compared to other dealers in the MDA. Of those sales, only 24 percent were sales in the APR for Clermont. The vast majority of consumers in Clermont purchased automobiles from dealers in the MDA or other more remote dealers. Mealey sold more vehicles to consumers in Clermont than did Seidle. Seidle achieved only 56 percent of the sales opportunities available to it. The MDA An Area of Geographic Sales and Service Advantage ("AGSSA") is an area within which a dealer is closer to consumers than any other same line-make dealer. There are five AGSSAs in the MDA. Holler is located in AGSSA 1. Mealey is located in AGSSA 2. Classic, the proposed dealership, is located in AGSSA 3. Rummel is located in AGSSA 4. World is located in AGSSA 5. Each AGSSA satisfies both conjunctive requirements in the cross-sell test. Each AGSSA is connected by consumer behavior, road networks, and inter- brand dealer locations. The relevant community or territory is the MDA. The MDA consists of AGSSAs 1-5. AGSSAs 1-5 are identifiable plots within the relevant community or territory. Adequate Representation In order for the adequacy of representation by existing dealers in the MDA to be assessed, their performance must be compared to a reasonable standard. A reasonable standard for such a comparison is the national average for Chevrolet's market share. The Florida Average The Florida average is not a reasonable standard. Florida has lagged behind the national average from 1991 through June, 1994. In 1993, Chevrolet's market share in Florida ranked 43 out of 50 states. Unique characteristics of Florida consumers account for only a portion of the difference between Florida and national averages. The remaining shortfall is attributable to deficiencies in Chevrolet's statewide dealer network. A dealer network includes the number and location of individual operations. Chevrolet's share of competitive franchises in Florida is below its national average. This is a significant factor in a brand's ability to achieve a reasonably expected market share. The Florida average includes network deficiencies for Chevrolet. It is inappropriate to use the Florida average as a standard to assess the adequacy of representation by existing dealers in the MDA. The National Average National average is first adjusted to account for unique consumer characteristics in Florida. After the appropriate adjustment, Chevrolet market penetration in the MDA is below national average. In 1993, for example, Chevrolet market share expectation in the MDA was 15.42 percent. In AGSSA 3, Chevrolet market expectation was 15.23 percent. In 1993, actual Chevrolet market penetration in the MDA was 12.32 percent. Actual market penetration in AGSSA 3 was only 10.76 percent. The shortfalls experienced in the MDA and AGSSA 3 are not attributable to local characteristics such as the presence of large numbers of daily rental cars in Orlando. More than half of all local markets in Florida exceed market share expectation adjusted for local characteristics. From 1991 through June, 1994, the MDA and AGSSA 3 performed significantly below the minimum market expectation. The degree of shortfall in the MDA has steadily declined on a percentage basis. The contribution by World to Chevrolet performance in the MDA has steadily increased. However, World's contribution to Chevrolet performance in AGSSA 3 did not improve Chevrolet performance in AGSSA 3 even though World had significant improvement in the MDA as a whole. The combined effort of existing dealers besides World has remained relatively constant. Through June, 1994, the MDA reached only 86.9 percent of the minimum expected market penetration. The contribution by existing dealers to Chevrolet performance in AGSSA 3 also remained relatively constant. It ranged from 68.8 percent of minimum expected penetration in 1991 to 71 percent through June, 1994. Vehicle Registration New vehicle registration density for the automobile industry mirrors patterns for population and households. The trend for the industry in the MDA and AGSSA 3 is upward. Each AGSSA in the MDA, including AGSSA 3, has experienced significant growth in population and households during the past 14 years. Growth rates are about four times the national rate and are expected to continue for at least the next five years. 5/ The MDA population has a strong distribution of median and above average income. There are virtually no economically depressed areas. There is a steady upward trend in employment. These factors represent a favorable environment for new vehicle sales. Growth in the MDA and AGSSA 3 represents new opportunity for Chevrolet. Registration activity in AGSSA 5 increased substantially after World was added as an existing dealer in the MDA. Sales by existing Chevrolet dealers in the MDA also increased. From 1991 through 1994, registrations in AGSSA 3 were less than the MDA and AGSSA 5. Chevrolet performance in AGSSA 3 ranks well below expected market penetration. Market Opportunity Gross registration loss is the number of registrations needed to raise each census tract within the MDA to the expected registrations for that area. Gross registration loss is a reasonable means of calculating market opportunity but does not represent the maximum opportunity. The amount and location of gross registration loss for Chevrolet in the MDA demonstrates a consistent pattern of under performance by existing dealers from 1991 through 1994. The establishment of World in 1991 raised the market efficiency of AGSSA 5 from 75.9 percent of expected market in 1990 to 103 percent in 1994. Chevrolet's overall market share increased. However, the addition of World did not eliminate under- performance. After controlling for the establishment of World, the gross registration loss for Chevrolet from 1991-1994 in AGSSAs 1- 4 was 6,083. That is an annual average loss of 1,521. The average annual loss in AGSSAs 1-4 from 1991-1994 is consistent with the loss for each year. The gross registration loss for AGSSAs 1-4 in 1991 was 1,489. In 1992, the loss was 1,510. The 1993 and annualized 1994 losses were 1,667 and 1,632, respectively. Chevrolet's overall registration shortfall in the MDA for 1993, including AGSSA 5, was 1,920 units. Of the units Chevrolet did sell in the MDA, approximately 1,216 were attributable to sales by Chevrolet dealers located outside the MDA ("insell"). If the proposed dealership had existed in 1993 and had penetrated the market at the same level as the average of existing dealers in the MDA, the proposed dealer would have sold 1,602 units. Projected sales by the proposed dealer in 1993 represent only 51.1 percent of combined shortfall and insell. Without insell as a component of opportunity, projected sales would not have eliminated gross registration loss. Assessing lost opportunity by gross registration loss is consistent with actual experience. The addition of World in 1991 raised AGSSA 5 efficiency from 75.9 percent of expected in 1990 to 103 percent of expected in 1994. Sales by existing dealers in the MDA remained stable through 1993 and increased in 1994. Chevrolet's overall market share increased and insell declined. The addition of a new dealer in a market in which there is sufficient opportunity for additional representation generally expands the market. Establishment of a Chevrolet dealer in the MDA for Jacksonville, Florida increased efficiency from below expected to above expected without decreasing sales by existing dealers. Insell also declined. The addition of a GMC Truck dealer in the MDA for St. Petersburg and Clearwater, Florida achieved similar results. Dealer Network Despite significant growth in population, households, and new vehicle registrations, Chevrolet's dealer network in the MDA has not expanded since 1930. Chevrolet's share of automobile franchises nationally is 10 percent. Its share of franchises in the MDA is only five percent. Chevrolet needs 8.5 dealers to achieve the same share of franchises in the MDA that it maintains nationally. The addition of the proposed dealer would raise Chevrolet's share of MDA franchises to 6.25 percent. Chevrolet has not been able to achieve its minimum expected market share with four dealers in the MDA. Proximity The ability of existing dealers to penetrate the market is strongest near their dealerships. It tapers off substantially as distance increases. 6/ Chevrolet is farther from AGSSA 3 than approximately 23 other brands. Ford has nearly a four mile advantage in distance over Chevrolet in AGSSA 3. The proposed dealer would improve Chevrolet's proximity to AGSSA 3 consumers. A brand's ability to penetrate a market diminishes as proximity to consumers diminishes, and vice versa. Before World was added to the MDA, Chevrolet's lowest market penetration occurred nearer the World site. Market penetration in the MDA increased nearer to Chevrolet dealers in existence prior to the addition of World. After World was added to the MDA, Chevrolet's highest market penetration occurred nearest the World site. World improved Chevrolet proximity to consumers in AGSSA 5 by approximately 2.5 miles. Chevrolet's efficiency to the expected market share improved in AGSSA 5 from 74.4 percent to 102.9 percent. Other line-makes experience similar market penetration. Market share for Ford is highest near their respective dealerships. Market share diminishes as distance from the dealerships increases. Ford achieves approximately 200 percent of the market penetration achieved by Chevrolet in the vicinity of the Ford dealer in AGSSA 3. The establishment of the Ford dealer in 1988 resulted in an increase of Ford market share relative to the national average. The site of the proposed dealer is close to an optimal location that maximizes Chevrolet proximity to consumers in the MDA and AGSSA 3. The site of the proposed dealer is further enhanced by an anticipated extension of Maitland Boulevard. The extension will facilitate greater visibility and accessibility to consumers. Operating Efficiency If all dealers in the MDA are operated as efficiently as they can be operated, a new dealer is most disadvantaged in the relevant community or territory. The new dealer lacks customer loyalty, word of mouth recommendations, and an established warranty and customer service business. If an existing dealer is forced to withdraw from the MDA as a result of the addition of a new dealer, the impact on the public interest, consumers, the manufacturer, and remaining existing dealers is positive. The addition of the new dealer eliminates inefficiency and strengthens the brand's overall competitiveness in the market, thereby increasing value and convenience for consumers. It is undisputed that Rummel is an inefficient Chevrolet dealer. Chevrolet loses approximately 1,000 sales each year as a result of inefficient operation of Rummel. Rummel failed to maintain the minimum level of operating capital prescribed in its dealer agreement with Petitioner. From 1989 through 1993, Rummel operated far below its required operating capital level and at a deficit. Inadequate working capital can interfere with a dealer's ability to adequately represent product in the market. Inadequate working capital can prevent the dealer from paying the floor plan lender and thereby prevent the dealer from obtaining product to sell. Rummel's inadequate working capital caused problems in its floor plan financing. Rummel's floor plan financing was revoked from March 16, 1992, through May 1, 1992. Rummel sales were substantially below its contractual sales obligations with Chevrolet from 1990 through 1993. Chevrolet placed Rummel on Chevrolet's Performance Improvement Program in February, 1993. However, Rummel did not submit a plan to address its sales deficiencies that was satisfactory to Chevrolet. Chevrolet granted Rummel's request for a special allocation of vehicles. However, Rummel refused to submit orders so that the allocation could be delivered. Mr. Ken Rummel frequently replaced himself as dealer operator without approval from Chevrolet. The dealer agreement requires a dealer to devote his or her personal services to the daily management of the dealership. Order Bank Management Chevrolet distributes new vehicles to its national dealer body based upon a mathematical formula that accounts for each dealer's rate of sale and current product availability. A dealer can grow its business by increasing the rate at which it sells the product allocated to it. Before Chevrolet can ship a vehicle to a dealer, the dealer must submit a "selectable" order to Chevrolet. Product allocated to a dealer but not ordered may be purchased by other dealers. A dealership must properly manage its order bank. For approximately 100 production weeks for 1992 and 1993 model vehicles, Mealey placed no selectable orders for a broad range of Chevrolet product. From August, 1991, through July, 1993, Mealey frequently rejected its allocation of product through a lack of selectable orders. During the same period, World and other existing dealers in the MDA received additional product which was available to Mealey. To a lesser degree, World practiced selective ordering. World and Mealey are adequately capitalized and in sound financial condition. Neither would suffer any adverse financial impact from the proposed dealership. Enhanced Competition And The Public Interest Where there is sufficient opportunity for additional representation, as there is in the MDA and AGSSA 3, the impact on consumers from an additional dealer is positive. Enhanced intra- brand and inter-brand competition results in lower transactional costs, lower pricing, better trade-in value, better financing, greater selection, and better service. Enhanced competition also increases the perception by consumers that they are receiving greater value. Existing Chevrolet dealers in the MDA will benefit from the proposed dealer. Public exposure to the Chevrolet brand will be greater. Existing dealers will share the benefits of greater advertising, public display, and demonstration of product. Enhanced competition encourages existing Chevrolet dealers to become more efficient and aggressive. There is greater opportunity to convince non- brand or marginal customers to buy Chevrolets. Enhanced competition is unlikely to result in reduced profits for existing dealers due to elasticity of demand in the automobile industry. Enhanced competition stimulates the competitive viability of the line-make in the market through greater efficiency and perceived value. The proposed dealer favorably impacts the public interest. The public obtains greater value, and there is a better allocation of scarce resources. The proposed dealership also means additional employment and enhanced tax revenues.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and therein GRANT the application for the proposed dealership. RECOMMENDED this 1st day of February, 1996, in Tallahassee, Florida. DANIEL S. MANRY, 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 1st day of February, 1996.
The Issue The issue in the case is whether an application for a new point franchise motor vehicle dealership filed by Keeway America, LLC, and Sunset Point Scooters, Inc. (Petitioners), should be approved.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order dismissing the protest filed by Retro in this case and granting the Petitioners' request to establish a new point franchise motor vehicle dealership for the sale of ZHQM motorcycles. DONE AND ENTERED this 23rd day of October, 2009, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of October, 2009. COPIES FURNISHED: Gary Parr Sunset Point Scooters, Inc. 6481 27th Avenue North St. Petersburg, Florida 33710 Jennifer Clark Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-308 2900 Apalachee Parkway Tallahassee, Florida 32399-0635 Doug Vitello Sunset Point Scooters, Inc. 112 South Maywood Avenue Clearwater, Florida 33765 Zhong Zhuang Keeway America, LLC 2912 Skyway Circle, North Irving, Texas 75038 Edward Dreyer, Jr. Retro Unlimited, Inc. 3200 Dr. Martin Luther King, Jr. Street, North St. Petersburg, Florida 33704 Carl A. Ford, Director Division of Motor Vehicles Highway Safety and Motor Vehicles Neil Kirkman Building, Room B-439 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 Robin Lotane, General Counsel Highway Safety and Motor Vehicles Neil Kirkman Building 2900 Apalachee Parkway Tallahassee, Florida 32399-0500
The Issue Whether Respondent, Maserati North America, Inc.’s ("MNA"), proposed 2017 Commercial Policy Program ("2017 Program") is a modification of the franchise agreement between MNA and Petitioner, New Country Motor Cars of Palm Beach, LLC, d/b/a Maserati of Palm Beach ("Palm Beach"), or Petitioner Recovery Racing, LLC, d/b/a Maserati of Ft. Lauderdale ("Fort Lauderdale"); and, if so, whether it is fair and not prohibited by section 320.641(3), Florida Statutes (2016). Whether MNA’s proposed modifications to the Existing Franchise Agreements with Petitioners are fair and not prohibited under section 320.641(3).
Findings Of Fact Based on the evidence presented, the Pre-hearing Stipulation of the parties and the record as a whole, the following relevant and material Findings of Fact are made2/:
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: A final order be entered by the Department of Highway Safety and Motor Vehicles: (1) DISMISSING Petitioners’ claims regarding MNA’s 2017 Commercial Policy Bonus Program; and (2) GRANTING, IN PART, AND DENYING, IN PART, Petitioners’ claims regarding modifications in the Proposed New Agreement, as set forth above. DONE AND ENTERED this 23rd day of January, 2018, in Tallahassee, Leon County, Florida. S ROBERT L. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of January, 2018.
The Issue The issue is whether, pursuant to section 320.642, Florida Statutes (2013), Respondent Jaguar Land Rover North America LLC (JLRNA) may relocate the dealership of Respondent Warren Henry Jaguar from 20800 Northwest Second Avenue, Miami, to the east side of Biscayne Boulevard, about 306.45 feet south of Northeast 151st Street, in North Miami.
Findings Of Fact Warren Henry Jaguar is an authorized Jaguar dealer located at 20800 Northwest Second Avenue in Miami Gardens. Warren Henry Jaguar has occupied this location since 1985. Since December 2012, Warren Henry Jaguar has shared this location with the Land Rover dealership of Land Rover North Dade, LLC. Both entities are owned by Warren Henry Automobiles, Inc., which also owns Infiniti and Fiscar dealerships near Warren Henry Jaguar's present location, as well as Land Rover South Dade, LLC, which is mentioned below. By notice dated December 2, 2013, JLRNA informed the Department of Highway Safety and Motor Vehicles (DHSMV) that it intended to permit Warren Henry Jaguar to relocate its Jaguar dealership to a new facility to be located on the east side of Biscayne Boulevard in North Miami, about 306.45 feet south of the intersection of Biscayne Boulevard and Northeast 151st Street, in North Miami. The new dealership would be in a development to be known as Biscayne Landing. The existing and proposed locations are both in Dade County, whose population exceeds 300,000 persons. On December 9, DHSMV published notice to this effect in the Florida Administrative Register. Despite an incorrect proposed street address, The Collection's principal, Kenneth Gorin, knew the proposed location of the relocated Jaguar dealership and timely protested the proposed relocation. The Collection is an authorized dealer for Jaguar, Audi, Porsche, Ferrari, Maserati, McLaren, Aston Martin, and Alfa Romeo. The Collection sells and services these vehicles from a single dealership located at 200 Bird Road in Coral Gables, Dade County. Warren Henry Jaguar and The Collection are "motor vehicle dealers" within the meaning of section 320.60(11)(a)1., Florida Statutes. JLRNA is a "distributor" and "licensee" within the meaning of section 320.60(5) and (8), Florida Statutes. As such, JLRNA is authorized to distribute Jaguar and Land Rover motor vehicles to its respective authorized dealers in Florida. In general, JLRNA assigns each of its dealers an area of responsibility (AOR) based on the proximity of zip codes to each dealership. Each Jaguar dealership has a non-exclusive AOR, meaning that JLRNA may unilaterally change a dealer's AOR. Although the AOR of Land Rover of North Dade is also non- exclusive, the AOR of Land Rover of South Dade is exclusive, meaning that JLRNA may not unilaterally change its AOR. The present location of Warren Henry Jaguar is east of the Sun Life Stadium. This area is in economic decline, as evidenced by widespread commercial vacancies and elevated crime levels. Within Warren Henry Jaguar's AOR for its current location, the new location would be about 7.2 road miles and less than five air miles to the southeast of the current location. The proposed location would be directly west of Oleta River State Park, which is separated from Haulover Park on the ocean by a narrow finger of the northernmost portion of Biscayne Bay. The proposed location is in an area that is economically vibrant. During at least one 12-month period within the 36 months preceding publication of notice of the relocation, The Collection made more than 25% of its retail sales of new Jaguars to persons who registered those vehicles within a radius of 12.5 miles of the proposed relocation site. Warren Henry Jaguar's present location is about 16.3 air miles from The Collection's dealership. The proposed location is about 2.4 air miles and 2.2 road miles closer to The Collection's dealership; the new location would be about 13.9 air miles and 15.8 drive miles from the Collection. The drive time between The Collection's dealership, on the one hand, and the present and proposed locations, on the other hand, would be almost unchanged. The "community or territory" within which to judge the performance of the Jaguar brand is the combined AORs of The Collection, Warren Henry Jaguar, and Alpine Motors, which is the Jaguar dealership in Ft. Lauderdale, Broward County (CommTerr). The parties agree upon this designation of the CommTerr, which captures the three Jaguar dealers operating in Dade and Broward counties. As noted in the Conclusions of Law, the adequacy of Jaguar representation in the CommTerr requires consideration of at least 11 factors, as set forth in section 320.642(2)(b). These statutory factors are considered, where appropriate, in groups. Two of the 11 statutory factors are the reasonably expected market penetration for the CommTerr and the volume of registrations and service business transacted by the existing dealers in the CommTerr. See § 320.642(2)(b)3. and 11. The assessment of the performance of the CommTerr requires the establishment of a benchmark against which the CommTerr may be measured. A reliable benchmark must reflect the relevant demographics of the CommTerr. A benchmark relatively close to Broward and Dade counties would better reflect the market and demographic conditions than a more distant benchmark. After considering a number of factors, JLRNA's dealer network analyst selected as a benchmark the AOR of the West Palm Beach Jaguar dealer. The analyst has testified as an expert in almost 100 cases of this type, including 10 to 15 dealer- relocation cases, and has been accepted as an expert in each case that went to trial. In the alternative, JLRNA's dealer network analyst selected as a benchmark the AORs of all Florida Jaguar dealers outside of the CommTerr. The exclusion of the CommTerr from the alternative benchmark was necessitated by the fact that the size of these two counties would have overrepresented their sales performance and effectively distorted the sales of Jaguar dealers through the remainder of Florida. These benchmark selections are reasonable. The Collection's dealer network analyst did not object to the alternative benchmark, although his Florida benchmark includes the CommTerr. However, the Collection's dealer network analyst objected to the West Palm Beach AOR primarily because this was the second-highest-performing AOR in Florida in 2012, although it has since ranked lower. As already noted, reliance on the West Palm Beach AOR as a benchmark tends to control demographic variables. The reasonableness of this selection is further evidenced by the fact, noted below, that Alpine Motors performed quite well when compared to the benchmark West Palm Beach AOR during the period in question. The objection to the West Palm Beach AOR is therefore rejected. To address any material difference in market conditions between the CommTerr and the benchmark area, JLRNA's dealer network analyst analyzed consumer purchase preferences in these two markets. During the relevant period, Jaguar's offerings have been the XF, which is in the medium premium sedan segment, and the XJ, which is in the large premium sedan segment. During most of the relevant period, JLRNA also offered the now-discontinued XK, which was in the large premium sport segment. In the last couple of years, JLRNA replaced the XK model with the F model--first a convertible and then a coupe; the F model is in the premium sport segment. Segmentation analysis applies more objective filters, such as body type (e.g., sedan vs. coupe) and body length, plus more subjective filters, such as eliminating otherwise-eligible line-makes, such as Hyundai, due to the perception that they are not within the core premium brand associated with Jaguar. After applying these filters and making relatively minor adjustments for segment-based market preferences between the CommTerr and the West Palm Beach AOR, the JLRNA dealer network analyst reasonably determined that Jaguar sales in the CommTerr were inadequate. For instance, in 2012, for the medium premium, large premium, and large sport premium (XK not yet replaced by F) segments, the Jaguar dealers would have been expected to generate 1129 retail registrations, but achieved only 822. The expected penetration for Jaguar dealers in the CommTerr was 8.32%, but the actual penetration was only 6.06%; this translates to a retail registration effectiveness of 72.8%. At the time that the JLRNA dealer network analyst prepared his initial report, 2012 was the last year for which retail registration effectiveness data was available. At the time, though, 2012 was not an anomaly. The retail registration effectiveness of the CommTerr compared to the West Palm Beach AOR was 98.1% in 2009, 83.1% in 2010, and 93% in 2011. Updating his earlier work, the JLRNA dealer network analyst showed that the CommTerr underperformed in 2013 and 2014 (through June) with retail registration effectiveness, when compared to the West Palm Beach AOR, of 85.6% and 78.2%, respectively. The downward trend from adequate performance in 2009 and near-adequate performance in 2011 became more pronounced from 2012 through June 2014. As noted above, Alpine Motors performed well during this period. In 2009, 2011, and 2013, its retail registration performance exceeded the performance of the West Palm Beach AOR benchmark. The underperformance of the CommTerr is thus attributable to the underperformance of Warren Henry Jaguar and The Collection, whose retail registration performance fell below that of the West Palm Beach AOR benchmark each year from 2009 through June 2014. The CommTerr performed no better when compared to the alternative benchmark of Florida less the CommTerr. Here, the CommTerr achieved retail registration effectiveness of 100% in 2010, 95.7% in 2011, 87.5% in 2012, 90.83% in 2013, and 84.81% through June 2014. And the below-benchmark performance is attributable to Warren Henry Jaguar and The Collection, as, again, Alpine Motors' retail registration effectiveness exceeded that of Florida less the CommTerr in 2009, 2010, 2011, and 2013. Based on the foregoing, new Jaguar sales have achieved below-expected market penetration in the CommTerr after consideration of all relevant factors, and JLRNA has received inadequate representation in the CommTerr as a whole. These findings are driven by penetration and representation factors applicable to the portion of the CommTerr in Dade County. Two of the 11 statutory factors are: a) whether there is adequate interbrand and intrabrand competition with Jaguar in the CommTerr and adequate consumer care for Jaguar in terms of sales and service and b) whether the relocation is justified based on economic and marketing conditions pertinent to dealers in the CommTerr. See § 320.642(2)(b)9. and 10. Based on population and demographics, the CommTerr encompasses one of the more important markets for luxury vehicle manufacturers in the world in terms of opportunities for sales and corporate branding. The CommTerr promises to continue to represent an important market for new luxury vehicle sales into the future. For relevant segments, new-vehicle registrations in the CommTerr have increased from 10,054 in 2010 to 17,984 in 2013. For the first six months of 2014, these registrations reached 9611, annualizing to another increase in new-vehicle registrations in 2014. For the most part, the period in question covers the recovery of the auto industry from the Great Recession of 2008. However, there is some evidence that Jaguar may be a brand in decline, as its popularity among older buyers has not transferred to younger buyers. From 2006 to 2011, U.S. Jaguar sales dropped from 19,943 to 11,138 new vehicles. But the vast potential of the south Florida market to support more luxury vehicle sales supports the finding that Jaguar sales in the CommTerr are inadequate. Based on the foregoing, inadequate performance by Jaguar in the CommTerr during the period in question has not been due to adverse economic and marketing conditions. Inadequate performance by Jaguar in the CommTerr is due to inadequate representation by The Collection and Warren Henry Jaguar in engaging in interbrand and intrabrand competition. Two factors of the 11 statutory factors are: a) the impact of the relocated dealer on consumers, the public interest, existing dealers, and JLRNA and b) the size and permanency of investment reasonably made and reasonable obligations incurred by existing dealers to perform their obligations under their dealer agreements. See § 320.642(2)(b)1. and 2. There is substantial opportunity for additional Jaguar sales in the CommTerr through two means: conquest sales, meaning the sale of Jaguar models to purchasers who own corresponding models of competitors' vehicles, and the sale of Jaguar models by CommTerr dealers to displace pump-in sales, which are sales by Jaguar dealers outside of the CommTerr to purchasers within the CommTerr. If the CommTerr dealers achieved the retail registration effectiveness of the West Palm Beach AOR, based on 2012 registration data, 350 conquest sales and 106 displaced pump-in sales would be available to the CommTerr dealers. These two categories thus represent a total opportunity of 456 new- vehicle sales. JLRNA's dealer network analyst estimates that Warren Henry Jaguar would obtain about 116 of these sales, if it relocated to the proposed location, leaving about 340 sales to The Collection and Alpine Motors. For 2013, the dealer network analyst estimates that, if it relocated, Warren Henry Jaguar would obtain 127 sales from conquest and pump-in displacement sales, leaving 246 sales to The Collection and Alpine Motors. By some measures, The Collection had, at 103 units, the largest shortfall in sales, when measured against average sales, among all U.S. Jaguar dealers for the 12 months ending in July 2014. Even The Collections' dealer network analyst conceded that sales performance of The Collection--as well as Warren Henry Jaguar (except in 2008), but not Alpine Motors--was below his Florida benchmark every year. (Pet. Ex. 2, Tab 11, p. 4.) The Collection contends that its below-average performance is due to its status as a single-line Jaguar dealer, as contrasted to the dual-line (Jaguar and Land Rover) dealership of Warren Henry Jaguar and its affiliate. The Collection's claim of disadvantage as a single-line dealer fails for two reasons. First, The Collection represents numerous other luxury brands, including Audi, which features SUVs that are competitive with Land Rover SUVs. Second, Alpine Motors, which has consistently outperformed The Collection and Warren Henry Jaguar, is a single-line dealer without other brands--and has earned a profit each year since 2009. Evidence offered by The Collection concerning the financial impact of the relocation was flawed. For instance, The Collection's dealer network analyst could offer no support for his assumption of a direct relationship between reduced sales revenues and reduced service and parts revenues. Worse, The Collection's accountant incorrectly assumed a direct relationship between reduced gross revenues and reduced profits. The relationship between dealership revenues and profits can be complicated. For instance, notwithstanding the lost sales opportunities of 103 units for the 12 months ending in July 2014 and poor sales over the entire period in question, The Collection is the most profitable Jaguar dealership in the United States. From 2011 to 2013, The Collection's net after- tax profit climbed 45% on the sale of seven fewer new Jaguars. Similar indirect relationships between new-Jaguar sales and gross or net after-tax profits exist from 2009 through August 2014. For example, The Collection's gross profit increased 23.3% from 2010 to 2012 while its vehicle sales decreased by 9.2%. Less dramatically, in attempting to demonstrate that The Collection's Jaguar-based financial performance was precarious, The Collection's accountant imputed excessive rent based on an overly generous value assigned to the facility and an excessive allocation to Jaguar of a share of the facility and facility costs. The accountant also distorted The Collection's Jaguar-based financial performance by including one-time legal expenses paid or incurred in 2013 in connection with this dealer-relocation litigation. As noted above, there is little risk posed to The Collection from the proposed relocation because there is plenty of sales opportunity in the CommTerr to go around. Thus, there is little risk posed to The Collection's investment and obligations in connection with its dealer agreement with JLRNA. Moreover, there is little, if any, evidence as to the size or permanency of investment or obligations incurred by The Collection to perform its obligations under its agreement with JLRNA. The record does not permit a precise allocation of facility expenses to Jaguar--and, thus, The Collection's obligations to Jaguar--but the facility-expense allocation is smaller than estimated by The Collection's accountant. JLRNA argues that a Jaguar loss, if any, would be a rounding error, given the sales and profits generated by The Collection's sales and service of the other seven brands. As framed, this argument is irrelevant because it impermissibly enlarges the scope of the issues of these cases. But where, as here, the protesting dealer represents several line-makes in a single facility and the subject line-make is a small fraction of its overall business, the investment risk posed to such a Jaguar dealer, as The Collection, is much less than the risk posed to a single-line Jaguar dealer that represents no other line-makes. Based on the foregoing, the relocation of Warren Henry Jaguar would not have an adverse impact on existing dealers, nor would it have an adverse financial impact on The Collection. And this relocation would not pose an unreasonable risk to The Collection's investment and obligations under its agreement with JLRNA. Another factor of the 11 statutory factors is any action by JLRNA to deny The Collection, as to the Jaguar brand, the opportunity for reasonable growth, market expansion, or relocation, including the availability of line-make vehicles in keeping with the reasonable expectations of JLRNA in providing an adequate number of dealers in the CommTerr. See § 320.642(2)(b)4. Although owned by JLRNA, Land Rover is not the same line-make as Jaguar, so JLRNA's refusal to grant The Collection a Land Rover franchise is not cognizable under this statutory factor. At some point, Mr. Gorin and Mr. Zinn negotiated the sale of Land Rover of South Dade to Mr. Gorin, The Collection, or an affiliate of either of them. But these negotiations were unsuccessful, and, of course, this proceeding cannot serve as a means of forcing Mr. Zinn (or Mr. Gorin) to sell so as to create a dual-line dealership in south Dade County. As noted above, the dealer agreement between Land Rover of South Dade and JLRNA precludes the manufacturer's unilateral revision to the dealer's AOR, so JLRNA could not create for The Collection an AOR out of the AOR of Land Rover of South Dade, even if JLRNA were motivated to do so. The corporate policy of JLRNA is to encourage dual- line dealers. There is nothing inherently objectionable in such a policy. Even with the growing popularity of Land Rover and declining popularity of Jaguar over the past several years, this corporate policy, on the present record, has not denied The Collection a reasonable opportunity for growth. However, Jaguars and Land Rovers share a common engine on a number of models, and JLRNA allocates these engines between the two line-makes. Obviously, the potential exists for JLRNA to restrict the growth of single-line Jaguar dealers by allocating a disproportionately large number of engines to Land Rovers. But the record does not demonstrate that JLRNA has done so in these cases. Except for a few months leading up to the administrative hearing, when the supply of XF and new F models was constrained, all Jaguar models have otherwise been in free supply during the period in question, so JLRNA's allocations of engines between Jaguars and Land Rovers could not have denied The Collection a reasonable opportunity for growth. Further, The Collection may have declined allocations, even of the F model, during the period in question, further underscoring the free-supply status of all Jaguar models during the relevant period. Based on the foregoing, JLRNA has not denied The Collection the opportunity for reasonable growth, market expansion, or relocation, including the availability of Jaguar vehicles in keeping with the reasonable expectations of JLRNA in providing an adequate number of dealers in the CommTerr. Another factor of the 11 statutory factors is any attempt by JLRNA to coerce The Collection into consenting to the relocation of Warren Henry Jaguar. See § 320.642(2)(b)5. On one occasion, JLRNA's Vice President of Dealer Network Development warned Mr. Gorin that he would be "crossing a line" if The Collection persisted in objecting to the relocation of Warren Henry Jaguar. The officer made the comment at an informal encounter with Mr. Gorin during a Jaguar dealer meeting. The officer added that The Collection's relationship with JLRNA would never be the same if Mr. Gorin did not drop its protest of the relocation. The officer characterized the protest as The Collection's "suing" JLRNA. The Vice President of Dealer Network Development has considerable power over Jaguar dealers. He was and is in charge of the Business Builder Program, which is the program by which dealers, such as Warren Henry Jaguar and The Collection, earn manufacturer hold-backs by various activities. For Jaguar, these hold-backs, which are more formally known as a "variable margin program," amount to up to 7% of the manufacturer's suggested retail price (MSRP) of a vehicle and may provide the difference between a profit and loss in Jaguar dealership operations over the course of a year. Notwithstanding the source of these threats, their seriousness is negated by the absence of any attempt whatsoever by JLRNA to punish The Collection for maintaining this protest. Had there been such evidence, the weight that would have been assigned to this factor would have been considerable and possibly jeopardized the proposed relocation. Another factor of the 11 statutory factors is the distance, travel time, traffic patterns, and accessibility between The Collection and the proposed relocation. See § 320.642(2)(b)6. As noted above, as a result of the relocation, the air distance between The Collection and Warren Henry Jaguar would be reduced by about 2.4 miles and the road distance would be reduced by about 2.2 miles. The relationship between relatively small changes in distance between dealers and the lack of meaningful impact on the non-relocating dealer is reflected in section 320.642(5)(a)4., which bars a protest if the relocating dealer reopens less than six miles from its existing location and its new location is more than 15 miles from the non- relocating dealer. The proposed relocation meets the first criterion and, by road miles, the second criterion. But the new location, by air miles, is about one mile short of the 15-mile threshold. Nonetheless, the relatively short distance that Warren Henry Jaguar would be moving and the relatively small change in the proximity of its new location to The Collection are facts to be considered under this statutory factor. In terms of travel time, the existing and new locations of Warren Henry Jaguar are both about 20.6 minutes from The Collection. And the relatively modest distance between the existing and new locations would not produce any changes in average driving time for owners of Jaguars in operation within Warren Henry Jaguar's AOR. Based on the foregoing, there are no material differences in distance, travel time, traffic patterns, and accessibility between The Collection, on the one hand, and, on the other hand, Warren Henry Jaguar's existing and new locations. Another factor of the 11 statutory factors is whether benefits to the consumer will likely occur from the relocation and whether these benefits are not obtainable by other geographic or demographic changes or expected changes in the CommTerr. See § 320.642(2)(b)7. The MSRPs of the Jaguar models at issue range from about $50,000 to over $100,000. Any foreseeable changes in the demographics of the immediate vicinity of Warren Henry Jaguar's present location are not going to be of any benefit to the public that might constitute customers of these luxury cars. The relocation toward the coast benefits the public because the demographics of the immediate vicinity of the new location is more in tune with the luxury car market. After the relocation, more of Jaguar's potential customers would be able to examine JLRNA's offerings in closer proximity to their homes, and all of Jaguar's potential customers would be able to examine Jaguar's offerings in a safer setting that hosts other luxury brands for comparison shopping, such as Audi, Lexus, and Lamborghini, and other high-end retail attractors, such as fine restaurants and high-end stores, including those at the nearby Aventura Mall and planned for the Biscayne Landing development itself. Based on the foregoing, the relocation of Warren Henry Jaguar will provide relevant consumers benefits that cannot be obtained by other geographic or demographic changes. The final factor of the 11 statutory factors is whether The Collections is in substantial compliance with its dealer agreement with JLRNA. It is. Balancing these 11 statutory factors, JLRNA has proved that its existing dealers in the CommTerr--particularly, The Collection and Warren Henry Jaguar--have provided inadequate representation. No other factors persuade otherwise.
Recommendation It is RECOMMENDED that the Department of Highway Safety and Motor Vehicles enter a final order dismissing all protests of The Collection to the proposed relocation of Warren Henry Jaguar to the east side of Biscayne Boulevard, about 306.45 feet south of Northeast 151st Street, in North Miami. DONE AND ENTERED this 22nd day of May, 2015, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of May, 2015. COPIES FURNISHED: Jennifer Clark, Agency Clerk Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-430 2900 Apalachee Parkway, MS 61 Tallahassee, Florida 32399 (eServed) Richard N. Sox, Esquire Bass Sox Mercer, P.A. 2822 Remington Green Circle Tallahassee, Florida 32308 (eServed) J. Martin Hayes, Esquire Akerman Senterfitt 106 East College Avenue, Suite 1200 Tallahassee, Florida 32301 (eServed) Stephanie Leigh Carman, Esquire Hogan Lovells US LLP 600 Brickell Avenue, Suite 2700 Miami, Florida 33131 (eServed) John J. Sullivan, Esquire Hogan Lovells US LLP 875 3rd Avenue New York, New York 10022 (eServed) Barrett Rachel Charapp, Esquire Charapp & Weiss, LLP 20801 Biscayne Boulevard, Suite 403 Aventura, Florida 33180 (eServed) Michael G. Charapp, Esquire Charapp & Weiss, LLP 8180 Greensboro Drive, Suite 1000 McLean, Virginia 22102 Brad D. Weiss, Esquire Charapp & Weiss, Llp 8180 Greensboro Drive, Suite 1000 Mclean, Virginia 22102 Ryan L. Ford, Esquire Hogan Lovells Us Llp 555 13th Street, Northwest Washington, Dc 20004 Kimberly S. Maccumbee, Esquire Charapp & Weiss, Llp 8180 Greensboro Drive, Suite 1000 Mclean, Virginia 22102 Terry L. Rhodes, Executive Director Department Of Highway Safety And Motor Vehicles Neil Kirkman Building, Room B-443 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 (Eserved) Steve Hurm, General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-432 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 (eServed)
The Issue Whether Petitioner's application to relocate B.O.O., Inc., d/b/a Acura of South Florida (Acura of South Florida) from its current location in Hollywood, Florida, to its proposed location in Pembroke Pines, Florida, should be approved.
Findings Of Fact Parties American Honda is a licensee and manufacturer as defined by Section 320.60(8) and (9), Florida Statutes. Acura of South Florida and Case Acura are motor vehicle dealers as defined by Section 320.60(11)(a)1., Florida Statutes. At all relevant times, Acura of South Florida's principal is Craig Zinn (Mr. Zinn); Case Acura's principals are Rick and Rita Case (Mr. Case and Mrs. Case, respectively, and collectively, the Cases). Notice and Standing With respect to notice and standing, the parties have stipulated as follows: On October 15, 2004, notice of American Honda's intent to relocate Acura of South Florida (proposed relocation) to Pembroke Pines from its current location in Hollywood was duly-noticed by publication in the Florida Administrative Weekly. Case Acura has standing to protest the proposed relocation, and timely filed its protest. The Community or Territory The parties have stipulated that the Community or Territory (generally referred to in the industry as a "comm/terr" ) relevant to this proceeding is the area defined by American Honda as the Pembroke Pines comm/terr (Pembroke Pines comm/terr or comm/terr). Both Acura of South Florida and Case Acura are located within the comm/terr, as is the proposed relocation site. The proposed relocation site is located west of both Acura of South Florida and of Case Acura. The Proposed Relocation and Related Market Studies Case Acura is, at all relevant times, centrally located in Ft. Lauderdale in Broward County, Florida. Major Broward County traffic arteries provide ready access to Case Acura from the north, south, east and west within the comm/terr. Acura of South Florida is located south of Case Acura, and just north of the Broward County line. Unlike Case Acura, Acura of South Florida does not offer customers ready access from any direction within the comm/terr. Both Case Acura and Acura of South Florida are located well east of the proposed location. From time to time, as circumstances warrant, American Honda evaluates specific existing or proposed comm/terrs, including the Pembroke Pines comm/terr, by performing a so-called market study. American Honda's market studies are an integral part of the company's strategic and long-range planning process. American Honda's market studies are conducted by teams of experienced and appropriately credentialed experts (market study team(s)). With reference to this case, market studies in the Pembroke Pines comm/terr were conducted in 1997 and again in 2003. The proposed relocation grew out of the results and recommendations of the 1997 market study team. The same results and recommendations were reached again by the 2003 market study team, based upon updated information concerning relevant data which emerged between the two market studies. Both studies documented that Broward County's population had been and would continue for the foreseeable future to "trend west" within the comm/terr. This westward population trend has been and is predicted to continue and to be particularly pronounced among affluent households. Because American Honda manufactures luxury vehicles under the Acura brand, American Honda and its dealers seek to "capture" or "conquer," i.e. attract the business, of such households, while maintaining their existing customer base of affluent households. The teams which conducted both market studies determined that the present configuration of Acura dealers within the comm/terr (dealer network) did not provide adequate representation for American Honda's Acura brand (adequate representation). The lack of adequate representation was a function of the westward population trend. To remedy the situation, and in accordance with Florida law concerning dealer relocation, both market study teams reasonably recommended that Acura of South Florida be relocated to western Broward County. The recommendation was not implemented following the 1997 market study; at that time, and for some years before and after, the owners of Acura of South Florida (Mr. Zinn's predecessors) were beset by illness and management difficulties, and not in a position to undertake the recommended relocation. Likewise American Honda was not in a position to force a relocation upon Acura of South Florida, because it had neither contractual rights nor statutory rights to do so. The 2003 market study team revisited the comm/terr in order to verify or refute the conclusions and recommendations of the 1997 study team in light of all that had transpired since 1997. Upon careful consideration of updated data, the 2003 study team reasonably concluded that the dealer network as it was then configured still failed to afford adequate representation. American Honda's market study teams, as a matter of course, conduct informal interviews with all dealers in the comm/terr when assembling market study data. The 1997 and 2003 market study teams followed this practice. During the 2003 interview with him, Mr. Case was asked whether he would like to move his dealership. Mr. Case replied unambiguously that he was well-satisfied with his present location, where he had become one of Acura's most successful dealers. It is noted that Acura dealers are permitted to market and to sell Acuras anywhere, both within and without the comm/terr in which they are located. The Cases have taken particular advantage of this opportunity, a factor which contributes to Case Acura's significant profitability. Dealer input, and the present success or lack thereof of dealers within a comm/terr, are data considered by market study teams in the context of all the other data. Upon consideration of all relevant data, including the input of the dealers within the Pembroke Pines comm/terr, the 2003 market study team adhered to the conclusion of the 1997 team and recommended implementation of the relocation of Acura of South Florida as proposed in 1997. As Acura of South Florida and American Honda set out to implement the relocation recommendation, Mr. Case had a change of heart and came forward to insist that he was entitled to be the dealer to be relocated. He also insisted that Acura of South Florida remain where it was. In support of these late- asserted demands, Mr. Case testified that he had previously been informed by the "zone manager" for the comm/terr, one Ray Mikiciuk (Mr. Mikiciuk) that Case Acura (and not Acura of South Florida) would be relocated. According to Mr. Case, Mr. Mikiciuk was authorized by American Honda to so advise Mr. Case on American Honda's behalf. Mr. Case also claims that Case Acura would have been the dealership relocated but for a threat by Mr. Zinn to sue American Honda should Case Acura be relocated. Contrary to Mr. Case's testimony regarding the foregoing, the persuasive evidence established that since 1997, American Honda executives supported the market study recommendations for the Pembroke Pines comm/terr, including the proposed relocation. Mr. Mikiciuk is a low level employee; there is no persuasive evidence that Mr. Mikiciuk ever had authority to speak for American Honda with reference to dealer relocations, let alone to bind the company. These facts were well known to Mr. Case. Mr. Case had unfettered access to the highest level American Honda executives over decades of mutually lucrative dealings with American Honda and related subsidiaries. Mr. Case had no reluctance to use these open lines of communication with regard to matters of minor as well as major importance to Case Acura. Yet, he now posits that American Honda, speaking through zone manager Mikiciuk, intended to overrule its 1997 and 2003 market study teams and relocate Case Acura, and reneged only because of Mr. Zinn's threat to litigate. The foregoing scenario is charitably described as counterintuitive. No corroborating evidence was provided. Mr. Case's testimony concerning his dealings with American Honda in regard to the proposed relocation is uncorroborated, unbelievable, and not credited by the fact-finder. Mr. Zinn initiated his purchase of Acura of South Florida in the spring of 2003. By the time the transaction was finalized in December 2003, anticipated future change(s)-- including the westward population trend identified in the 1997 market study--had become substantially more pronounced. Other changes had developed, or were reasonably anticipated to develop in the foreseeable future. For example, Acura of South Florida is presently and permanently foreclosed from providing customers and staff even the basic amenity of on-site parking, inasmuch as the Florida Department of Transportation (DOT) has taken by condemnation a 23-foot strip along the entire dealership frontage. Thirty parking places have been lost. Signage advising the public that they had reached Acura of South Florida is no longer permitted. At its present location, it is impossible for Acura of South Florida to be brought into compliance with Acura's so-called Design Image Standards (DIS) because the dealership property is too small to allow for the expansion required by DIS. American Honda and its network of dealers deem implementation of DIS at every dealership to be crucial to Acura's future success or failure in the marketplace. Additionally, the dealership is a prime candidate to be declared a "non-conforming use" by local zoning authorities. Such designation would render it impossible to obtain necessary permits to make needed improvements in the future. An Objective, Reasonable Standard In order to assess the adequacy of representation afforded by the existing dealer network in the comm/terr and to measure the level of opportunity available in the market, it is necessary to develop an objective, reasonable standard against which to compare the actual market penetration achieved by the existing dealer network, which includes, in this case, Acura of South Florida and Case Acura. A standard is a measure of the level of performance a brand can reasonably expect to achieve in the market with an adequately performing dealer network; that is, an adequate number of dealers performing competitively. The most objective data available for measuring the performance of a dealer network is market penetration data. Market penetration is the ratio of a brand's performance against the competitive industry. Market penetration is a direct measure of both inter-brand and intra-brand competition. Intra- brand competition is competition between competitors of the same brand. Inter-brand refers to competitors of different brands. The first step in developing a reasonable standard is to select a suitable comparison area. When choosing a comparison area, it is essential to select an area that is itself adequately represented. In determining whether a proposed comparison area is adequately represented, national average market penetration is an extremely conservative benchmark, because it includes all of the adequately represented, inadequately represented, and unrepresented areas within the United States. By contrast, the State of Florida is not an appropriate standard comparison area against which to judge the performance of Acura in the Pembroke Pines comm/terr because at relevant times the brand performs below national average in Florida. This is so because Florida has a disproportionate number of areas in which Acura has no dealer representation as well as a disproportionate share of underperforming dealers. National average market penetration is, under all the facts and circumstances of this case, the appropriate starting point for developing a reasonable standard for the Acura brand. The national average must be adjusted, however, to take into account unique consumer preferences over which the dealer network has no control, which can affect market share. Unique consumer preferences in the local market can be accounted for through a process called segmentation analysis. In this process, groups of vehicles in the segments to be analyzed are far more comparable with each other than with other vehicles not in the segments. Consequently, segments contain a group of similar vehicles that, by their design and physical characteristics, meet a certain set of consumer transportation needs. American Honda arranges its Acura vehicles into seven segments: small sporty, sporty luxury coupe, mid-size luxury sedan, full size luxury sedan, near luxury, exotic, and mid- luxury. The segmentation analysis process employed by American Honda accurately reflects the demographic features--including age, income, and education--of consumers who have actually purchased the vehicles in Acura's seven segments. In addition, the segmentation analysis employed by American Honda takes into account other factors which are unrelated to any particular consumer. Such factors include the state of the economy, product quality, and design features. Under all the facts and circumstances revealed in the record, the national average performance for Acura as adjusted for local consumer preferences in the Pembroke Pines comm/terr (the expected standard) is the appropriate standard for measuring the adequacy of representation being provided by existing Acura dealer networks and for establishing the level of opportunity available to Acura dealers in the Pembroke Pines comm/terr. At all relevant times, national average penetration, adjusted for local consumer preferences, produces an expected standard in the comm/terr of 10.58 percent, while the comm/terr is 10.3 percent of the retail industry segments in which Acura competes. For the year 2005 through June 30, the expected standard for the Pembroke Pines comm/terr is 11.37 percent while the Pembroke Pines comm/terr is 10.92 percent of the retail industry segments in which Acura competes. The reasonableness of the expected standard is confirmed by the fact that Acura has achieved or exceeded the standard in the recent past or currently meets or exceeds the standard in several markets in Florida; a sixth market in recent years has missed the standard only once, by four-tenths of a point in 2004. The persuasive data established that the expected standard is reasonable and can be achieved in the comm/terr if the Acura brand is adequately represented. Taking the foregoing factors into account, national average, adjusted for local consumer preferences, is the appropriate standard by which to judge the adequacy of representation being provided by the existing Acura dealer network and the level of opportunity available in the comm/terr. Impact on Manufacturer American Honda's Acura brand is, at relevant times, losing available sales in the comm/terr due to the inability of the existing Acura dealer network to penetrate the comm/terr at reasonably expected levels in light of the opportunity available. The persuasive evidence established that the gap between reasonably expected levels of penetration and the actual dealer network performance will grow. Taking reasonably anticipated future changes into account, the evidence of record established that the manufacturer will enjoy increased sales and overall increased customer convenience as a result of the proposed relocation. Investment of and Potential Impact Upon Existing Dealers Mr. Zinn and the Cases have invested significant dollar amounts to perform their obligations under their respective American Honda/Acura franchise agreements. They have likewise invested significant sweat equity, and expect to continue to manage their dealerships in a hands-on manner. The Cases contend that their investment in their Acura dealership will be at risk should the proposed relocation proceed. There was no persuasive evidence to support this contention. Rather, Case Acura is well positioned; well capitalized; and highly likely to respond positively to inter-brand competition arising from the proposed relocation. The Cases are aggressive and highly experienced dealers. It is reasonable to anticipate that the Cases will not lose sales; profit; reasonable opportunity for growth; or growth in the value of their multi-million dollar investment in Case Acura. Likewise, other existing dealers in the comm/terr are reasonably expected to grow and to maintain the value of their investments if the proposed relocation goes forward. Additionally and more specifically, the evidence is sufficient to establish that existing dealers in the comm/terr will be positively impacted by increased sales and service opportunities if the proposed relocation goes forward. Based upon the foregoing, the evidence is sufficient to establish that the proposed relocation is warranted and justified based on economic and marketing conditions, including future changes and present, accelerating trends in the comm/terr, which continues to grow rapidly in terms of population and of affluent households, which factors present increased sales and service opportunity for dealers. These opportunities are likely to be captured if the proposed relocation goes forward, and unlikely to be captured if it does not. Coercion of Existing Dealers There have been no efforts by American Honda to coerce any existing dealer to consent to the proposed relocation. Protesting Dealer Compliance with Dealer Agreement Case Acura is at all relevant times in compliance with the terms of its dealer agreement. Distance and Accessibility Congested traffic conditions in the western portion of the comm/terr militate heavily in favor of the proposed relocation. The proposed relocation will provide consumers with an increased level of convenience, and stimulate inter-brand competition. The market studies and common sense demonstrate that affluent consumers will not travel substantial distances to purchase an Acura when a variety of other luxury cars are more conveniently available. Other luxury vehicle dealers have taken note of the rapid growth of affluent homes in west Broward, and have provided and continue to provide improved accessibility. Acura's current dealer network in the comm/terr has not kept pace with American Honda's need to offer its existing and prospective customers an adequate level of accessibility, convenience and service. Benefits to Consumers Obtained by Geographic or Demographic Changes The evidence is sufficient to establish that consumer benefits will occur as a result of the relocation of Acura of South Florida. Such benefits cannot be obtained by expected demographic or geographic changes in the comm/terr. Adequacy of Interbrand and Intrabrand Competition and Consumer Care The evidence is sufficient to establish that the performance of Acura in the comm/terr is below reasonable levels under the appropriate standard, thereby reflecting inadequacy of inter-brand and intra-brand competition. With regard to consumer convenience, the evidence is sufficient to establish that it is necessary to locate a dealership within in the western portion of the comm/terr, where existing and potential Acura customers have moved and continue to move in large numbers, in order to provide them adequate customer care, including sales and service facilities. Relocation Justification Based on Economic and Marketing Conditions The evidence is sufficient to establish that the proposed relocation is warranted and justified based on economic and marketing conditions, including future changes. Western Broward County continues to grow at a rapid rate in terms of affluent population, households, and increased sales and service opportunities which are likely to be captured if the proposed relocation goes forward. Volume of Existing Dealers Registrations and Service Business The evidence is sufficient to establish that the volume of registrations and service business is hindered by the present configuration of the dealer network in the comm/terr, and that the volume of registrations and service business by existing Acura dealers in the comm/terr will improve if the proposed relocation goes forward.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is RECOMMENDED that the Department of Highway Safety and Motor Vehicles issue a final order approving American Honda's application to relocate Acura of South Florida. DONE AND ENTERED this 25th day of October, 2006, in Tallahassee, Leon County, Florida. S FLORENCE SNYDER RIVAS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of October, 2006. COPIES FURNISHED: James D. Adams, Esquire Adams, Quinton & Paretti, P.A. 80 Southwest 8th Street, Suite 2150 Miami, Florida 33130 Michael J. Alderman, Esquire Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-432 2900 Apalachee Parkway Tallahassee, Florida 32399-0635 Alan N. Jockers, Esquire Craig Zinn Automotive Group Corporate Offices 2300 North State Road 7 Hollywood, Florida 33021 Dean Bunch, Esquire Sutherland, Asbill & Brennan, LLP 3600 Maclay Boulevard, South, Suite 202 Tallahassee, Florida 32312-1267 Fred O. Dickinson, III, Executive Director Department of Highway, Safety and Motor Vehicles Neil Kirkman Building 2900 Apalachee Parkway Tallahassee, Florida 32399-0635 Judson M. Chapman, General Counsel Department of Highway, Safety and Motor Vehicles Neil Kirkman Building 2900 Apalachee Parkway Tallahassee, Florida 32399-0635
The Issue The issue is whether Petitioners are entitled to a motor vehicle dealership that is proposed to be located in Apopka, Florida.
Findings Of Fact Respondent is an existing franchised dealer of motorcycles manufactured by Chuanl Motorcycle Manufacturing Co., Ltd. (CHUA). Petitioners have proposed the establishment of a new dealership to sell the same line and make of motorcycles as those sold by Respondent. Respondent's dealership is located at 306 West Main Street, Apopka, Florida 32712. Petitioners' proposed dealership would be located at 1918 South Orange Blossom Trail, Apopka, Florida 32703. The proposed dealership is within a 12.5-mile radius of Respondent's dealership. Respondent has standing to protest the establishment of the proposed dealership.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Highway Safety and Motor Vehicles enter a final order denying the establishment of Petitioners' proposed franchise. DONE AND ENTERED this 29th day of May, 2009, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of May, 2009. COPIES FURNISHED: Carl A. Ford, Director Division of Motor Vehicles Department of Highway Safety and Motor Vehicles Neil Kirkland Building, Room B-439 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 Robin Lotane, General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 Jennifer Clark Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-432 2900 Apalachee Parkway Tallahassee, Florida 32344 James Sursely Action Orlando Motorsports 306 West Main Street Apopka, Florida 32712 Gloria Ma El Sol Trading, Inc., d/b/a Motobravo, Inc. 19877 Quiroz Court City of Industry, California 91789 Tina Wilson TGT Companies, Inc., d/b/a Extreme Motor Sales 1918 South Orange Blossom Trail Apopka, Florida 32703
The Issue The issue in this case is whether Petitioners are entitled to a motor vehicle dealership that is proposed to be located in Fort Walton Beach, Florida.
Findings Of Fact The evidence showed that the dealership proposed by Petitioners would sell the same line and make of motorcycles as those sold by Respondent. The proposed dealership would also compete in the Respondent’s territory since it would be located in the same county as Respondent and would be within 20 miles of Respondent. Respondent has standing to protest the establishment of the proposed dealership. On September 18, 2007, a Notice of Hearing setting the date, time and location of final hearing was issued in this case. The Notice of Hearing was mailed to the last known, valid addresses of the Petitioners, which were also the addresses provided in Petitioners’ Notice of Publication. Neither Notice of Hearing was returned. This cause came on for hearing as noticed. After waiting more than an hour, the Petitioners failed to appear to prosecute their claim. There has been no communication from the Petitioners before, during, or since the hearing to indicate that they would not be attending the final hearing. Because of Petitioners’ failure to appear, there was no evidence to demonstrate that Petitioners are entitled to a franchise motor vehicle dealership in Fort Walton Beach, Florida. Absent such evidence, the establishment of the proposed dealership should be denied.
Recommendation Accordingly, in consideration of the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered by the Florida Department of Highway Safety and Motor Vehicles denying the establishment of Petitioners’ proposed franchise. DONE AND ENTERED this 31st day of January, 2008, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of January, 2008. COPIES FURNISHED: Michael J. Alderman, Esquire Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-432 2900 Apalachee Parkway Tallahassee, Florida 32399-0635 Carl A. Ford, Director Division of Motor Vehicles Neil Kirkman Building, Room B-439 Tallahassee, Florida 32399-0635 Judson M. Chapman, General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 David Wray Wholesale Nation Automotive, Inc. 319 Miracle Strip Parkway Fort Walton Beach, Florida 32548 Mei Zhou SunL Group, Inc. 8551 Esters Boulevard Irvine, Texas 75063 Curtis Mitchell Coastal Powersports 12 Eglin Parkway Southeast Fort Walton Beach, Florida 32548
The Issue The issue is whether the Dealer Sales and Service Agreement which Gus Machado Buick-GMC, Inc., has with Buick and GMC Truck Divisions of General Motors Corporation may be terminated by General Motors for abandonment under Section 320.641, Florida Statutes (1989), because Machado Buick failed to engage in business for more than ten consecutive business days.
Findings Of Fact Gus Machado is a Cuban-American. He purchased a Buick-GMC Truck dealership formerly known as Seipp Buick in Hialeah on March 3, 1982, after Mr. Machado had been in the automobile business for more than 30 years. The purchase price for the dealership, including the 6.25 acres of real estate on which the dealership was located, was about $4.5 million, $3 million of which was financed. The loan was secured by a mortgage on the dealership's real estate. Shortly after Mr. Machado purchased the dealership, he transferred the ownership of the real estate to himself, and leased it back to the dealership entity known as Gus Machado Buick-GMC, Inc., of which Mr. Machado is the sole shareholder. When he did this, General Motors told Mr. Machado that it regarded the rent to be charged to the dealership as excessive, but Mr. Machado believed that the rental payments were set in the amount which the dealership could pay given his projected sales volume. Mr. Machado was the only Hispanic dealer for the Buick Division in Dade County, Florida. The City of Hialeah is overwhelmingly Hispanic. The staff of the dealership was about 80 percent Hispanic. Mr. Machado focused his marketing efforts on Hispanic customers. The dealership's sales volume increased from about $19 million fiscal in year 1982, to $26 million in fiscal year 1983, the first full year Mr. Machado owed the dealership, to as much as $36 million dollars in later years. Buick recognized Mr. Machado's achievements in the sale of Buick motor cars by designating him the No. 1 Hispanic dealer in the country for a number of years. From 1983 to 1985, the dealership was profitable, and that profit enabled Mr. Machado to purchase a $2 million home in 1985 in an exclusive area. He renovated it from 1985 to 1990 at a substantial cost (about $7 million dollars) which Mr. Machado paid for with cash from his personal funds. 1/ Profitable times continued through the 1987-1988 models years. In 1987 Mr. Machado refinanced the dealership real estate for $4 million, which increased the amount of the mortgage on the property by $1 million. He then distributed that cash to his various companies, which included 1) a separate Ford dealership also located in Hialeah, Florida, 2) a Budget Rental Car day rental business in Puerto Rico, and 3) a long-term automobile leasing business in Puerto Rico. In 1987, Mr. Machado received a $1,306,000.00 dividend distribution from Gus Machado Buick-GMC. Mr. Machado received no salary from Gus Machado Buick-GMC in 1987, but he did receive the annual rental payments from the dealership over and above the dividend distribution and the $1 million obtained from refinancing the real property on which the Buick-GMC Truck dealership was located. After the increase in the mortgage obligation, Gus Machado Buick-GMC Truck paid $107,100.00 in rent to Mr. Machado, in addition to repayment of the mortgage, taxes, insurance, and repairs on the property. The automobile business is inherently cyclical, and sales of cars from the Buick-GMC Truck franchise began to fall off in the 1988 model year and matters became worse in 1989. At the same time, Buick generally lost market share in 1989 and 1990. This difficult period coincided with the closure of several General Motors dealerships in Dade County. The evidence is insufficient to demonstrate exactly why any one of those dealerships failed. The relative increase in popularity of foreign, especially Japanese, automobiles may have played some part in their financial difficulties. Too little is known of their management to make any finding about whether those failures resulted from poor management, poor times for the automobile industry as a whole, problems with the design, engineering, sales or service of General Motors automobiles, or some combination of all of these factors. Mr. Machado also had an unusual problem because of his Hispanic market. The fall of communist regimes in Europe led many Hispanics to believe the downfall of Castro was imminent. They became inclined to save money to invest in a new free market in Cuba. This also depressed sales of new cars and trucks to some degree. The extent of lost sales due to these beliefs was not, and probably could not be quantified. During this period of decline, Mr. Machado came to believe that it would be an advantage to add another line of automobiles to his dealership. Multiple point dealerships were becoming more common, and his dealership was large (6.25 acres) and could handle another line. He sought the assistance of the Buick Division in adding another franchise to his dealership. Mr. Machado also attempted to reduce his inventory, labor and advertising expenses in an effort to control costs. Mr. Machado's problems were greatly compounded when he discovered, in 1989, that his two Puerto Rican companies were in serious financial difficulty as the result of mismanagement. Mr. Machado had not been deeply involved in their day-to-day management. One of the problems in Puerto Rico was that vehicles in the lease fleets were being disposed of "out-of-trust," which meant that automobiles for which Mr. Machado had received financing through General Motors Acceptance Corporation were being disposed of at retail without repayment of their financed purchase price. In the automobile industry, this is regarded as a serious breach on the part of the borrower in his dealings with his financing source. The total outstanding obligations for the two Puerto Rican businesses exceeded $12 million. The magnitude of the Puerto Rican losses required that these businesses become the focus of attention by Mr. Machado. From July 1989 to November of 1990, he began to devote the greatest portion of his time to management of those distressed companies by spending four days of each week in Puerto Rico. Mr. Machado's management efforts were rather successful. Ultimately, the two Puerto Rican companies were sold or liquidated, and at that time the debt owed to GMAC for the Puerto Rican operations had been reduced from $12 million to $2 million. While Mr. Machado devoted most of his attention to his Puerto Rican businesses, the responsibility for the day-to-day operation of the Buick-GMC dealership in Hialeah was left to Mr. Machado's wife, who had worked in real estate, but never in the automobile business, and the senior employees at the Buick-GMC Truck dealership. The operation of a new car dealership is quite complex. A dealership contains five distinct profit centers, new vehicle sales, used vehicle sales, parts sales, vehicle service, and finance and insurance. One of the most difficult aspects of the management of a new car dealership is maintaining adequate cash flow. For example, a dealership does not realize its profit immediately after performing warranty work on a vehicle or upon the sale of a car. Through billing cycles the profit may not show up on the books for some time. Having adequate working capital is necessary so that the dealership is able to pay its obligations as they mature, even though when comparing total assets to total liabilities, the dealership may be solvent. Mrs. Machado did attend a 30 day dealership management course, but that course is not one designed to qualify a person to manage a dealership, rather it is designed by General Motors to provide family members of a dealer with an introduction to dealership management. That training, plus active participation in dealership management, may ultimately qualify that family member, such as a daughter or son, to take over a dealership. It was too limited to give Mrs. Machado the training, or especially the experience, to lead the dealership through a trough in the automobile sale cycle. Mrs. Machado did have the assistance of the dealership's general manager, comptroller, and the managers of the various departments. This is not a substitute for the experienced oversight of the dealership owner, however. Misplaced reliance on on-site managers for Mr. Machado's Puerto Rican operations had lead to the very serious financial problems of those businesses. Gus Machado Buick-GMC Truck sold a larger number of Buick automobiles and GMC trucks in 1989 than the dealership had sold in 1987. Ironically, 1987 was a profitable year, but 1989 was not, even though the gross profit per unit sold in 1989 ($1,171 for cars and $1,210 in trucks) was slightly higher than the gross profit per unit sold in 1987 ($1,166 for cars and $1,019 for trucks). Mr. Machado ultimately requested assistance from Buick in attempting to identify a potential purchaser for his Buick-GMC Truck dealership. General Motors commonly receives these sort of requests from its dealers. A manager for Buick did locate one prospective buyer and Mr. Machado had some contact with him, but nothing came of it. The most serious problem which Gus Machado Buick-GMC Truck ultimately encountered, and which forced its closure in February 1991, was the loss of its floor plan financing through General Motors Acceptance Corporation (GMAC) in late May or early June of 1990. Although credit difficulties began earlier, they came to the fore in mid to late December 1989 after Mr. James R. Hardesty became the branch manager for the GMAC office which handled dealerships in Miami. Mr. Machado met with Mr. Hardesty in January of 1990 because Mr. Hardesty was concerned about Gus Machado Buick-GMC Truck's credit worthiness. A check written to GMAC by the dealership to pay off a vehicle sold at retail had been dishonored by the dealership's bank, Consolidated Bank. This was not a good footing on which to begin Mr. Machado's relationship with Mr. Hardesty. GMAC had extended floor plan financing for new and used vehicles at the Buick dealership, and also had made a $600,000 loan to the dealership, but Mr. Hardesty believed that the books of the Buick dealership showed insufficient working capital available for the day-to-day operation of the business. Under the separate Dealer Sales and Service Agreement which Mr. Machado had with General Motors, the dealership was required to maintain a minimum net working capital of $2 million. Mr. Machado agreed to infuse additional working capital into the business, although Mr. Hardesty did not require that Mr. Machado obtain a specific amount of additional capital. Mr. Machado acknowledged at hearing that he knew the business needed $600,000 to $700,000 in working capital. Mr. Hardesty knew that the dealership was losing money and was being run on a day-to-day basis by Mrs. Machado, not Mr. Machado. This did not give him a great deal of confidence in the dealership's management team. GMAC had other problems in its relationship with the Machado dealership. Even before Mr. Hardesty came to Miami, GMAC was not receiving timely interest payments on the Machado Buick inventory it had financed, on the $600,000 loan GMAC had made to the dealership, or timely payment on dealer reserve chargebacks. Audits of the dealership inventory revealed GMAC was not being paid in a timely manner when cars were sold at retail, which required GMAC to conduct audits of the cars on the Machado lot more frequently than had been customary. One of the things Mr. Hardesty did was to require that for any unit which Gus Machado Buick-GMC Trucks sold, the floor plan financing for that car would have to be paid off within 24 hours of sale. This requirement was consistent with the written agreements which Mr. Machado had with GMAC. It was the practice in the industry, however, for GMAC to permit dealers in good financial condition more time to pay off cars, perhaps as much as three to four days. By insisting on the 24-hour pay-off, Gus Machado Buick-GMC Truck had less float, and consequently needed more working capital. The 24-hour pay-off requirement had the effect of requiring Mr. Machado to infuse the equivalent of about $120,000 working capital into his business in order to keep current on the dealership's bills. Mr. Machado understood Mr. Hardesty's position. When Mr. Hardesty also attempted to obtain additional security through a mortgage on the dealership property, however, Mr. Machado declined. After the initial meeting, the relationship between GMAC and Gus Machado Buick-GMC which began on a difficult footing because of the returned check became more rocky. Mr. Hardesty discovered that checks written to GMAC were being paid only because the bank used by Gus Machado Buick-GMC Truck, Consolidated Bank, provided the dealership with overdraft protection. In effect, the Machado dealership did not have sufficient working capital to pay off the wholesale financing on cars it was selling and was relying on ad hoc extensions of credit by its bank in order to pay off the GMAC liens on those cars. This was an indication of severe lack of working capital in the dealership. Overdraft protection gives the bank the option to hold a check for up to three days before deciding whether to pay it. This put the floor plan financing entity at considerable risk because cars sold by Gus Machado Buick-GMC Truck had an average pay-off due to GMAC of $15,000 per unit. Over three days Consolidated Bank could accumulate substantial dollar volume in checks presented by GMAC for payment. GMAC would not know for three days whether checks it received from Gus Machado Buick-GMC Truck to pay off the financing on those units which had been sold to third parties would be honored. Moreover, the dealership had significant loans from Consolidated Bank, which could exercise a set-off right against the funds in the Machado account to be used to pay off the GMAC liens. For these reasons Mr. Hardesty insisted that Mr. Machado move his dealership account to a bank which did not provide overdraft protection and did not have other loans to the dealership. The checking account was moved to Southeast Bank. The Machado dealership still did not make timely payments on its wholesale interest obligations and on the $600,000 capital loan which GMAC had made to the dealership. Audits conducted by GMAC of the cars on hand at the dealership revealed that vehicles were being delivered to retail customers without payment being made to GMAC within the time period allowed. Perhaps worst of all, GMAC found that the debt which it had loaned Gus Machado Buick-GMC Truck $600,000 to pay off (see Finding 17) had not been paid, and no satisfactory explanation could be made about what had happened to that money. Over several meetings, Mr. Hardesty stressed to Mr. Machado that it was imperative that additional working capital be provided to the dealership in order for GMAC to continue its relationship as the floor plan financing entity for Gus Machado Buick-GMC. Mr. Machado had difficultly in obtaining additional capital because he had chosen to make substantial investments in real estate, including the purchase and renovation of his home. Mr. Machado repeatedly gave assurances to Mr. Hardesty that he would infuse additional capital into the dealership, but did not do so. After the dealership account had been moved to Southeast Bank, in May of 1990, GMAC received checks for seven or eight cars which had been delivered to retail customers which were dishonored by Southeast Bank. Had the Machado account remained at Consolidated Bank, those checks might have been paid by Consolidated Bank using overdraft protection. The significant point, however, is not only that the checks were returned, but that the returns demonstrated that the Machado dealership continued to have inadequate working capital to pay the business' debts as they matured. This lead Hardesty to put Mr. Machado's credit line on hold, which meant that GMAC would not automatically finance new cars for the dealership. Mr. Machado would have to discuss any new purchases with Mr. Hardesty, who would make a decision of whether or not to finance them. Thereafter, Mr. Machado presented to Mr. Hardesty a deposit slip showing that $300,000 had been deposited in the Gus Machado Buick-GMC Truck dealership's working account as additional working capital. Mr. Machado asked that the normal credit relationship be reestablished. Mr. Hardesty discovery shortly thereafter that two days after that deposit was made, $200,000 had been withdrawn and applied elsewhere, and the remaining $100,000 had been used to cover a bank overdraft. The dealership's recent history of problems, including 1) the manipulation of the $600,000 GMAC loan which had been extended to extinguish a dealership debt, 2) the failure to make timely payments to GMAC on that loan and on interest due on floor plan financing, 3) the dealership's repeated overdrafts, 4) the several returned checks, 5) the lack of candor of Mr. Machado in attempting to mislead Mr. Hardesty into believing that $300,000 had been deposited into the business as additional working capital, 6) the dealership's monthly operating losses, and 7) the operation of the dealership by Mrs. Machado, who was not an experienced dealer, led Mr. Hardesty to believe that Gus Machado Buick-GMC was not credit worthy. He suspended the dealership's floor plan financing. The effect of that suspension was dramatic. General Motors will not build cars for a dealer unless the dealer posts a large cash deposit or had an arrangement with a financial institution to pay General Motors for the cars to be built. Mr. Machado was unable to purchase any new automobiles and had to operate only with its remaining inventory. GMAC did not, as it might have, repossess the existing inventory. Without floor plan financing, however, the only way for Gus Machado Buick-GMC Truck to acquire new vehicle inventory was to pay for it with cash, which Mr. Machado could not do. Mr. Machado did attempt to obtain alternate financing. Due to the difficult conditions in the banking industry, Mr. Machado was not able to find a bank willing to take on floor plan financing for his dealership, and although he approached Ford Motor Credit to provide floor plan financing for the automobiles at his Buick dealership, it was unwilling to do so. The suspension of the line of credit by GMAC, as a practical matter, scared off other lenders. The reasons GMAC had for suspending the line of credit should independently have lead any prudent lender in possession of all the facts to a similar conclusion. Lending money to Gus Machado Buick-GMC Truck at that time was risky business. As the inventory of new cars dwindled, so did sales. Many dealership employees were let go. By early November of 1990, Buick Motor Car Division learned that Mr. Machado was considering converting his dealership property into a shopping center. A Buick employee spoke to Mr. Machado and expressed concern about the use of the dealership property in a manner contrary to the terms of the Dealer Sales and Service Agreement. Mr. Machado stated that if the plan to change the use of the dealership property came to fruition, he would like to discuss relocation alternatives with Buick at that time, but it was too premature to consider a relocation of the dealership yet. Mr. Machado acknowledged that any request for relocation would have to be made in writing. In the fall of 1990 Mr. Machado was sued for $7 million by AmeriFirst for a default with respect to the $4 million loan on the dealership property and a separate mortgage on Mr. Machado's Ford dealership for $3 million. Suits were also filed against him by Universal Bank for $210,000, the Bank of Boston for $300,000 for loan defaults, and another suit was filed by a former employee for $21,000. As late as November of 1990, Mr. Machado believed that the Buick dealership could become profitable if it had the necessary inventory of new vehicles and he was able to devote all of his time to management of the dealership. By February 1, 1991, the Machado Buick-GMC Truck dealership ceased operation. It did not have a sales and service facility open and available for work eight hours a day, five days a week, excluding holidays. General Motors advised Mr. Machado on March 5, 1991, that 15 days from the date of that notice the Dealer Sales and Service Agreements Mr. Machado had would be cancelled because the dealership had been closed for more than ten business days, in violation of the agreement. By letter of March 11, 1991, Mr. Machado asked to relocate his dealership to a facility which was then a Mohawk Tire store. That facility did not meet the requirements for dealer operations, and would require extensive modification and enlargement. In addition, Mr. Machado did not have any assurance that if he could arrange to remodel that location he could also obtain the necessary floor plan financing to operate the Buick-GMC dealership. Later, on July 25, 1991, Mr. Machado entered into a Sales Agreement for the Buick-GMC Truck franchise with Alan Potamkin, who either owns or is involved in the ownership of more than 55 automobile dealerships around the country, including General Motors dealerships. Mr. Potamkin has proposed to move the Buick-GMC Truck dealership to other locations in Hialeah or in Dade County. Mr. Potamkin submitted the necessary paperwork for review of a possible transfer of the Buick-GMC Truck dealership from Mr. Machado to Potamkin, but the acquisition agreement which was presented in evidence specifically shows that Mr. Machado is not selling the existing dealership's land or facilities to Mr. Potamkin. Consequently, he would have to find some other location for the Machado dealership. He could not merely take over the dealerships on the same terms and conditions which Mr. Machado had. The location and facilities necessarily would be different. Mr. Machado would be free to use the 6.25 acres on which the dealership was located for some different endeavor.
Recommendation It is RECOMMENDED that a final order be entered by the Department of Highway Safety and Motor Vehicles finding that Gus Machado Buick-GMC Truck, Inc., abandoned its Dealer Sales and Service Agreement with Buick and GMC Truck by failure to engage in business with the public since February 1, 1990, and that Mr. Machado has failed to prove that the closure of the dealership was due to any reason which would excuse its failure to conduct business under Section 320.641(4), Florida Statutes (1989). DONE AND ENTERED in Tallahassee, Leon County, Florida, this 9th day of April 1992. WILLIAM R. DORSEY, JR. 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 9th day of April 1992.
