The Issue The issue is whether the Petitioners' proposal for a dealer to sell two new lines of motorcycles should be approved.
Findings Of Fact On October 10, 2008, in the Florida Administrative Weekly, Volume 34, Number 41, two separate Notices of Publication for a New Point Franchise Motor Vehicle Dealer in a County of More than 300,000 Population were published. The first notice provided, in relevant part, as follows: Pursuant to Section 320.642, Florida Statutes, notice is given that [Galaxy] intends to allow the establishment of [Treasure Coast] as a dealership for the sale of motorcycles manufactured by Taizhou Zhongneng Motorcycle Co. Ltd. (ZHNG) at 7320 South U.S. 1, Port St. Lucie (St. Lucie County) Florida 34952 on or after September 26, 2008. The second notice provided, in relevant part, as follows: Pursuant to Section 320.642, Florida Statutes, notice is given that [Galaxy] intends to allow the establishment of [Treasure Coast] as a dealership for the sale of motorcycles manufactured by Zhejiang Taizhou Wangye Power Co. Ltd (ZHEJ) at 7320 South U.S. 1, Port St. Lucie (St. Lucie County) Florida 34952 on or after September 26, 2008. On October 16, 2008, Respondent filed the following letters of protest with the Department of Highway Safety and Motor Vehicles: In regards to the intent of [Galaxy] to establish a Taizhou Zhongneng Motorcycle Co. Ltd. (ZHNG) with [Treasure Coast] for the sale of motorcycles at 7320 South U.S. 1, Port St. Lucie, Fl [sic] 34952. This letter represents a written complaint to their application for this dealership, because we already represent said dealership. and In regards to the intent of [Galaxy] to establish a Zhejiang Taizhou Wangye Power Co. Ltd (ZHEJ) with [Treasure Coast] for the sale of motorcycles at 7320 South U.S. 1, Port St. Lucie, Fl [sic] 34952. This letter represents a written complaint to their application for this dealership, because we already represent said dealership. Both letters made the following additional representations: The proposed dealership would be within 20 miles of our dealership, as measured by straight line distance. They are 8.61 miles away per mapquest. The proposed dealership is to be located within the contractual area outlined in our dealer agreement, as we have a 20 mile exclusivity. We have made more than 25% of our retail sales to persons whose registered household addresses are within 20 straight line miles of the proposed dealership during the past 12 month period. By letter dated October 22, 2008, the Department apparently tried to refer this matter to DOAH. For reasons that were not explained, however, this matter was not received at DOAH until it was referred again by letter dated June 3, 2009. The protest filed by Respondent was timely. The parties agreed that the population of St. Lucie County is over 300,000, and that Respondent's dealership is 8.61 miles from the proposed site. Respondent has dealer agreements to sell various lines of motorcycles, including motorcycles manufactured by Zhejiang Taizhou Wangye Power Co., Ltd. (ZHEJ); and motorcycles manufactured by Taizhou Zhongneng Motorcycle Co. Ltd. (ZHNG). At the hearing, Mr. Young agreed that the evidence showed that, as a dealer for Zhejiang Taizhou Wangye Power Co. Ltd. (ZHEJ), Respondent has adequately promoted that line and has made 25 percent or more of its retail sales to household addresses within 12.5 miles of the proposed dealership. At the hearing, Mr. Young said that the only motorcycles at issue were those manufactured by Taizhou Zhongneng Motorcycle Co. Ltd. (ZHNG). Specifically, he questioned whether the line represented sufficient numbers of sales within the territory. Mr. Mourning explained that the ZHNG line was also called ZNEN before 2009. He produced records that confirm that Taizhou Zhongneng Motorcycle Co. Ltd., used ZNEN as the make of its vehicles in 2008. Taken together, his sales records for ZHNG and ZNEN motorcycles demonstrated that he also adequately and successfully represents that line in the territory.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Department of Highway Safety and Motor Vehicles enter a Final Order denying Treasure Coast's applications to become the licensee to sell motorcycles line-makes manufactured by Zhejiang Taizhou Wangye Power Co. Ltd. (ZHEJ); and by Taizhou Zhongneng Motorcycle Co. Ltd. (ZHNG) at the proposed site. DONE AND ENTERED this 2nd day of November, 2009, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER 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 2nd day of November, 2009. COPIES FURNISHED: Electra Theodorides-Bustle, Executive Director Department of Highway Safety and Motor Vehicles 4052 Bald Cypress Way, BIN A02 Tallahassee, Florida 32399-1701 Robin Lotane, General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building 2009 Apalachee Parkway Tallahassee, Florida 32399-0500 Guy Young J & F South Florida Investments, Inc. d/b/a Treasure Coast Scooters and Things 7320 South US 1 Port St. Lucie, Florida 34952 Mark Mourning WenMark Inc., d/b/a All The Wheel Toys 1540 Northwest Federal Highway Stuart, Florida 34994 Jennifer Clark, Esquire Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-308 2900 Apalachee Parkway Tallahassee, Florida 32399-0635 Leo Su Galaxy Powersports, LLC, d/b/a JCL International, LLC 2667 Northhaven Road Dallas, Texas 75229
The Issue The issue in the case is whether an application for a new point franchise motor vehicle dealership filed by Universal Parts, Inc., d/b/a Partsforscooters.com, and Eco-Green Machine LLC, d/b/a Eco Green Machine (Petitioners), should be approved.
Findings Of Fact The Respondent has a franchise agreement to sell ZHNG motor vehicles, the line-make proposed to be sold by Eco Green Machine, LLC. The Respondent's dealership is located 4.1763 miles from Eco Green Machine, LLC’s, dealership. There was no evidence presented at the hearing that the Respondent, or any other existing franchised dealer that registers new motor vehicle retail sales or leases of the ZHNG line-make within the community or territory of the proposed dealership, are not providing adequate representation of the ZHNG motor vehicles.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order denying the application filed by the Petitioners to establish a new point franchise motor vehicle dealership for the sale of ZHNG motorcycles. DONE AND ENTERED this 30th day of March, 2010, 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 30th day of March, 2010. COPIES FURNISHED: Jennifer Clark Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-308 2900 Apalachee Parkway Tallahassee, Florida 32399-0635 Michelle R. Stanley Tropical Scooters, LLC 11610 Seminole Boulevard Largo, Florida 33778 Ronnie Pownall ECO Green Machine, LLC, d/b/a ECO Green Machine 7000 Park Boulevard, Suite A Pinellas Park, Florida 33781 John Celestian Universal Parts, Inc. 2401 72nd Street, North St. Petersburg, Florida 33710 Carl A. Ford, Director Division of Motor Vehicles Department of Highway Safety and Motor Vehicles Neil Kirkman 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
Conclusions This matter came before the Department for entry of a Final Order upon submission of a Recommended Order of Dismissal by Administrative Law Judge Jeff B. Clark, of the Division of Administrative Hearings, pursuant to non-compliance to the requirements set out in the Order to Show Cause—for both parties to file responses no later than August 7, 2009 as to why this matter should not be closed based on lack of response to the Initial Order. The Department hereby adopts the Recommended Order of Dismissal as its Final Order in this matter. Accordingly, it is hereby ORDERED that this case is CLOSED and no license will be issued to Galaxy Powersports, LLC d/b/a JCL International, LLC and Wild Hogs Scooters and Motorsports, LLC to sell motorcycles manufactured by Zhejiang Taizhou Wangye Power Co. Ltd. (ZHEJ) at 3311 West Lake Mary Boulevard, Lake Mary (Seminole County), Florida 32746. 4 DONE AND ORDERED this /2.’~ day of September, 2009, in Tallahassee, Leon County, Florida. LA. FORD, Direct6r Division of Motor Vehicles Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399 Filed with the Clerk of the Division of Motor Vehicles this [oth day of September, 2009. . 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. CAF/vlg Copies furnished: Leo Su Galaxy Powersports, LLC d/b/a JCL International, LLC 2667 Northhaven Road Dallas, Texas 75229 Jason Rupp Wild Hogs Scooters and Motorsports, LLC 8181 Via Bonita Street Sanford, Florida 32771 James Sursely Action Orlando Motorsports 306 West Main Street Apopka, Florida 32712 Michael J. Alderman, Esquire Department of Highway Safety and Motor Vehicles Neil Kirkman Building 2900 Apalachee Parkway, Room A432 Tallahassee, Florida 32399 Jeff B. Clark Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Nalini Vinayak Dealer License Administrator Florida Administrative Law Reports Post Office Box 385 Gainesville, Florida 32602
Conclusions This matter came on for determination by the Department upon submission of an Order Closing File by Daniel M. Kilbride, an Administrative Law Judge, of the Division of Administrative Hearings, 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. ORDERED that this case is CLOSED and no license will be issued to Sunl Group, Inc. ‘and Action Motorsports to sell motorcycles manufactured by Astronautical Bashan Motorcycle Manufacture Co. Ltd. (BASH) at 11485 South Cleveland Avenue, Suite 1, Fort Myers (Lee County), Florida 33907. DONE AND ORDERED this a — day of July, 2009, in Tallahassee, Leon County, Florida. 'ARL A. FORD, Direct6r Division of Motor Vehicles Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399 Filed with the Clerk of the Division otor Vehicles this ZB day of July, 2009. 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. CAF/vlg Copies furnished: Kyle Lee Ride Green, Inc. 5686 Youngquist Road #113 Fort Myers, Florida 33912 Mei Zhou Sunl Group, Inc. ~ 8551 Ester Boulevard Irving, Texas 75063 Howard Chappell, Esquire Law Offices of Howard Chappell 1514 Cumberland Court Fort Myers, Florida 33919 Michael J. Alderman, Esquire Assistant General Counsel Department of Highway Safety and Motor Vehicles ; Neil Kirkman Building, Rm. A-432 Tallahassee, Florida 32399-0504 Daniel M. Kilbride Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Nalini Vinayak Dealer License Administrator - Florida Administrative Law Reports Post Office Box 385 Gainesville, Florida 32602 STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS SUNL GROUP, INC., AND ACTION MOTORSPORTS, Petitioners, RIDE GREEN, INC., ) ) ) ) ) vs. ) Case No. 08-5720 ) ) ) Respondent. ) )
The Issue Whether existing Mazda dealers are providing adequate representation of the Mazda line-make in the community or territory in which Mazda Motor of America, Inc., proposes to add a dealer.1/
Findings Of Fact The Parties MMA is a “licensee” as defined by section 320.60(8), Florida Statutes. SMM is a “motor vehicle dealer” as defined by section 320.60(11). Notice and Standing On August 9, 2013, notice was published in the Florida Administrative Register announcing MMA’s intent to establish Brickell Mazda as a dealer for the sale of Mazda vehicles at 618 Southwest Eighth Street, Miami, and for the service of Mazda vehicles at 665 Southwest Eighth Street, Miami (jointly referred to as the Proposed Point). These two parcels of real property are situated 71 feet apart and directly across from each other on opposite sides of Southwest Eighth Street, a three-lane one-way street that is not a limited access highway. The proposed additional dealer would be located in Miami-Dade County, Florida, which has a population of more than three million persons. SMM is an existing franchised Mazda dealer operating from a facility located at 18010 South Dixie Highway, Miami, Florida. SMM timely protested the proposed additional dealer. During several 12-month periods within the 36 months preceding publication of notice of the proposed additional dealer, SMM made more than 25% of its retail sales of new Mazda vehicles to persons who registered those vehicles within a radius of 12 and one-half miles of the proposed location of the proposed additional dealer. If Brickell Mazda is permitted to open at the Proposed Point, its Mazda sales operations and its Mazda service and parts operations will open on the same day, and it will operate its Mazda sales and service operations at the Proposed Point until completion of construction of a new Mazda sales and service facility to be located within two miles of the Proposed Point. Community or Territory The first issue to be addressed in this protest is the identification of an appropriate “community or territory” (Comm/Terr), which is the relevant geography within which to judge the performance of the Mazda brand. Section 320.642, Florida Statutes, does not provide any specific criteria for geographically defining the Comm/Terr. In determining the geographic boundaries of the Comm/Terr, consideration is given to the areas assigned to Mazda dealers by MMA. MMA assigns to each of its dealers a geographic area known as a Statistical Observation Area (SOA), which is comprised of United States (U.S.) Census Bureau census tracts close to each dealer. A dealer’s SOA is the area in which a dealer has a geographic advantage with respect to consumers, who generally will shop for a new vehicle at the closest dealer, unless they are dissatisfied with that dealer for some reason. In determining the geographic boundaries of the Comm/Terr, consideration is also given to the buyer behavior of new Mazda consumers--what is the geographic area where consumers in that area buy the majority of their new vehicles from dealers in that area, and where the dealers in that area sell the majority of their new vehicles to consumers in that area. The Comm/Terr should also have “connectivity” meaning that the areas within the Comm/Terr are reasonably connected from a buyer behavior point of view. MMA defines the Miami Metro market as an area encompassing all of Miami-Dade County, all of Broward County, a portion of northern Monroe County (consisting of the upper Keys), and a portion of southern Palm Beach County. MMA employs the 2010 version of U.S. Census Bureau census tracts to define the Miami Metro market. Sharif Farhat, MMA’s expert witness, testified that the proper Comm/Terr in this case is the geographic area within the four Miami-Dade SOAs–-Ocean Mazda (Ocean), Mazda of North Miami (North Miami), SMM, and the open point (formerly Potamkin Mazda’s SOA), which shall be referred to hereinafter as the “Miami Comm/Terr.” Joseph Roesner, SMM’s expert witness, agreed that the Miami Comm/Terr is the proper Comm/Terr. Based on a consideration of all relevant evidence, the proper Comm/Terr in this case is the Miami Comm/Terr. Within the Miami Comm/Terr, Mazda’s competitors are represented in the areas near SMM, Ocean, and North Miami, and also in the open point SOA where Brickell Mazda is proposed, but where there is no current Mazda dealer. Historical Network Changes, Existing Dealer Network For over 16 years, from April 1992 until Potamkin Mazda (Potamkin) closed in March 2009, there were four Mazda dealerships operating in Miami-Dade County–-Ocean Mazda, North Miami/Marlin Mazda, SMM/Kendall Mazda and its predecessors, and Potamkin. If the operations of Williamson Mazda and Spitzer Mazda in Homestead are considered, there were five Mazda dealerships operating in Miami-Dade County for some of those years. It has only been since March 2009, or a little over five years, that there have been only three Mazda dealerships operating in Miami-Dade County. The current Mazda dealers in Miami-Dade County are Ocean (9.3 miles from the Proposed Point), North Miami (13.8 miles from the Proposed Point), and SMM (14.6 miles from the Proposed Point). In 2012, within the SOA of the Proposed Point, North Miami registered the most new Mazda vehicles (204) and SMM registered the least (73), whether measured by number of units or percentage of registrations in the SOA. Brickell Mazda will be the first Mazda dealer added since the 2008/2009 downturn in the automotive industry, and the fourth Mazda dealer in the Miami Comm/Terr, with no plans by MMA to add a fifth dealer. Prior to SMM opening in October 2007, Kendall Mazda (Kendall) operated at 18010 South Dixie Highway, Miami. Kendall lost its floor plan (the bank credit line used to purchase new vehicles from MMA), and it sought bankruptcy court protection. On March 19, 2007, SMM’s parent company, South Motors Company of Dade County, purchased the Kendall dealership property from the trustee for the Kendall bankruptcy. When South Motors Company of Dade County purchased the property, SMM did not yet have a Mazda dealership agreement. Prior to its closing, Kendall received negative local publicity, caused in part by that dealership not paying off loans on customers’ trade-in vehicles. Kendall’s actions could have damaged Mazda in the market place. Before being awarded a Mazda franchise by Mazda and opening the Mazda dealership, SMM knew of the problems caused by the prior dealer, and expected that SMM would struggle to be profitable because of issues with Kendall. SMM even considered not opening the dealership. However, SMM expected that, in time, it could overcome these issues and decided to open the dealership. SMM was awarded its Mazda franchise by Mazda and did not have to purchase the franchise rights from another Mazda dealer. Not only did SMM not pay any money for acquiring the franchise, but MMA provided $200,000.00 in monetary assistance to SMM specifically to assist in establishing itself in the market. Kendall’s actions no longer impair SMM’s performance as a Mazda dealer. Potamkin was previously located in the open point SOA where the Proposed Point is located. Potamkin’s location was 9.3 miles from Kendall, which is where SMM is located today. The Proposed Point is 14.6 miles from SMM and will provide better spacing between Mazda dealers. Potamkin’s dealership facility was located on four different properties, the leases for which were expiring in February 2009. Potamkin told MMA that it wanted to either close or sell the dealership. The proposed buyer was a prior Mazda dealer, but MMA did not consider him to be a successful dealer and was not interested in him as a buyer for the Potamkin point. Potamkin closed in March 2009, the same year that General Motors and Chrysler filed for bankruptcy and many dealers, not just Mazda dealers, were struggling financially on the heels of the financial crisis and the bottoming out of the automobile market the year before. MMA made the decision to negotiate a voluntary termination of Potamkin and temporarily close the point, in order to provide Ocean and SMM two years to absorb the sales and fixed operations business of Potamkin. In making this decision, MMA conducted a risk/benefit analysis. One potential benefit was that Ocean and SMM might be able to increase sales and profitability. Other benefits were that MMA could “control the point and plan for the future” and “attract a top tier dealer candidate.” The risk was that Ocean and SMM would not be able to “absorb sales and fixed operations business.” MMA believed closing Potamkin would also help the “crowded” Miami dealer representation, caused by Ocean’s relocation to within four miles of Potamkin. MMA approved Ocean’s relocation because Ocean’s dealership facility was in the direct flight path of jets landing at Miami International Airport, and the noise disrupted sales and service operations. There is no evidence that Potamkin voluntarily terminated because there were four Mazda dealers in Miami-Dade County. MMA kept the SOA formerly assigned to Potamkin as an open point and did not assign any of Potamkin’s market area to Ocean or SMM. The Proposed Point is further away from both Ocean and SMM than was the prior Potamkin location. After Potamkin closed in 2009, Ocean and SMM were not able to increase their sales to “absorb” Potamkin’s sales business or achieve an acceptable level of sales in the market area previously served by Potamkin. Furthermore, SMM was not able to increase its profitability, and it continued to operate at a loss, which has been the case since the dealership opened in 2007. SMM’s losses decreased in 2010, but then increased in 2011 and 2012. Mario Murgado is an experienced and successful new car dealer who expressed interest to MMA in becoming a Mazda dealer. Mr. Murgado was born in Havana, Cuba, is fluent in Spanish and English, and is experienced in marketing and selling new motor vehicles to Hispanic and non-Hispanic customers in the Miami market. Mr. Murgado owns several successful automobile dealerships on Southwest Eighth Street in Miami, which is within the open point SOA formerly assigned to Potamkin, including Honda, Buick, GMC, and Pontiac. This area is within “Little Havana,” one of the most densely Hispanic populated areas in Miami. Mr. Murgado also owns and operates Audi and Infinity dealerships in Stuart, Florida. Mr. Murgado entered into a Letter of Intent with MMA in which he agreed that “the Permanent Dealership Site shall meet Mazda’s design and image standards” and which contains specified minimum square footage requirements at the proposed Brickell location. On August 9, 2013, MMA gave notice of its intent to allow the establishment of Brickell Mazda at the Proposed Point.2/ Adequacy of Representation in the Community or Territory-– Statutory Criteria After establishing the proper Comm/Terr, section 320.642(2)(b) outlines 11 factors to be balanced when determining whether or not current representation in the Comm/Terr is adequate. Impact of the Proposed Additional Dealer on Consumers, Public Interest, Existing Dealers, and MMA Impact on Consumers and Public Interest The Miami Comm/Terr is currently served by three Mazda dealers located in the northern (North Miami), western middle (Ocean), and southern (SMM) portions of the market. The proposed Brickell Mazda location would service the eastern middle portion of the Miami Comm/Terr. Each of the three existing dealers is located in a large cluster of other dealers that offer competing line-make vehicles. These locations provide consumers with convenient access to cross shopping opportunities. The proposed additional dealer would also be located next to a Honda, Buick, and GMC dealership. The travel distance from the proposed location to SMM is 15.4 miles. From the proposed location to Ocean is 10.5 miles. From the proposed location to most of North Miami, the travel distance is 14.5 miles. The proposed location is approximately 2.4 miles east of the former Potamkin, which would place it further away from its nearest competing Mazda dealership, Ocean. The existing road network provides consumers access to one or more Mazda dealers via major arterial roadways: North Miami is accessed from Interstate 95 or the Florida Turnpike, major north/south arteries; Ocean is accessed from the Dolphin Expressway, a major east/west artery, the Palmetto Expressway, a major north/south artery, or the Florida Turnpike; and SMM is located on U.S. 1, a major north/south artery, and is also accessible from the Florida Turnpike. Drive times between the existing Mazda dealerships vary dramatically based upon traffic congestion, which can be notoriously heavy. Consumers would have convenient access to the proposed Brickell Mazda location from U.S. 1, the Dolphin Expressway, and Interstate 95. The Proposed Point is on Southwest Eighth Street (Tamiami Trail/U.S. 41), which is an east-west three-lane main artery leading into downtown Miami. Brickell Mazda will provide a shuttle service for Mazda customers who work in downtown Miami. Downtown Miami workers and residents would have the greatest enhanced accessibility to Mazda sales and service due to the close proximity of the proposed location to downtown. On average, Mazda consumers in the Miami Comm/Terr have to travel 10.2 miles to a Mazda dealer, which is the highest distance of all brands in the Miami Comm/Terr, placing the Mazda brand at a significant disadvantage to other competitors offering more convenience in terms of travel distance. The establishment of Brickell Mazda would reduce the average distance to the nearest Mazda dealer in the Miami Comm/Terr from 10.2 miles to five miles, which would place Mazda in the middle of its competitors in terms of customer convenience based on travel distance. The proposed additional dealer will benefit consumers by providing an additional choice for Mazda sales and service at a new facility owned and operated by an experienced and successful automobile dealer and shortening the travel distance for some consumers in the Comm/Terr. More specifically, the addition of a new Mazda dealer at the proposed Brickell location will make sales and service of Mazdas significantly more accessible to the growing residential population of downtown Miami. Impact On Existing Dealers The analysis of the potential impact on existing dealers begins with an assessment of the opportunity for Mazda sales in the Miami Comm/Terr in addition to the sales occurring historically. These are additional sales available to existing dealers who compete aggressively that will offset any potential impact resulting from Brickell Mazda’s establishment. These additional sales come from two sources–-sales by competitors (conquest sales) and Mazda sales by Mazda dealers outside the Miami Comm/Terr into the Miami Comm/Terr (in-sell). Based on 2012 registration data, there were 1,729 additional conquest sales available if the Miami Comm/Terr achieves the Broward average.3/ A significant number of these conquest sales are located in and around the central part of the Miami Comm/Terr where Brickell Mazda is proposed. Based on 2012 registration data, there are 775 additional in-sell registrations available to Mazda dealers in the Miami Comm/Terr. The total of these conquest sales and in-sell sales is 2,504 units, which is a significant missed opportunity. Brickell Mazda’s potential sales of 647 within 20 miles, and 56 beyond 20 miles, total 703 units, leaving an additional 1,801 units available to the existing dealers. Another way to measure impact is to examine the change in the existing dealers’ expected sales based on the changes to their SOAs that would occur if Brickell Mazda is established. The changes in the SOAs reflect changes in each dealer’s geographic advantage. All of the existing dealers have significant sales opportunities within their assigned SOAs, and should suffer no negative impact after Brickell Mazda opens. SMM had the opportunity to capture 84 additional sales just as a result of in-sells made by North Miami alone in 2012, which are more sales than SMM made into the open point SOA the same year. SMM argues that the addition of another Mazda dealer in the Comm/Terr will necessarily result in each of the existing dealers receiving a lesser share of total sales. However, this argumemt was not supported by credible testimony. To the contrary, a review of the data regarding the addition of a new Mazda dealership in other markets demonstrates that there is a likely benefit to existing dealers. For example, after the addition of a Mazda dealer in Wesley Chapel (Tampa area), registration effectiveness increased 65.5%, indicating that the result was an effective, aggressively-competing dealer network. The sales performance of the existing dealers also improved, indicating no negative impact on sales relative to their historical sales. After the addition of a Mazda dealer in Jacksonville, Mazda’s market share increased 29% because of conquest sales, and in-sell sales decreased. After the addition of a Mazda dealer in Royal Palm Beach, following the closing of two Mazda dealers, and at a very difficult time for the automotive industry in 2008 and 2009, Mazda’s market penetration was better than in the state of Florida as a whole, and the SOA with a Mazda dealer had improved sales performance. These case studies indicate that the addition of a Mazda dealer, where there is inadequate performance, results in increased Mazda market penetration due to increased customer satisfaction, and that existing dealers are not negatively impacted because of the new dealer. Financial Impact on South Motors4/ SMM is wholly owned by South Motors Company of Dade County, which also owns and operates several other automobile dealerships in South Florida. Since commencing operations in 2007, SMM has continually operated at a loss, averaging approximately $750,000 in losses each year since 2008.5/ SMM executives have made no decision and have not even discussed whether to close the dealership if losses continue. Ricardo Lujan, Vice President of Finance for South Motors Company of Dade County, testified that SMM can “continue to increase our revenues and get to profitability,” but he will recommend that SMM close if Brickell Mazda is established because new vehicle sales will be split among four dealers instead of three. This erroneously assumes that the number of new vehicle sales is a “fixed pie,” which ignores conquest sales and in-sell sales available in the Miami Comm/Terr to dealers willing to compete for automotive sales and service, as well as future growth in the market. Mr. Roesner acknowledged that a new Mazda dealer in a market can generate new excitement in the Mazda brand and cause people who would not otherwise do so to buy new Mazda vehicles, resulting in increased conquest sales. The mere existence of Brickell Mazda with new Mazda signage may cause people to take note of the brand. The increase in sales has the potential to lead to increased service business for existing Mazda dealers. Mr. Roesner estimates that based on 2012 sales volume, SMM would lose between 67 and 135 new Mazda sales if Brickell Mazda is established. This calculation ignores the fact that SMM failed to capture 233 units sold to customers in SMM’s SOA by other Mazda dealers. In short, Mr. Roesner’s financial analysis merely states that SMM will lose more business with the addition of Brickell Mazda without considering the opportunity that currently exists for SMM and all Mazda dealers in the Miami Comm/Terr. Further, if SMM operates according to Mr. Roesner’s financial analysis, SMM will never be profitable--even if Brickell Mazda is never established. Mr. Roesner’s financial analysis fails to include any calculation of the new car sales volume necessary for SMM to break even. Using Mr. Roesner’s calculations and assumptions, Mr. Farhat analyzed SMM’s break-even point and determined SMM would have to more than double its annual sales in its new car department, and also double its volume in every other department to break-even, regardless of whether Brickell Mazda is established. In short, if Mr. Roesner’s financial/sales analysis is to be believed, SMM will not be able to grow sales and will never be profitable even if Brickell Mazda does not open. SMM’s financial problems and inability to make a profit result from poor dealership operations, not the opening of Brickell Mazda, and only SMM can address and rectify its own operational issues. There is no competent, substantial evidence in the record that Brickell Mazda’s opening will cause SMM to go out of business. Impact on MMA With the addition of Brickell Mazda, MMA will have greater market penetration (as discussed in greater detail below) and a more competitive dealer network in the Miami Comm/Terr, resulting in increased sales of MMA vehicles, and more satisfied Mazda customers, which will enhance the Mazda reputation to the benefit of MMA and its dealers. Investment of Existing Dealers SMM has invested $6.6 million in its dealership operations, and its parent company, South Motor Company of Dade County, has invested $6.8 million in the facilities from which SMM operates. The undisputed testimony establishes that the other existing Mazda dealers in the Comm/Terr have made similar facility investments. SMM’s investment does not include the dealership property, which is owned by SMM’s parent company, South Motors Company of Dade County. SMM’s investment in its Mazda dealership is substantially less than what it would be in the ordinary course of business, because it does not own the dealership property and has entered into an interest-only, below-market-rate lease with South Motors Company of Dade County. SMM’s investment is also less because many of its ordinary business expenses are paid by South Motors Company of Dade County. Reasonably Expected Market Penetration Market penetration, or registration performance, is a measure of the share of the retail automobile market which a line-make achieves during a defined period of time in a particular geographic area. In the automobile industry, market penetration is calculated by dividing the number of new vehicles of a line-make that are registered by the number of all new vehicles of competing line-makes that are registered. Thus, for instance, the calculation of the 2013 Mazda market penetration in the Comm/Terr would be: Total Number of New Mazda Registrations in the Comm/Terr during 2013 divided by the Total Number of New Competitive Line-Make Registrations in the Comm/Terr during 2013. Appropriate Benchmark Identifying an Appropriate Comparison Area In determining whether Mazda is currently achieving a reasonably expected level of market penetration in the Comm/Terr, a standard or benchmark for market penetration must first be established against which Mazda’s performance is compared. That benchmark must be reasonable, and should be neither too high nor too low. In determining a standard to measure performance in the Miami Comm/Terr, market penetration in another geographic area (“comparison area”) is assessed in order to arrive at a level or standard of performance that can reasonably be achieved in the Miami Comm/Terr. The comparison area must be independent of the Miami Comm/Terr, so that the Miami Comm/Terr is not being measured against itself. A smaller comparison area close to the Miami Comm/Terr is superior to a larger comparison area that is farther away because the larger area will include dealers in diverse areas whose performance could be affected by market occurrences such as buy-sells, relocations, and facility changes, and because the larger area will include areas that have no Mazda dealer. For a larger comparison area, such as the U.S. or Florida, it is appropriate to consider only the areas that have a Mazda dealer, known as U.S. Represented SOAs or Florida Represented SOAs. The combined SOAs of the three Mazda dealers in Broward County, Florida--Gunther and the two Lou Bachrodt dealerships–- comprise a smaller comparison area adjacent to the Miami Comm/Terr in the same state and climate. The larger comparison areas suggested by SMM, of U.S. Represented and Florida Represented, are not appropriate benchmarks to determine adequate representation in the Miami Comm/Terr because over the period of 2010 through July 2013, the Broward SOAs consistently achieve higher market penetrations and demonstrate what an adequately represented market can achieve. MMA’s use of regional averages or other comparison areas in standardized reports to dealers is not a reason to use Region as the comparison area in this case. Instead, a more thorough analysis of the South Florida market is appropriate in determining adequacy of performance, as required under section 320.642. Using the Broward SOAs as the comparison area (Broward average) results in the dealers in the Miami Comm/Terr being compared to dealers in Broward County, and not to dealers in distant and diverse parts of the U.S. or Florida. The dealers in the Broward SOAs are in the same advertising market as the dealers in the Miami Comm/Terr; were in the same dealer advertising group with the Miami Comm/Terr dealers until March 2012; and, like the Miami Comm/Terr dealers, had no dealer advertising association after March 2012. Another key factor weighing in favor of using the Broward SOAs as the comparison area is the similar Hispanic population to the Miami Comm/Terr. While not as high as the Miami Comm/Terr, the Broward SOAs have high percentages of Hispanic population compared to most other SOAs in Florida. Segmentation Analysis The second step in determining the benchmark is segmentation analysis, the process by which any differences in product popularity caused by consumer purchase preferences between the Miami Comm/Terr and the benchmark area are addressed. This analysis accounts for any differences between the Miami Comm/Terr and the Broward SOAs for consumers purchasing certain types of vehicles, such as trucks or SUVs, and not others. MMA’s product lines are broken down into various segments, such as subcompact, mid-size, and SUV, and then Mazda registrations in those segments are compared to industry registrations in those same segments. By dividing the number of Mazda registrations in each segment by the number of industry registrations in each segment, the actual penetration rate in each segment in the Miami Comm/Terr is obtained. The overall actual Mazda penetration rate in 2012 in the Miami Comm/Terr for all segments was 3.43%. This is computed by dividing the total actual Mazda registrations within the Mazda Comm/Terr by the actual industry registrations. These same computations using the actual Mazda and industry registrations in the Broward SOAs yield the actual penetration rate in each segment for 2012 in the Broward SOAs. The number of expected registrations in 2012 in the Miami Comm/Terr in each segment is computed by multiplying each segment’s actual penetration rate in the Broward SOAs by the number of industry registrations in that same segment in the Miami Comm/Terr. The overall expected Mazda penetration rate in 2012 for all segments in the Miami Comm/Terr is 5.29%, computed by dividing the number of expected registrations of 4,320 (Mazda registrations in Miami Comm/Terr if Mazda captured what the Broward SOAs dealers captured) by 81,721 (total competitive registrations in the Comm/Terr). Mazda’s expected registrations, or market penetration, for other years can be computed by multiplying the expected penetration rate for that time period by the number of actual industry registrations in the Miami Comm/Terr for that time period. For example, applying the 2012 Broward average expected penetration rate of 5.29%, Mazda’s expected registrations in the Miami Comm/Terr were 4,320 registrations, while its actual registrations were only 2,800. Confirmation of the Benchmark as Reasonable The third step in determining the benchmark is to test the reasonableness of the benchmark by determining if it has been achieved. There are many areas in Southeast Florida, including areas in Miami-Dade, Broward, and Palm Beach counties, that achieve or exceed the Broward average of 5.29%. The Broward average of 5.29% has also been consistently achieved or exceeded in various markets in Florida over a period of time from 2010 to July 2013. Although the Broward average includes Gunther, one of MMA’s highest selling dealers, this is not a valid reason to reject it as the benchmark because the Broward average of 5.29% is achieved in numerous areas in Southeast Florida, and over time in various other markets in Florida. Mr. Roesner proposed alternative benchmarks of U.S., comprised of the entire U.S.; the Region, comprised of several states in addition to Florida; and the entire state of Florida. Mr. Roesner’s Florida benchmark includes many areas with no Mazda dealer representation. Mr. Roesner’s U.S., Region, and Florida benchmarks are not appropriate benchmarks because those areas are too diverse or different from the Miami Comm/Terr to permit a meaningful comparison. Based on a consideration of all relevant evidence, the appropriate comparison area is the Broward SOAs, and the segment- adjusted Broward average of 5.29% is a reasonably expected market penetration level for adequate representation in the Miami Comm/Terr. Performance of Dealer Network in Miami Comm/Terr Compared to Reasonably Expected Market Penetration Mazda’s performance in the Miami Comm/Terr (actual market penetration) is measured relative to the segment-adjusted Broward average (expected market penetration) to determine if the dealer network in the Miami Comm/Terr is providing adequate representation. For the years 2010 through July 2013, the Miami Comm/Terr performed well below the reasonably expected Broward average performance. Specifically, in 2010, the Miami Comm/Terr performed at 68.7% of the reasonably expected Broward average, with a loss of 1,604 new vehicle registrations; in 2011, at 67.4% of reasonably expected Broward average and 1,535 lost registrations; in 2012, at 64.8% of reasonably expected Broward average and 1,520 lost registrations; and calendar year to date (CYTD) July 2013, at 65.8% of reasonably expected Broward average and 1,659 lost registrations (on an annualized basis). The Miami Comm/Terr’s performance in the 60th to 70th percentile range is not a low “C” average; rather it is considered very low achievement because the Broward average is considered to be reasonably expected, and not superlative, performance. In another words, 100% is merely average and to be expected. The Miami Comm/Terr is performing well below a reasonable level of performance, and its performance has been consistently below average-–65% of Broward SOAs. Mr. Farhat credibly testified as to the import of this performance-- consumers are saying they’re dissatisfied with the Mazda effort, the Mazda Network. Consumers in Broward County are buying at a certain rate. Consumers in this area [the Miami Comm/Terr] are buying at 50 or 60 percent of that rate. So consumers are telling Mazda they’re not happy. This is not an adequately represented [market]-–there’s not enough competition. There’s not enough convenience. And it’s displayed in ultimately, you know, their purchases. They put their money where their mouth is, and it’s not going to Mazda. The fact that the Miami Comm/Terr’s performance has been consistently below the Broward average indicates inadequate performance by the Mazda dealer network. This below-average performance is evident throughout the Miami Comm/Terr in all four of the SOAs–-Ocean, SMM, North Miami, and the open point. North Miami’s performance (although still below the Broward average) is better than the other SOAs’ performance and indicates that a stronger performing dealer can do better, so that improved performance is available with a stronger dealer effort. The Miami Comm/Terr’s performance is still inadequate when compared to the more conservative benchmark, suggested by SMM, of the Florida Represented average. The Miami Comm/Terr’s performance declined in each year from 2010 through CYTD July 2013 as measured by the Florida Represented average, indicating inadequate performance and consumer dissatisfaction with the level of Mazda dealership competition. Specifically, in 2010, the Miami Comm/Terr performed at 95.2% of Florida Represented average, with a loss of 179 new vehicle registrations; in 2011, at 94.3% of Florida Represented average, with a loss of 191 registrations; in 2012, at 84.3% of Florida Represented average, with a loss of 522 registrations; and CYTD July 2013 (MMA gave notice of establishing Brickell Mazda in August 2013), at 80.8% of Florida Represented average, with a loss of 759 registrations (on an annualized basis). This same below average and declining performance measured against the Florida Represented average is evident in the Ocean, SMM, and open point SOAs. North Miami’s performance is better as measured against the Florida Represented average, which indicates the very conservative nature of the Florida Represented as a benchmark. However, even North Miami’s performance is declining under the Florida Represented average, dropping over 20% from 2010 to CYTD July 2013. As Mr. Farhat testified, under either the Broward or Florida Represented benchmarks, his conclusions are the same-- So the pattern, I think, is similar. The conclusion is, ultimately, relative to the reasonable benchmark, which is the Broward County SOAs, the Miami Comm/Terr, and in particular, areas south of the Lehman [North Miami] SOA are inadequately represented. There is very poor performance. There is significant incremental opportunity. And even to the more conservative Florida benchmark, you have the same conclusion: Areas below or South of Lehman are not adequately represented by the existing Mazda dealer network. Based on a consideration of all relevant evidence, it is determined that there is an inadequate level of representation of Mazda in the Miami Comm/Terr. Consideration of All Factors Which May Affect Market Penetration The “market penetration” factor requires not only a determination of the appropriate comparison and analysis of how the existing dealers are penetrating their market, but requires “consideration of all factors which may affect said penetration, including, but not limited to, demographic factors such as age, income, education, size class preference, product popularity, retail lease transactions, or other factors affecting sales to consumers of the community or territory.” § 320.642(2)(b)3., Fla. Stat. In addition to the segmentation analysis discussed above, which takes into consideration vehicle size and class preference, both MMA and SMM presented extensive evidence regarding the potential effect of the Miami Comm/Terr Hispanic population, and the lack of Spanish-language advertising by MMA and the Miami Comm/Terr Mazda dealer group. SMM argues that there are unique demographic factors in the Comm/Terr which explain why Mazda’s market penetration dropped from 2011 to 2012 and through July 2013. Further, SMM argues that MMA’s failure to conduct advertising in Spanish, in the Miami Comm/Terr, resulted in Mazda’s declining market penetration. These arguments were not supported by credible evidence. Miami-Dade County makes up the vast majority of the Comm/Terr. The population of Miami-Dade County is 67% Hispanic. By contrast, the population of Broward County is just 27% Hispanic. Within Miami-Dade County more than 50% of the Hispanic population is Spanish dominant, meaning that they speak mostly or only Spanish. Spanish dominance is high across Hispanic nationalities and socio-economic levels. A vast majority of the Hispanic population in Miami- Dade County are Latin Americans who immigrated to this Country. The population of Miami-Dade County is such that Spanish speakers immigrating to the county are not required to assimilate by learning English. Even those Spanish speakers who also speak English are able to live their daily lives without communicating in English. A large portion of the Miami-Dade County population consumes Spanish media, in the form of El Nuevo Herald (the Spanish language version of The Miami Herald); the numerous Spanish language radio stations; and the four Spanish broadcast television (TV) stations. Spanish broadcast TV stations are the most popular in Miami-Dade County. The two top-rated six o’clock TV newscasts in Miami-Dade County are on Spanish stations. Among broadcast TV viewers, greater than 50% watch Spanish TV stations between the hours of 6:00 p.m. and 11:00 p.m. Because of the high concentration of Hispanics in Miami-Dade County, along with the high percentage of Hispanics that are Spanish dominant and the popularity of Spanish media, Spanish advertising is very common throughout Miami-Dade County. There are three categories or “tiers” of advertising in the automotive industry–-Tier 1, Tier 2, and Tier 3. Tier 1 advertising is designed to promote the Mazda brand to a national audience; for example, a Mazda automobile advertisement during a sporting event. MMA pays for all Tier 1 advertising. Tier 2 advertising is designed to advertise the Mazda brand in connection with specific offers available to potential customers in a market area, and usually includes some reference to the local dealers. Dealer groups, known as Dealer Marketing Groups (DMGs), purchase Tier 2 advertising with funds derived from two sources: 1) member dealers contribute on a per-car basis for all cars purchased from MMA (currently 1.5% of base MSRP)6/; and 2) MMA contributes an additional amount (currently $.50 for each dollar contributed by dealers). DMGs are formed when dealers in the same media market area, known as a Dominant Market Area (DMA), voluntarily join together to pool their advertising dollars to fund advertising in their DMA. South Motors, Ocean, and North Miami are not part of a DMG. If a dealer is not a member of a DMG, the per-car contribution that would otherwise go to the DMG is kept by the dealer and can be used for advertising. DMGs work with MMA to make advertising buys in the local media. MMA’s advertising agency will propose advertising content and buys, and the DMGs decide how and on what ads to spend their money. Prior to DMGs, Mazda dealers joined Tier 2 marketing groups known as voluntary or “Vol” groups, which were similar to DMGs, and used dealer contributions and matching funds from MMA to engage in Tier 2 advertising. The Vol groups disbanded in 2012 when the DMG program began. Not all Mazda dealers are in DMGs. A single point market (only one Mazda dealer) does not have a DMG because with no pooling of funds, the dealer can make its own decision about advertising content and buys. In multi-point markets (more than one Mazda dealer), if the dealers voluntarily agree to form a DMG, MMA will support them. If dealers in a market decide not to form a DMG, MMA does not attempt to force them. If MMA were to provide funds for Tier 2 advertising in markets where there is no DMG, it would discourage dealers from participating in DMGs and contributing to the cost. MMA has 18 multi-point markets in the Southeast Region, and ten do not have DMGs. The Mazda dealers in Nashville and Winston-Salem formed DMGs and later disbanded them. MMA currently has six multi-point markets in Florida with DMGs and two multi-point markets without DMGs. There are two DMGs in Florida with some, but not all, dealers participating-–West Palm and Orlando. In Palm Beach County, there are two high-volume dealers in the southernmost part of the county who agreed to form a DMG because the dealers to the north do not compete with them. In Orlando, there is one dealer in Ocala who is on the fringe of the DMG and does not strongly compete with the five Orlando dealers in the DMG. MMA prefers not to have DMGs with less than all dealers participating because of the “free rider” problem, where the non-participating dealers may benefit from the advertising paid for by the participating dealers. In both West Palm and Orlando, all of the dealers are aware of and have consented to the formation of the DMGs without the participation of all dealers in these DMAs. Tier 3 advertising is designed to persuade individual local consumers to do business with a particular dealership; for example, advertising of the dealership in local media, the internet, or on billboards. Each individual dealership pays for its Tier 3 advertising. MMA reimburses a portion of each dealership’s Tier 3 advertising costs by crediting the dealer’s account with amounts known as Co-Op funds. In addition to Co-Op funds, if a dealer is not a member of a DMG, the per-car contribution that would have gone to the DMG is returned to the dealer and can be used for additional Tier 3 advertising. In addition to providing funds for the three advertising tiers, MMA periodically has available regional marketing funds used for additional regional advertising or events, or to assist dealers with grassroots events or additional local advertising. MMA ran Tier 1 advertising in English during all times relevant to this proceeding. Tier 1 advertising provides the same coverage in all markets for all dealers. Beginning in 2013, MMA increased its Tier 1 advertising to be “always on” for all dealers 52 weeks a year. Since October 2010, the majority of Mazda Hispanic advertising has been at the Tier 2 level by the Vol groups or DMGs. MMA’s decision to shift Hispanic advertising to the Tier 2 level is consistent with its overall marketing strategy to put greater emphasis on local versus national media. MMA’s marketing strategy allows DMGs to focus on Hispanic advertising in markets where there is a large population of Spanish-dominant speaking consumers. DMGs vote and determine whether to engage in Hispanic advertising. DMGs in some markets have elected to engage in Hispanic advertising. Currently, DMGs engage in Hispanic advertising in the following markets–-Tampa, Orlando, West Palm, Los Angeles, Sacramento, San Francisco, Houston, Dallas, and the lower Rio Grande Valley. In 2013, MMA investigated the feasibility of a Tier 1 national Hispanic advertising effort, but concluded that Hispanic advertising was best done at the Tier 2 and 3 levels. MMA is not the only manufacturer that does not engage in Hispanic advertising at the Tier 1 level–-Kia and Hyundai do not conduct Tier 1 Hispanic advertising. In addition, at various times from 2010 to 2013, Hyundai, Buick, Mitsubishi, Volvo, GMC, Smart, Subaru, and Mini have not engaged in Tier 1 Hispanic advertising on local Spanish TV stations in the Miami- Dade/Broward market. MMA decided not to do Tier 1 Hispanic advertising because over two-thirds of the national Hispanic audience either speak English fluently or speak both English and Spanish. Miami-Dade and Broward counties comprise one market for advertising purposes (Miami-Dade/Broward Market). MMA’s Tier 1 advertising reaches a national audience (which would include the Miami-Dade/Broward Market) through its national TV, digital, and print categories. Through 2012, MMA engaged in Tier 1 English and Hispanic advertising in the Miami-Dade/Broward market, including Tier 1 Hispanic advertising on local Spanish TV stations. In 2013, MMA continued its Tier 1 English advertising in the Miami-Dade/Broward Market and also conducted a small amount ($5,663.00) of Tier 1 Hispanic advertising on local Spanish TV stations. Garage Team Mazda is MMA’s contracted advertising agency and tracks MMA’s media planning and spending. Garage Team Mazda prepares summaries of MMA spending on Tier 1 and Tier 2 advertising. MMA and Garage Team Mazda compute the actual advertising dollars spent in the Miami-Dade/Broward Market by taking the percentage of U.S. households defined by Nielsen to be in the Miami-Dade/Broward Market (1.4%) and applying that percentage to the total national spending. For the fiscal year ending March 2010, MMA spent $30,407,616.00 on Tier 1 TV advertising, of which 1.4%, or $425,706.00 was spent in the Miami-Dade/Broward market. For the fiscal year ending March 2011, MMA spent $35,715,344.00 on Tier 1 TV advertising, of which 1.4%, or $500,014.00 was spent in the Miami-Dade/Broward Market. For the fiscal year ending March 2012, MMA spent $80,401,232.00 on Tier 1 TV advertising, of which 1.4%, or $1,125,617.00 was spent in the Miami-Dade/Broward Market. For the fiscal year ending March 2013, MMA spent $87,530,735.00 on Tier 1 TV advertising, of which 1.4%, or $1,225,430.00 was spent in the Miami-Dade/Broward Market. For the fiscal year ending March 2014, MMA spent $108,065,318.00 on Tier 1 TV advertising, of which 1.4%, or $1,512,914.00 was spent in the Miami-Dade/Broward Market. These sums represent only Tier 1 advertising on national TV, and do not include other Tier 1 advertising such as national radio, print, spot TV, digital, etc. Tony Garcia, SMM’s advertising expert, testified that MMA’s spending on general and Hispanic advertising in Miami-Dade and Broward counties has been decreasing, and as a result Mazda “gets lost in the shuffle.” However, Mr. Garcia based his conclusions on advertising spending figures that include only a limited number of local TV stations; and, even for those stations, the figures do not include national broadcast advertising. As a result, Mr. Garcia does not know what additional Tier 1 advertising each manufacturer is doing. The Tier 1 spending in Mr. Garcia’s report could reflect as little as 5% or more than 75% of Tier 1 spending in the Miami-Dade/Broward Market; and, thus, Mr. Garcia did not know the true percent of spending for Tier 1 advertising of each brand. With regard to Tier 2 spending, Mr. Garcia did not know whether the data he relied on included all Tier 2 spending by dealer advertising associations or whether the data correctly segregated Tier 1 and Tier 2 spending. Mr. Garcia also testified that MMA’s Mazda advertising is not reaching an important segment of the market, specifically Hispanics. However, Mr. Garcia does not know what portion of the Hispanic population that speaks “mostly Spanish” is not reached by English language advertising. Mr. Garcia also does not know how likely Hispanics are to purchase new motor vehicles, but admits that is something a new car dealer would want to know before spending money on Hispanic advertising. Roughly 12.5% of the Miami-Dade population speak only Spanish. Before the DMG program started in 2012, all Mazda dealers in Miami-Dade and Broward counties belonged to the Vol group and engaged in Tier 2 English and Hispanic advertising. The Miami-Dade/Broward Mazda Vol group did not agree on Hispanic advertising and compromised on spending a very small amount on Hispanic advertising. The Miami-Dade/Broward Mazda Vol group disbanded at the start of the DMG program. Hispanic advertising placed by the Vol group continued to run in the Miami-Dade/Broward Market until February or March 2012. After the Vol group disbanded, the dealers in the Miami-Dade/Broward Market did not agree to form a DMG because some dealers were not interested. Mazda dealers are free to engage in Hispanic advertising at the Tier 3 level and, in fact, can use the funds that would otherwise go to the DMG, along with Co-Op funds which are reimbursed by MMA. MMA cannot force its dealers to join a DMG. Less than all of the dealers can form a DMG, but this was not proposed by SMM, Ocean, or North Miami. Mazda dealers can also request reimbursement for advertising, including Hispanic advertising, from the Region’s yearly marketing funds. In January 2013, SMM requested regional marketing funds to reimburse expenses of a “grass roots event.” The request was not approved due to a lack of funds left in the regional budget for the fiscal year ending March 31, 2013. The open point SOA is 63.79% Hispanic, the second- highest Hispanic density of all the Mazda SOAs in Florida. In 2012, SMM sold 73 new Mazda vehicles to customers in the open point SOA, while North Miami sold 204. The disparity in the ability of these two dealers to penetrate the open point SOA-- under the same conditions of no DMG and no Hispanic Tier 2 advertising--belies the contention that Mazda’s performance in the open point SOA is affected by a lack of Hispanic advertising. If the lack of Tier 1 and/or Tier 2 Spanish language advertising is hampering SMM’s ability to sell to customers in the open point SOA, North Miami would not be able to sell almost three times as many vehicles to customers in the same highly Hispanic SOA. The disparity points to differences in individual dealer operations, not a lack of Hispanic advertising. SMM also contends that the cessation of Tier 2 advertising, in any language, in March 2012 is responsible for Mazda’s declining market penetration in the Miami Comm/Terr. However, as noted above, the performance of all the SOAs in Broward and Dade counties had already peaked in 2010 and had started to decline in 2011. After the Miami-Dade and Broward dealers’ DMG ceased, the per-car contributions by the dealers were returned by Mazda to the dealers, which funds may be spent on advertising or other purposes. Based on a consideration of all relevant evidence, it is determined that the economic and marketing conditions in the Miami Comm/Terr are not likely causes of the inadequate representation and, in fact, support the need for the establishment of Brickell Mazda. Based on a consideration of all relevant evidence, it is determined that the Hispanic population in the Miami Comm/Terr and the end of Tier 2 Hispanic and/or English advertising in 2012 are not likely causes of the inadequate representation. Action by MMA Denying Existing Dealers Opportunity for Reasonable Growth and Market Expansion There is no evidence establishing that MMA has taken any action to deny existing dealers an opportunity for reasonable growth and market expansion. Attempts by MMA to Coerce Existing Dealers to Consent to the Proposed Additional Dealer There is no evidence establishing that MMA attempted to coerce existing dealers to consent to the proposed additional dealer. Distance, Travel Time, Traffic Patterns, and Accessibility Between Existing Dealers and the Location of the Proposed Additional Dealer As discussed in greater detail above, SMM, Ocean, North Miami, and the proposed Brickell Mazda location are all accessible by major north/south and east/west thoroughfares. Travel times between existing dealers and the proposed location will vary significantly depending upon traffic conditions. The drive time between the Proposed Point and SMM is approximately 20 to 25 minutes but will take longer if there is congested traffic. The establishment of Brickell Mazda will reduce the average distance to the nearest Mazda dealer in the Miami Comm/Terr in half and eliminate any significant drive time for those who live and work in the immediate downtown Miami area. Benefits to Consumers Not Likely to be Obtained by Geographic, Demographic, or Other Expected Changes As discussed above, it is likely that consumers will benefit from Brickell Mazda’s opening, through greater convenience in accessing Mazda sales and service, and increased competition among competitive dealerships and Mazda dealers, resulting in lower prices and improved facilities with better customer care and service. Whether the Protesting Dealer is in Compliance with Its Dealer Agreement SMM is in compliance with its Mazda franchise agreement. Adequacy of Interbrand and Intrabrand Competition and Adequacy of Convenient Consumer Care, including Adequacy of Sales and Service Facilities The presence of interbrand competition (Mazda dealers vs. other brand dealers) and intrabrand competition (Mazda dealers vs. other Mazda dealers) in the Miami Comm/Terr is also assessed as a factor influencing consumer behavior. With respect to intrabrand competition, existing dealers strenuously compete for new Mazda vehicle sales and service business throughout the Comm/Terr. Each of the three existing Mazda dealers in the Comm/Terr sells into the SOAs in which the other dealers are located, and into the open point SOA in which the proposed additional dealer would be located. However, Ocean and SMM consistently lagged behind North Miami in terms of market performance. With respect to interbrand competition, every line- make that Mazda competes with is represented by at least one dealer in the Comm/Terr (all line-makes except for Smart have more than one dealer). The evidence is that there is inadequate interbrand competition because consumers are not buying Mazda vehicles at the rate projected by the Broward average benchmark, thus indicating their dissatisfaction with the Mazda dealer network in the Miami Comm/Terr. Whether the Proposed Additional Dealer is Justified Based on Economic and Marketing Conditions The Miami Comm/Terr, which is composed of the four SOAs of North Miami, Ocean, SMM, and the open point, constitutes a big market, by any measure, with a 2012 population of roughly 3,080,000. The four SOAs all have significant concentrations of populations, with the open point SOA having the greatest density of population. Mr. Farhat testified that this indicates a “hole for the Mazda network” where Brickell is proposed, and where there is no current convenient Mazda dealership. The same pattern is true for households in the Miami Comm/Terr, with high household density and past and projected growth both throughout the area and in the open point SOA. A general pattern of population, household, and employment growth, while not a direct predictor of new vehicle sales, does indicate more new vehicle sales over time. Based on the overall population and number of households, the Miami Comm/Terr is a very large, strong, and growing market in terms of new vehicle sales opportunities. Employment in Miami-Dade County has also grown steadily since the bottom of the recent economic recession in 2009, another positive indicator for new vehicle sales. Households with median incomes between $25,000 and $85,000 (potential Mazda purchasers based on buyer reports), are found throughout the Miami Comm/Terr, a further indicator of new Mazda vehicle sales opportunities. Mr. Farhat assessed the number of Mazda dealerships relative to competitor dealerships to calculate Mazda’s “shelf space,” or share of franchise. Mr. Farhat calculated that Mazda’s share of franchises in the Miami Comm/Terr of 3.1% is low compared to 4.9% in the Broward SOAs and 4.7% in the Florida Represented SOAs, which has caused Miami Comm/Terr consumers to buy other brands and not Mazda. Mazda has three dealers in the Miami Comm/Terr. Only four other competitive brands (Fiat, Subaru, Mini, and Smart) have three or fewer dealers. Fourteen other competitive brands have four or more dealers. MMA wants to be located where its competitors have dealers. Using regression analysis, Mr. Farhat testified to the direct correlation between shelf space and higher market share, and concluded that the Miami Comm/Terr needs “4.8 Mazda dealers, or, essentially, more than four, which is five” dealers in order to be able to achieve the Broward average. Using the more conservative Florida Represented standard, Mazda would still need more than four dealers to achieve the same shelf space as its competitors, indicating that the Miami Comm/Terr is too big for just three Mazda dealers. Based on a consideration of all relevant evidence, it is determined that the economic and marketing conditions in the Miami Comm/Terr support the need for the establishment of Brickell Mazda. Volume of Registrations and Service Business Transacted by Existing Dealers As discussed above, the existing dealers are not meeting the Broward average or the Florida Represented benchmark for registrations. Registrations have been declining in the Miami Comm/Terr for the last three years. With only three Mazda dealers, the Miami Comm/Terr currently provides the greatest sales opportunity per dealer among all Florida markets. If Brickell Mazda is added, the Miami Comm/Terr will have four Mazda dealers and will still present substantial opportunities for sales, ranking as the second largest opportunity per dealer just behind Orlando. The same is true with respect to expected service opportunities as measured by units in operation per dealer. With three dealers, the Miami Comm/Terr currently provides the largest service opportunity per dealer among all Florida markets. If Brickell Mazda is added, the Miami Comm/Terr will still be a very large service market, ranking fourth in opportunity per dealer behind Orlando.
Recommendation Based on 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 granting the application to establish Miami Automotive Retail, Inc., d/b/a Brickell Mazda, as a dealer for the sale and service of Mazda vehicles, with sales to be located at 618 Southwest Eighth Street, Miami, Miami-Dade County, Florida 33130, and service to be located at 665 Southwest Eighth Street, Miami, Miami-Dade County, Florida 33130. DONE AND ENTERED this 1st day of August, 2014, in Tallahassee, Leon County, Florida. S MARY LI CREASY 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 1st day of August, 2014.
Findings Of Fact Based upon the evidence presented at hearing, the following findings of fact are determined: PARTIES The Applicant has applied to the Department for a motor vehicle dealer license authorizing it to operate a Yamaha franchise motorcycle dealership in Jacksonville, Duval County, Florida, at 8940 Lem Turner Road. (Testimony of Turner; P.E. 2.) Petitioner, Ron Turner Cycles, Inc. (hereinafter "Turner"), owns and operates a dual Yamaha/Suzuki motorcycle dealership in Jacksonville at 10263 Beach Boulevard. The Suzuki franchise for that location was acquired in 1976, and the Yamaha franchise followed in 1979. Turner has owned the exclusive Suzuki motorcycle franchise for Duval County since 1976. In addition to its dealership on Beach Boulevard, Turner owns and operates a Suzuki dealership located at 8940 Lem Turner Road, which opened in September of 1982. Petitioner's President, Ron Turner, has lived in Jacksonville for 39 years and has been in the motorcycle business for 20 years. The Protestant owns and operates an existing Yamaha motorcycle dealership in Jacksonville, located at 4949 Blanding Boulevard. The Protestant also owns Honda and Kawasaki motorcycle dealerships in Duval County, located on Blanding Boulevard. (Testimony of Purcell and Turner; P.E. 1.) The Applicant and the Protestant are the only existing Yamaha franchise dealers in Duval County. Yamaha has determined that a third franchise dealership should be located in the northside area of Jacksonville and has issued the Applicant a letter of intent dated July 30, 1982, indicating its willingness to enter into a Dealer Agreement with the Applicant to operate a Yamaha motorcycle dealership at 8940 Lem Turner Road, Jacksonville, Florida. (Testimony of Turner and Ewing; P.E. 1 and 3.) Yamaha is the national distributor for Yamaha brand motorcycles, parts and accessories in the United States. Its model issue for 1983 is constituted of 42 motorcycles ranging in retail price from $300.00 to $5,000.00. Yamaha offers various street machines, competition machines and dual-purpose motorcycles. The Department is an agency within the State of Florida with regulatory responsibility and authority, among those duties being the requirement to approve or disapprove the application for-new motorcycle dealer licenses in Florida sought by the prospective franchisees of the various motorcycle manufacturers and distributors. TERRITORY INVOLVED Duval County is a large county with a population of approximately 571,003 based on the 1980 census, and has experienced a growth rate of 8 percent from 1970 to 1980, which represents an average annual rate of increase of 0.5 percent to 0.7 percent. During the next ten years, population growth and employment is expected to continue in a modest fashion. The City of Jacksonville encompasses the entire county except for the Beaches and Baldwin. Jacksonville is divided by the St. Johns River running north and south, and the various areas of the county are connected by major federal highways, Interstate 10, Interstate 295, Interstate 95, U.S. 1 and U.S. 90 (Beaver Street). (Testimony of Perry; P.E. 1.) Largely because of wide geographic separation between the population located east and west of the St. Johns River and in northern parts of the county, each area has developed distinct and identifiable marketing areas for general retail businesses. (Testimony of Perry; P.E. 1.) The area west of the St. Johns River (hereinafter "Southwest Jacksonville") may be described as that part of the city south of Beaver Street (U.S. Highway 90) to the county line and west of the St. Johns River to the Whitehouse area. The Jacksonville Naval Air Station and Cecil Field Naval Air Station are located in this market area. Using postal zip code areas, Southwest Jacksonville includes zip codes 32204, 32205, 32210/44, 32221 and 32222, and has a population of 58,643 people. (Testimony of Turner, Lamprecht and Perry; P.E. 11 and 12.) Four major franchise motorcycle dealerships are located in Southwest Jacksonville and the extreme northern part of adjacent Clay County. They are found on Blanding Boulevard. The brands are Honda, Yamaha, Suzuki and Kawasaki, three of which (Honda, Yamaha and Kawasaki) are owned by the Protestant's owner, Gary Purcell. (Testimony of Turner and Purcell; P.E. 1.) The area east of the St. Johns River (hereinafter "Southeast Jacksonville") may be described as that part of the city east of the St. Johns River including the Arlington-Fort Caroline and Southside areas. Numerous shopping centers, residential neighborhoods and Regency Square regional shopping center have developed to serve the population in this area. Using postal zip code areas, Southeast Jacksonville included zip codes 32207, 32211, 32216/24, 32217, 32223 and 32225, and has a population of 181,982 people. (Testimony of Turner, Lamprecht and Perry; P.E 9 and 10.) Four major franchise dealerships are located in Southeast Jacksonville: Honda (2), Kawasaki, and Turner's dual Yamaha/Suzuki dealership on Beach Boulevard. (Testimony of Turner; P.E. 1.) The market areas in the northern part of the city (hereinafter the "Northside") include most of the growing residential and commercial neighborhoods north of Beaver Street within a pie-shaped area lying between Interstate 95, U.S. 1, and zip code 32219 north of Cecil Field Naval Air Station. Using postal zip code areas, the Northside includes zip codes 32206, 32208, 32204, 32218 and 32219, and has a population of 143,308 people. (Testimony of Turner, Lamprecht and Perry; P.E. 1 and 15.) There are no major franchise motorcycle dealerships on the Northside, except for the Suzuki shop owned by Turner on Lem Turner Road. (Testimony of Turner.) MARKET AREA INVOLVED Customers for the sales and service of new Yamaha motorcycles in Duval County are served primarily at two separate locations previously described as the Southwest Jacksonville and Southeast Jacksonville market areas. The Protestant serves the Southwest Jacksonville market area. Turner serves the Southeast Jacksonville market area. (Testimony of Lamprecht and Ewing; P.E. 8.) Two and one-half years ago, Yamaha made a preliminary determination that an additional dealership was needed in Jacksonville, but such action was postponed for two years while Yamaha's district sales managers worked with Turner and the Protestant to try and increase Yamaha's market share in Duval County. When the market penetration as a percentage of market share did not advance, Yamaha decided to open a third dealership in Duval County. (Testimony of Ewing.) July of 1982 was the date the decision to open the additional dealership was formalized. The Northside market area was selected as the location for the new dealership, based upon the fact that there were no other motorcycle dealerships in the northern part of Jacksonville and outlying areas adjacent to that part of Jacksonville. This area was also selected because the majority of people who buy Yamaha products are in the middle-to-low income range, and the Northside has that type population. (Testimony of Ewing.) An inverse relationship exists between the likelihood of selling a person a Yamaha motorcycle and the distance between the dealership and where the customer lives. Generally speaking, consumers shop in their neighborhoods for convenience, and if there is no Yamaha dealer, they will go to competitive brands if available, or not buy if required to drive 30 miles round-trip to purchase a Yamaha motorcycle. (Testimony of Turner and Lamprecht.) The distance between the Protestant's existing dealership on Blanding Boulevard and the Applicant's proposed dealership on Lem Turner Road in the Northside market area is 15 miles and takes approximately 20 to 25 minutes to travel, depending on traffic. The distance and time between the dealerships of the Protestant and Turner and Turner and the Applicant are also 15 miles, and 20 to 25 minutes. (Testimony of Turner; P.E. 1.) ADEQUACY OF REPRESENTATION BY TURNER AND PROTESTANT IN THE NORTHSIDE MARKET AREA Market penetration relative to competitors is a standard tool for measuring the adequacy and performance of a motorcycle dealership. Market penetration is determined by Yamaha by use of: (1) R. L. Polk Company (hereinafter "Polk") motorcycle statistics based on state and county new motorcycle registrations, (2) Yamaha warranty registrations for its existing dealers categorized by dip code designation, and (3) population-per-dealer statistics. (Testimony of Lamprecht.) According to Polk, the four largest selling motorcycle brands in the United States are Honda, Yamaha, Kawasaki and Suzuki. The relative penetration of Yamaha during the year 1982, through October, in comparable market areas is as follows: UNITED STATES Honda - 42.3 Yamaha - 23.2 Suzuki - 14.8 Kawasaki - 13.6 SOUTHEASTERN REGION Honda - 50.1 Yamaha - 20.0 Suzuki - 13.5 Kawasaki - 12.0 DUVAL COUNTY Honda - 48.7 Kawasaki - 18.7 Yamaha - 16.4 Suzuki - 10.9 In both the United States and the Southeastern Region, Yamaha is number two in registrations, but in Duval County Yamaha has dropped to number three below Kawasaki. (Testimony of Lamprecht; P.E. 6.) During the past five years (1978 through October, 1982), Yamaha's market share of Polk registrations in Duval County has been well below both the Southeastern Region and the United States. In 1982, through the month of October, Yamaha's market shares in these areas of comparison were: United States 23.2 Southeastern Region 20.0 Duval County 16.4 Yamaha's market penetration, or share of total import sales, of 16.4 percent in Duval County is 3.6 percent behind its penetration in the Southeastern Region of 20 percent, and 6.8 percent behind its national market share of 23.2 percent. (Testimony of Lamprecht; P.E. 5.) Market penetration is also determined by Yamaha through population- per-dealer statistics. Based upon 1980 census figures, Yamaha has one dealer for every 139,155 people in the United States. In Duval County there are 287,350 people for each of Yamaha's two existing dealers, which is twice the national average. With three dealers in Duval County, the ratio would be one dealer for every 191,567 people, which is still substantially higher than Yamaha's national and regional penetration, and is an indication or explanation that Yamaha's market share in Duval County is lower than it is for the United States and the Southeastern Region because there are not enough dealers to serve the area. (Testimony of Lamprecht; P.E. 7.) Yamaha warranty registration records indicate that its dealers make most of their sales within the general area surrounding their dealerships. This is attributable to the shopping habits of customers; people prefer to purchase motorcycles and have them serviced from dealers which are convenient, close by, and readily accessible to where they live and work. In this case, the Protestant's sales experience is consistent with this customer preference. (Testimony of Lamprecht.) During the period from January 1, 1981, through August 31, 1982, Yamaha has determined that most of the Protestant's motorcycle sales occurred in the Southwest Jacksonville market area from the heavy concentration of population around its dealership. In 1982, through the month of August, the Protestant sold only three Yamaha motorcycles in the Northside market area out of a total of 140 Yamaha sales during that period, or 2.1 percent of its total sales. The Protestant's concentration of sales for the entire year 1981 showed the same pattern, and only 8.4 percent of its total sales were in the Northside market area. (Testimony of Lamprecht; P.E. 11 and 12.) Yamaha's warranty registration records show that during the year 1981, the Protestant sold 113 motorcycles in Southwest Jacksonville zip code areas which, spread over the total population in the area of 58,643, indicates a sales ratio of one motorcycle unit per 519 persons in the Southwest Jacksonville market area. (Testimony of Perry.) During the period from January 1, 1981, through August 31, 1982, Yamaha has determined that most of Turner's motorcycle sales occurred in the Southeast Jacksonville market area concentrated around its dealership. In 1982, through the month of August, Turner sold only ten Yamaha motorcycles in the Northside market area out of a total of 107 Yamaha sales during that period, or 9.3 percent of its total sales. Turner's concentration of sales for the entire year 1981 showed the same pattern and market area. (Testimony of Lamprecht; P.E. 9 and 10.) Yamaha's warranty registration records show that during the year 1981, Turner sold 103 motorcycles in Southeast Jacksonville zip code areas which, spread over the total population in the area of 181,982, indicates a sales ratio of one motorcycle unit per 1,767 persons in the Southeast Jacksonville market area. (Testimony of Perry.) Yamaha's warranty registration records further show that during the year 1981, Turner and the Protestant sold only 39 motorcycles in Northside zip code areas which, spread over the total population in the area of over 140,000, indicates a sales ratio of one motorcycle unit per 3,675 persons in the Northside market area. (Testimony of Perry.) The Protestant and Turner are not reaching the potential motorcycle market in the northern part of the city and, as a result, Yamaha representation and market share in Duval County market is inadequate. (Testimony of Lamprecht and Ewing.) ECONOMIC VIABILITY OF A NEW DEALERSHIP ON THE NORTHSIDE Turner now operates an efficient and profitable Yamaha/Suzuki motorcycle dealership on Beach Boulevard, and its sales during October, November and December, 1982, have been the best the dealership has had in seven years. (Testimony of Turner and Ewing.) Turner has been operating a Suzuki dealership on the Northside since September 1, 1982. Suzuki sales at that location through Christmas were within projections, and the business is operating on a break-even basis. Turner's Suzuki sales during this period were made primarily to customers living in the Northside zip code areas. (Testimony of Turner.) The average motorcycle consumer is a male, age 18 to 34, blue-collar worker, in the lower-middle to middle class. The Yamaha line is designed to capture a market for all age consumers. (Testimony of Lamprecht and Ewing.) The Northside has a population of over 140,000 persons, or 20 percent of the Duval County population. This population is essentially made up of middle or lower-middle income, blue-collar and clerical workers having a basic income of between $16,000 and $18,000 a year. This represents the backbone of the Duval County labor force and economy. The average family home in this area has a market price of approximately $30,000. All of these factors suggest that the Northside area has a good stable population of lower-middle income persons with purchasing power to buy motorcycles, and the area can be expected, like the rest of Duval County, to expand over the next ten years. (Testimony of Perry.) Retail sales studies made by Yamaha in the Southeastern Region establish that through the last quarter of 1982 there has been no change in retail sales from 1981 to 1982. (Testimony of Lamprecht.) Motorcycle registrations for Duval County for fiscal years 1977-1978 through 1980-1981 have shown a modest, stable increased trend consistent with the population growth, and such trend is expected to continue. (Testimony of Perry; P.E. 14.) The location of a Yamaha dealership on the Northside at the proposed Lem Turner location will not operate to reduce sales on the part of the Protestant or Turner. The dealership located in a presently unrepresented area will assist Yamaha in further penetration of the Duval County market. By increasing the visibility of Yamaha generally, the additional facility will increase demand and brand awareness for all Yamaha dealers along, with a greater degree of competition in sales and service. While the Protestant and Turner can offer Yamaha motorcycles to potential customers in the Northside Area, they cannot stimulate such sales as well as a specific dealership in that location could.
The Issue Whether Kawasaki Motors Corporation, U.S.A. (KMC) should be permitted to establish an additional franchised dealership for the sale of Kawasaki motorcycles, as Fun By Land and Sea, Inc. (FBLS), to be located at 3566 U.S. 92, Daytona Beach, Volusia County, Florida, pursuant to the standards established in Chapter 320, Florida Statutes.
Findings Of Fact Petitioner KMC is a licensed distributor of motor vehicles, to wit: Kawasaki motorcycles, and is authorized to sell to its dealers in Florida. Petitioner FBLS is an applicant for a Kawasaki dealership to be located at 3566 U.S. 92, Daytona Beach, Florida. Its principal is Jeffrey R. Bankston. FBLS proposes to be a multi-line dealership, carrying Ducati motorcycles, Aprilia motorcycles and scooters, assorted all terrain vehicles (ATVs) and other assorted accessories and merchandise in addition to Kawasaki products. Respondent DFM, the existing Kawasaki motorcycle dealer in Daytona Beach, Florida, is located at 480 Ridgewood Avenue, Holly Hill, Florida, which is 8.3 miles, by straight-line distance, and 12.5 ground miles from the proposed FBLS location. Its principal is Chris Gray. DFM also is a multi-line dealership, selling the following brands and products in addition to Kawasaki motorcycles: Honda, Yamaha, and Victory motorcycles, assorted ATVs, and personal watercraft and jet boats made by Sea Doo, Yamaha, and Kawasaki, and accessories and apparel of the named manufacturers. DFM has standing to protest, and timely protested, the proposed establishment of FBLS as a Kawasaki dealership, pursuant to Section 320.642(3), Florida Statutes. This proceeding is governed by Section 320.642, Florida Statutes, which sets forth the conditions for establishment of an additional dealership. Pursuant thereto, KMC may establish a new dealership if the existing franchised dealer, DFM, is not providing adequate representation of Kawasaki motorcycles in the subject community or territory. While the statute lists eleven factors which may be considered in making the determination that adequate representation is not being provided, the statute does not define "community," "territory," or "adequate representation." Information for the eleven factors overlaps in many ways. Therefore, except as noted hereafter, the eleven factors will be discussed together. For purposes of the instant proceeding, factor five, (coercion of a dealer by a manufacturer not to file a protest) is not an issue. See Finding of Fact 6. According to every standard KMC regularly uses, DFM was not meeting KMC's sales expectations at the time (1999-2000) KMC was deciding to add FBLS as a dealership. KMC does not consider DFM a "bad dealership," just one that is located in a market area that is too big for one dealer to effectively promote its product. The proposed new sales point for FBLS, commonly called an "add-point location," is located in Volusia County, Florida, which has more than 300,000 population, according to the most recent estimate of the University of Florida Bureau of Economic and Business Research. Statistical Information Due to DFM's protest, KMC re-analyzed the area served and the adequacy of DFM's representation by employing Mr. Thomas W. Longo. Mr. Longo holds a B.S. in system science engineering and an M.B.A. He has approximately fourteen years of hands-on experience with retail network analysis and network analysis of motor vehicle sales statistics. Mr. Longo was accepted as an expert in dealer network analysis.1 For his analysis, called an "Open Point Study," Mr. Longo relied on consumer behavior data commonly utilized in defining a "community or territory" (Comm/Terr), provided by the Motorcycle Industry Council (MIC), and demographic data from Claritas, which demographic data also is commonly used in the motor vehicle industry. The motor vehicle industry is unique in gathering data for all vehicles which are sold in the United States. This data permits examination of what consumers actually have done, as opposed to projecting what they may do in the future based upon a sample of less specific data. The consumer data used for Mr. Longo's analysis was provided by MIC, which collects the sales information from the major motorcycle manufacturers, assembles the data, and provides it back to the contributing manufacturers. This information includes certain attributes about the sale: when it was made, what type of motorcycle was purchased, and where the customer resides. MIC collects data on street-legal, on-road motorcycles, off-road motorcycles, ATVs, motor scooters, and dual-purpose motorcycles, which may be licensed and used on-road but which are often used for off-road purposes. Although MIC data contains information for all motorcycle products, only on-road motorcycles and dual-purpose motorcycle sales may be used for purposes of establishing adequacy of representation under Section 320.642, Florida Statutes. Mr. Longo's study used only such permissible data, which he then "broke-down" and cross-referenced in a variety of ways. A Metropolitan Statistical Area (MSA) constitutes an identifiable market area. A primary market area (PMA) represents the area, or identifiable plot, in which an existing dealer has, or a proposed dealer should have, a competitive advantage over same line-make dealers by virtue of the resident dealer's location. Within his overall assessment, Mr. Longo takes known and recorded motorcycle industry purchase behavior data and looks at it spatially. Part of the purpose of relying on actual purchase behavior patterns rather than making projections based on mean or median "demographics," such as population (numbers and age), income, employment, etc. factors, is to avoid marketing only to the mean or median of each demographic instead of marketing to all consumers on a geographic basis. Marketing to all consumers on a geographic basis is common in the motor vehicle industry and recognized by the case law developed under the controlling statute. Moreover, marketing of motor vehicles does not equate with most portable retail sales which are often marketed in single large multi- retailer locations such as malls, and for which buyer residence tracking is limited or impossible. In determining Comm/Terrs, PMAs, and markets generally, it is appropriate to consider the area assigned to the protesting dealer by KMC in its dealership franchise agreement, but consideration is not limited to that assigned area. Mr. Longo assigned each Kawasaki dealer, including Respondent DFM, a PMA with a radius of five miles around its dealership. This is the area typically indicated in the dealership franchise agreement. However, Mr. Longo considered this distance to be too small to constitute a reasonable area for analysis of market penetration. For instance, a five-mile radius would be even less than the distance provided by law for an existing dealer to qualify as a protestant against a proposed add-point dealer. Initially, each existing and proposed dealer in the area of the proposed add-point dealer plus the fringe, or surrounding area, was assigned the census tracts, as determined by the federal government after the most recent ten-year census, which are closest to that dealer or to the dealer who made the plurality of sales in the tract. All census tracts were assigned by distance, except for a few tracts in the Deltona area of Volusia County which were assigned to the dealer in Longwood, Seminole County, because the highly accurate past-sales information clearly showed that dealer had made the plurality of sales in those tracts. The area was then narrowed further. "In-sell" is a sale into one market by a dealer outside of that market. Nine Kawasaki dealers in St. Johns, Marion, Lake, Orange, Osceola, and Brevard Counties occupy the area surrounding the Volusia and Flagler County area. Consumer behavior data referred-to as "cross-sell" data, indicated that very few of the Kawasaki sales by these nine dealers were made to customers residing in Volusia and Flagler Counties. The vast majority of the sales into this area were made by protestant- Respondent, DFM. On this basis, all areas in the fringe surrounding Volusia and Flagler Counties were excluded from the Daytona Comm/Terr as defined by Mr. Longo. The Daytona Comm/Terr was defined as most of Volusia County (absent a few census tracts near Deltona) and Flagler County. At the present time, without any other Kawasaki dealer being located therein, DFM has a geographic sales advantage in the Daytona Comm/Terr. In a similar way, Mr. Longo used the assignment of census tracts within the Daytona Comm/Terr which are generally closest to DFM, and those generally closest to the add-point proposed for FBLS, together with consideration of the road network, to construct the PMAs. The "Daytona PMA" is the area in which DFM is located and in which it has a geographic advantage, and will continue to have that advantage, even if FBLS is permitted to open in the proposed location (add-point), which is the focus of this case. The "West Volusia PMA" is the area in which the proposed FBLS dealership would have a geographical advantage, if established. KMC, through Mr. Longo, defined the Jacksonville MSA as comprising four counties: Clay, Duval, Nassau, and St. Johns. KMC, through Mr. Longo, defined the Daytona MSA as comprising Volusia and Flagler Counties. Dr. Paul Mason, Ph.D., was accepted as Respondent DFM's expert in micro- and macro-economic analysis, research design, and statistical analysis of economic conditions and factors. He has never done any studies directly related to motor vehicle sales or utilized MIC data. He testified that Mr. Longo's Open Point Study and Mr. Longo's conclusions therefrom do not meet market sampling standards for projecting future sales, including but not limited to the absence of a statistical analysis of comparative market share data such as median, standard deviation, or range of distribution; the absence of a served market analysis; the absence of an averaging of adequately served markets; the absence of a segment preference analysis by dealer, county, market area, or state; the absence of separate age, income, and employment analyses; the absence of a chi-square analysis; the absence of a brand preferences analysis; problems with small sample bias; and the absence of a regression analysis, as those terms and functions are normally utilized for projection of future sales of other retail goods and services. However, Dr. Mason did not perform the computations he recommended, and his arguments that the necessary information was not implicit or "baked-into" the motor vehicle sales data was not persuasive. Respondent DFM challenged the data utilized by KMC's expert, Mr. Longo, and the methodology by which he applied that data to reach a conclusion that the Daytona Comm/Terr and Daytona PMA is inadequately represented. DFM also took issue with using the Jacksonville MSA for comparison with the Daytona Comm/Terr and Daytona and West Volusia PMAs. However, the boundaries arrived-at by Mr. Longo for each of these areas were not disputed, and no alternative Comm/Terrs, PMAs, or MSAs were offered by Respondent.2 Therefore, KMC's uncontroverted definitions of the Comm/Terrs, MSAs, and PMAs are utilized throughout this Recommended Order. Mr. Longo selected the Jacksonville MSA as a local market area which is adequately represented. Selecting a local market area establishes a "benchmark" for "adequacy of representation" against which the Daytona Comm/Terr and DFM's Daytona PMA can be assessed for adequacy of representation. Respondent attacked Mr. Longo's underlying data and methodology of selecting the Jacksonville Comm/Terr and MSA as deficient or misleading for purposes of assessing inadequacy of DFM's representation of KMC, on the same theories (see above) as it attacked his ultimate conclusions based upon his Open Point Study (analysis). However, despite Respondent DFM's cross- examination of Mr. Longo, independent evidence, and expert's opinion,3 it is found that the Jacksonville MSA is a viable benchmark for measuring adequacy of representation in this cause because the Jacksonville MSA is separate, local, adjacent, and does not overlap the Daytona Comm/Terr; it is not the highest- or lowest-served area; and it was tested against the state as a whole and against the nation as a whole, with adjustments for areas where there are no Kawasaki dealers at all; it is based on actual Kawasaki dealers' performance, adjusted for segment sales and popularity by calendar year to account for Kawasaki's model- mix change over time4; and insofar as possible, it removed from consideration those differences for which the dealer(s) or manufacturer cannot be held accountable. Finally, the Jacksonville MSA is a reasonably stable market for Kawasakis, based on the length of time the Kawasaki dealers there have been in operation, and in the Jacksonville MSA, Kawasaki has parity with three dealerships to three dealerships of Honda, Yamaha, Suzuki, and Harley-Davidson. In so finding, Respondent's expert's testimony has not been ignored. However, despite Dr. Mason's concerns, it appears that Mr. Longo's segmentation process took into account all of the necessary statutory components. Rather than looking at demographics and buyer profiles and comparing average customers to the rates at which motorcycles are purchased, segmentation is based on what those customers actually purchased. Therefore, the motorcycle sales data utilized by Mr. Longo implicitly includes ("bakes-in") those demographic components which Dr. Mason perceived as missing or unaccounted-for, even if Mr. Longo used a methodology different from that preferred by Dr. Mason. "Market share" represents the sales of a manufacturer, such as KMC, in proportion to the business available in a particular market. By measuring Kawasaki's penetration in each segment achieved in the Jacksonville MSA compared to the industry available in each segment in the Daytona Comm/Terr, an appropriate standard was established by Mr. Longo for the market share penetration KMC should reasonably expect in the Daytona Comm/Terr if KMC were receiving adequate representation. The Jacksonville MSA market share exceeds the Florida average market share for Kawasaki. Comparing either market share is acceptable under the statutory scheme and case law, but the Jacksonville MSA is a more accurate standard in this case than the Florida average for the reasons already set out and because the Florida average is composed of Kawasaki's performance in areas with adequate, inadequate, and no representation. By comparison, many areas of the Daytona Comm/Terr plus the fringe area are exceeding the Jacksonville MSA, and DFM has been increasing its share, with fluctuations, for three years, but the Daytona Comm/Terr as a whole is still only 66.7 percent of the Jacksonville market, or about two-thirds of what KMC should expect. DFM's performance is not adequate by the Jacksonville MSA standard in the Daytona Comm/Terr or in either DFM's Daytona PMA or in the West Volusia PMA, assigned to FBLS. Examination of the performance of Kawasaki as a brand in the Daytona Comm/Terr, utilizing the segmentation analysis, reveals that the efforts of all Kawasaki dealers selling into this area have failed to achieve a reasonably expected market penetration consistently during the period 1997 through the first eight months of 2000. Comparing the performance of Kawasaki in the Daytona Comm/Terr or DFM's Daytona PMA to either the Jacksonville MSA or the more conservative Florida average shows that Kawasaki has not achieved a reasonably expected market penetration. By either measure, the Daytona Comm/Terr's performance ranged between 50 percent of expected and 66.7 percent of expected, and much of this performance can be attributed to in- sell by other dealers outside the Daytona Comm/Terr. Similar patterns emerge when Kawasaki's penetration in the Daytona PMA and the West Volusia PMA is compared with expected penetration based on the Jacksonville MSA and Florida standards. Kawasaki's performance compared to the reasonably expected market share in the West Volusia PMA has remained consistently substantially below both the Florida and Jacksonville MSA standards for the period between 1997 and the first eight months of 2000. Oddly enough, Kawasaki's market penetration in the West Volusia PMA is slightly higher than it is in the Daytona PMA, where DFM is located. It is clear that DFM, the only dealer in the Daytona Comm/Terr, has not adequately represented Kawasaki even in its own PMA, but it is less clear why Kawasaki is doing better in the West Volusia PMA. The probable reason is in-sell.5 In defining the Comm/Terrs, MSAs, and PMAs, Mr. Longo considered actual past sales performance as controlled by the number of dealers, location of each dealer, and operation of each dealership, the three elements he perceives as elements of "the dealer network." A problem with the dealer network is the likeliest cause of inadequate representation. For example, the problem could be caused by an inadequate number of dealers, the manner in which the existing dealerships are being operated, or the location of the dealerships. The economic and marketing conditions in the area were reviewed to determine the most likely cause. There is a significant density of population in the area of the proposed FBLS dealership in West Volusia, which presently has no Kawasaki dealership which has demonstrated an ability to serve it. The whole Daytona Comm/Terr, as well as both PMAs, has experienced a significant household growth since 1980. These trends are predicted to continue through 2005. Industry experience has indicated that there is a sales component for motorcycles associated with household units. Demographic factors also indicate both the Daytona and West Volusia PMAs are each conducive to selling new motorcycles. They both contain a reasonable mix of upper and middle-income areas. The median household income of the new motorcycle buyer falls into the range around $50,000. Average annual employment in Volusia and Flagler Counties has grown by approximately 19,000 jobs between 1990 and 2000, indicating a generally healthy economy, and confirming the growth in the area. The current and future demographic factors indicate that the addition of a dealer is justified in terms of the economic factors and also indicate that inadequacy of representation is not due to demographic or other factors unrelated to the dealer network. In terms of growth of the total motorcycle industry, as reflected by the on-road and dual-purpose segment, there has been a substantial increase in the amount of the total industry sales available since 1996. This increase is present in both the Daytona PMA and the West Volusia PMA. The total motorcycle industry sales within the Daytona Comm/Terr have doubled from 1997 through August 2000, from 683 to 1,368. During this same period, DFM's sales into the Daytona Comm/Terr have increased from 43 to 69, an increase of 60 percent, while sales of other Kawasaki dealers to customers in the area have increased 300 percent, from 14 to 57. Respondent's suggestions that the stable and influx populations of the Daytona Comm/Terr are aging faster than the population of the Jacksonville MSA and that the Daytona market's increased employment statistics are somehow shaded by most new jobs being in the low-paying tourist industry as opposed to in industries paying over $50,000 per year involve comparing apples and oranges as applied to actual motorcycle sales made predicting potential sales to be made. In light of the growth in the total available motorcycle market in the Daytona Comm/Terr, measured by total industry sales, coupled with the demographic and employment characteristics, DFM's low market- share inadequacy is not due to local demographic or economic factors or lack of growth in the motorcycle industry, but is most likely due to DFM's inability to keep pace with the growth in its market. According to Mr. Longo's explanation, by examining the curve between zero and 100 percent of the marketing effort, the appropriate number of outlets in a market can be determined. For example, in the Daytona Comm/Terr, where Kawasaki is now solely served by DFM, Kawasaki has 10 percent of the franchises, whereas in the Jacksonville MSA, Kawasaki has 16.7 percent of the franchises. Kawasaki would be required to have two dealerships in order to have the same share of the franchises in the Daytona Comm/Terr that it has in the Jacksonville MSA. Therefore, in addition to DFM, the sole Kawasaki dealership present in the Daytona Comm/Terr at this time, a fraction of one more Kawasaki dealer is statistically necessary if Kawasaki's reasonably expected market share is to be reached in the Daytona Comm/Terr. The inadequate representation for Kawasaki in the Daytona Comm/Terr is not caused by population shifts or other demographic or income factors. Indeed, the Daytona MSA (Volusia and Flagler counties) population has grown at approximately the same rate as the Jacksonville MSA from 1990-1999, and has a higher predicted growth rate between 2000 and 2020. It is not unreasonable, based on the significant growth factors reviewed, to "round up" that need to add one more "real life" dealer at this time. Respondent's argument that one dealer should not be added because only "one-half" (actually seven-tenths) of an additional dealer has been statistically demonstrated as currently needed, based on figures now nearly one year old6, is rejected as unreasonable. The addition of one Kawasaki dealer would bring the Daytona Comm/Terr in line with other Florida markets in terms of available sales opportunities per dealer. See Findings of Fact 38 and 84. In the Daytona Comm/Terr, there are eleven competing motorcycle franchises. Yamaha and Honda have two each. Kawasaki has only one, DFM. DFM sells Kawasaki, Honda, and Yamaha motorcycles. FBLS' proposed location will be at a greater distance from DFM than the distance between the two existing Yamaha dealers and between the two existing Honda dealers, respectively. The addition of one Kawasaki dealer would bring KMC in parity with those manufacturers' presence in the Daytona Comm/Terr. The establishment of FBLS as an additional Kawasaki dealer is justified at this time based on the size of the market, measured in comparison to the Jacksonville MSA and the number of Kawasaki dealers and competitors there, and based on the comparative insufficiency of intra-brand competition (competition with other Kawasaki dealers) in the Daytona Comm/Terr. Inter-brand competition (competition with other brands) in the Daytona Comm/Terr also compares unfavorably with the Jacksonville MSA. The addition of a dealer in the Daytona Comm/Terr would increase convenience for Kawasaki customers in that area. The proposed location of FBLS in the West Volusia PMA is an area which is centrally located between the two major population centers in the Daytona Comm/Terr. It is very near the confluence of the major high speed thoroughfares in Volusia County, namely Interstate 95, Interstate 4, and U.S. 92. Mr. Ben L. Dyer, the Volusia County official in charge of the county's comprehensive plan, reported that a new highway was planned to intersect at U.S. 92 near the proposed dealership and run north to Flagler County, where a large Development of Regional Impact (DRI) also is planned. From a geographical standpoint, the Daytona Comm/Terr is large, approximately 60 miles from north to south. Even so, the driving distance between DFM and the proposed FBLS location is 15 and 18 minutes, compared to the 10-minute drive required to drive from one Honda dealership to the other and from one Yamaha dealership to the other in Daytona Beach. Locating FBLS as proposed would provide greater convenience to consumers, bring Kawasaki into greater parity with other manufacturers selling in the area, and still, presumably, have less impact on DFM than additions of new dealerships had to existing dealerships of other line-makes. The proposed add-point location will increase customer convenience by minimizing the distance which motorcycle buyers must travel to get to the nearest Kawasaki dealership. Respondent DFM offered no alternative proposed location for an additional dealership, but contended that KMC proposed to establish FBLS in the wrong place. DFM's contention appears to be that the add-point location is too far east of expected growth centers, particularly Deland and western and southwestern fringe areas of the Daytona Comm/Terr, to draw a supporting population of Kawasaki buyers. To this end, it was shown that there is a relatively low population in most of the two mile incremental, concentric circles (not census tracts) surrounding FBLS, due to conservation areas, dedicated lands, and burned-out areas. However, based on the evidence as a whole, it appears that although FBLS' proposed location on U.S. 92 (International Speedway Boulevard) is at the edge of current growth in the east Volusia/Daytona Beach area, growth of commercial development in Volusia County is generally towards the west. Further, although lands in the central part of the county have been set aside for conservation and other purposes and may not be developed, and although some of the area is set aside for only one residential dwelling per acre, the proposed FBLS location is very near the confluence of the three major highways which traverse Volusia County, namely, Interstate 95, Interstate 94, and U.S. 92. Therefore, the proposed location offers excellent accessibility to all areas of the Daytona Comm/Terr, including all areas of Volusia and Flagler counties. In addition, Mr. Richard Prioletti, the Daytona Beach planning administrator, testified that commercial growth was generally to the west, with the City of Daytona Beach being primarily "built out" and not available for additional development. Mr. Prioletti also confirmed that a Ford motor vehicle dealership and a Chevrolet motor vehicle dealership were relocating from downtown Daytona Beach to the intersection of Interstate 95 and LPGA Boulevard.7 Therefore, the fact that there may not be current substantial population within a short distance of FBLS' proposed add-point location does not eliminate it as an appropriate location, because it is appropriately located to serve all areas of the Daytona Beach Comm/Terr; appropriately located to capture in-sell now going out of the area to other dealers; and its business location is not contrary to the population and other similar business movements in the area. Respondent DFM did not give a clear estimate of the amount of lost business it would sustain as a result of the add- point dealership, either in terms of numbers of sales or financial impact, but its contention and its lay and expert witness testimony is that due to Mr. Gray's competitive nature and the allegedly unrealistic sales projections of Mr. Bankston on behalf of FBLS, a price war will ensue if FBLS is allowed to enter the Daytona Comm/Terr; that the price war will hurt DFM's business; and that the price war will drive FBLS and/or DFM out of business entirely, thereby unfavorably impacting consumers as well as the two dealers. The dealer franchise agreement between DFM and KMC specifies that the dealer is an independent businessperson and it is within the dealer's sole discretion as to how to operate its dealership. The same language will apply to FBLS if KMC is permitted to establish it. KMC is not obligated to, and has no way to, ensure either dealer's success or to prevent a price war if Mr. Gray and Mr. Bankston launch one. The only quantifiable evidence of an ensuing price war offered by DFM is that it currently has a 15 percent profit margin on the type of Kawasaki motorcycles cognizable by this statute, but would have to accept a margin of four to five percent to capture customers it is currently losing to in-sell dealers. Mr. Gray inferred thereby that he would have to make the same or a better deal to Kawasaki customers targeted by the proposed new dealership, based on FBLS's application information. His inference is not exactly a "price war," as commonly understood, and in terms of the impact that a new dealer may have on DFM, it is not highly significant, since DFM is willing to cut its profit margin to five percent now in order to capture in-sell. See Findings of Fact 89 and 92. Assuming, arguendo, that a price war ensues, customers would at least have a short-term cost benefit and no long term disadvantage if only one dealer does not make the competitive cut. However, for the following reasons, it is probable that the increased competition would not damage either DFM or the potential FBLS. Mr. Longo's estimate of sales of the proposed dealership, which is based on total industry motorcycle sales availability, rather than population, and based on 1999 data, shows FBLS as potentially selling 42 Kawasaki on-road and dual- purpose motorcycles in 1999 within 20 miles from the proposed add-point location. Mr. Bankston's application to KMC in 2000, estimated that FBLS would sell 150 new units from the proposed location. However, his estimate included 30 sales of Ducati motorcycles and 40 sales of Aprilia motorcycles and scooters, leaving 80 estimated Kawasaki sales. Mr. Bankston's estimate of 80 Kawasaki units included both on-road and off-road units and also included his estimate of the total sales of Kawasaki products he was going to make, not limited to those customers residing within 20 miles of FBLS's proposed location. Therefore, contrary to DFM's contention, it is found that Mr. Longo's year 1999 sales-estimate of 42 Kawasaki units cognizable by this statute to be sold within a 20-mile radius is not inconsistent with FBLS's 2000 sales-estimate of a total 80 Kawasaki units of all kinds to be sold to any location as set out in its dealer application. See Findings of Fact 3, 5, and 17. Gross sales loss takes into account only those census tracts which do not perform up to the expected potential for Kawasaki. Gross sales loss is the most appropriate manner to determine available opportunity, because it does not mask areas of loss with other areas of gain. For example, if the eastern half of a market was a certain number of units higher than expected, and the western half has the same number lower than expected, using a net sales analysis, there would appear to be no available sales opportunity for a brand. Mr. Longo's utilization of the gross sales loss concept avoids this masking. The gross sales loss in the Daytona Comm/Terr, as measured by Mr. Longo in those census tracts which did not reach the reasonably expected market penetration, was 65 units for the last full year measured of 1999. These 65 units presented a sales opportunity available to DFM, as did 40 units of in-sell, or 40 Kawasaki units sold by dealers outside of the Daytona Comm/Terr to customers residing inside the Daytona Comm/Terr. Utilizing the Jacksonville MSA as a standard, there was a total lost opportunity of 105 units which has not been gathered into DFM's coffers but which still would be available for DFM to compete for against FBLS, if FBLS is established as an add- point. If FBLS performs as expected in terms of its ability to sell motorcycles at various distance rings from its proposed location, it should not unfavorably impact DFM, or any impact need not be significant. The level of competition forced by the personalities of the respective principals of DFM and FBLS, is not quantifiable, but with 105 available units to compete for, it looks like a fairly level playing field. Even if the in-sell figure is removed, a gross loss (potential sales opportunity) of 65 units should provide good competition without unfair leverage by either dealer. Even if the more conservative Florida average standard is utilized to generate the potential gross loss, the gross loss of 49 units, plus the in-sell of 40 units, exceeds FBLS's projected total Kawasaki sales (not just sales of on-road units). At present, the Daytona Comm/Terr has 1,064 total available sales per dealer with only one dealer, DFM. Therefore, the proposed dealership will only bring the Daytona Comm/Terr in line with other markets. In terms of the availability of business for DFM and the add-point dealer to compete for, the addition of FBLS will place the Daytona Comm/Terr within the same range of available total industry sales per dealer as is currently the case in the Jacksonville MSA and other surrounding MSAs. Upon the credible evidence as a whole, it is found that the establishment of FBLS will benefit consumers by stimulating better prices overall and provide a more convenient place to shop for Kawasaki motorcycles and more convenient Kawasaki service without damaging either DFM or FBLS. The addition of a dealership would benefit KMC in terms of additional sales of motorcycles and market share. No evidence was presented that the existing DFM facility is inadequate or in any way inferior. In fact, a videotape and other evidence reveals an attractive, spacious, well-stocked location which should entice customers. See Finding of Fact 114. However, Kawasaki's market share deficiency demonstrates that something is preventing DFM from attaining an adequate market share for Kawasaki. The evidence as a whole suggests that the location is to blame. DFM presented evidence concerning Mr. Gray's total investment at DFM's existing location, including but not limited to its size, staff, expenses, shelf space, product lines and taxes. This investment was not broken down in any meaningful way as to Kawasaki products or related specifically to the Kawasaki dealer franchise agreement. DFM sells many other products. See Finding of Fact 5. Nonetheless, it is a substantial investment as to shared areas and items, which may not be easily separated. As to factor seven (proof that consumers would benefit by changes other than the addition of a new dealership), there was no persuasive evidence. Only Mr. Longo listed dealer- controllable generic methods which are known to improve market penetration8, but he listed these generally, and they were not specifically tied to what DFM could, or would, do. No nexus to "consumer benefit" was shown. It was not demonstrated that any of these generic methods were not currently being used or that increasing their use would be significant in this situation, and DFM did not commit itself to increasing any of these methods. DFM did commit itself to taking affirmative action to capture in-sells, that is, to avoid the loss of sales to Kawasaki dealers outside the Daytona Comm/Terr, specifically Orlando and St. Augustine (St. Johns County), but no specific strategy was expressed except for instructing DFM staff to be willing to immediately cut DFM's profit margin from 15 percent to five percent to combat in-sell.9 There was no evidence that DFM desired to relocate its facility location, but Mr. Longo advised against this as a means of one dealer attempting to cover an area actually requiring two dealers for effective marketing. Petitioner KMC, the manufacturer, does not suggest that DFM, the protesting dealer, has breached its dealership agreement. This eighth statutory factor cannot reasonably be read to include a breach by the manufacturer, but to the extent such a breach might have any bearing, it has been considered below under the heading, "Anecdotal Information." Anecdotal information Mr. Gray testified that whereas his other motorcycle brands, Honda and Yamaha, attempted to restrict the availability of product, KMC had not. How this situation resulted in the lower profit margin on KMC products that he was attempting to prove was not made clear, especially in light of his asserting DFM was willing to immediately reduce its profit margin on Kawasaki motorcycles to five percent in order to capture in-sell into the Daytona Comm/Terr. See Findings of Fact 76 and 89. DFM complained that it has not been able to sell Kawasaki police bikes since 1995. Various witnesses speculated that this was the result of a change in specifications by law enforcement; inferior product from the manufacturer, KMC; poor marketing of police bikes by DFM; or poor service by DFM. No proven causation emerged, and no statistic helped identify police bike marketing as a problem unique to DFM. Moreover, it is not unreasonable to expect that in the five intervening years, DFM would have revitalized its marketing share lost on police bikes. Respondent presented anecdotal, as opposed to statistical, information to the effect that the Daytona Comm/Terr (and inferentially DFM's PMA) is dominated by cruiser sales and that DFM has had difficulty marketing Kawasaki cruisers because they are inferior or outdated; because KMC does not offer financing plans which are competitive with other motorcycle brands' financing plans; and because KMC has warranty problems. Respondent represented that these were elements DFM, as the dealer, could not control. Assuming arguendo, the inferiority, if any, of Kawasaki's cruisers and that problems exist in marketing them, that variable would have been eliminated for statistical comparison by the Longo study, which only compared actual sales as opposed to making sales predictions based on past median behaviors. The statistical study actually shows the Jacksonville MSA as a bigger cruiser market than the Daytona Comm/Terr. Assuming arguendo, but not ruling, that product model inferiority, non-competitive financing plans, and warranty problems were somehow not "baked into" the Longo study like all other variables contained in past sales, these problems still would cut across model and dealer lines and not present marketing problems unique to DFM, its PMA, or the Daytona Comm/Terr. Likewise, it is of no consequence that the Longo Study did not give particular attention to the hours of service of various Jacksonville MSA dealers, as hours of operation are at the discretion of each dealer and a component of each dealer's actual sales accomplished, which sales data Mr. Longo utilized. Also of no consequence is the presence of a U. S. Navy base near one of the Jacksonville dealers. Respondent's witnesses contended, based on mostly stale experience, that naval personnel often shop there (near work) providing a Jacksonville MSA sales advantage. No information was provided as to what percentage of that dealer's customers were naval personnel who lived on-base or off-base, or who even purchased Kawasaki products. Nothing was demonstrated by Respondent's anecdotal evidence concerning the Navy base to legitimately vary the industry statistical data upon which Mr. Longo relied. Respondent DFM, the existing/protesting dealership is run by Chris Gray. Mr. Gray's family has been "in the business" for many years, and his wife, Christine, works in the dealership's office on a regular basis. KMC's district sales manager for DFM's location is Ken Couterier. As such, he services 45 dealers. He has been district sales manager for ten years in that location. Previously, he was a KMC district sales manager in Arkansas. Mr. Couterier's job is to maximize sales for KMC. KMC has found him to be an effective district manager in both locations. Mr. Couterier's district does not include the Jacksonville MSA. Therefore, Mr. Couterier had no effect on Kawasaki sales in that MSA. For purposes of this proceeding, DFM contends that Mr. Couterier has provided inadequate or subversive "support services" to DFM, due to the personal relationship between Mr. Couterier and Mr. Gray. The personal relationship between Mr. Gray and Mr. Couterier began to deteriorate in approximately 1992, when Mr. Gray's wife was having trouble getting rebates on Kawasaki's jet skis (not motorcycles) from headquarters. She approached Mr. Couterier for help while he was in Mr. Gray's office one day. While what was said is in dispute, the greater weight of the credible evidence is that Mr. Couterier said to Mrs. Gray something to the effect of, "Who held a gun to your head and made you become a Kawasaki dealer?" Whereupon, Mr. Gray heatedly told Mr. Couterier, in an intimidating manner, that he was out of line. Since that time, Mr. Couterier has not visited DFM on any regular basis, and attempts by third parties to heal the rift have failed. Mr. Gray eventually got his jet ski rebates, although response from the head office (not from Mr. Couterier) was admittedly slow. James Capps is the KMC executive who oversees Mr. Couterier and approximately 600 other KMC district managers in 22 states and the District of Columbia. He made the decision to add a new dealership. Mr. Capps has met with Mr. Gray and/or Mr. Gray's family members and sales manager on at least three occasions to hear their complaints concerning Mr. Couterier, which complaints involve anger over Mr. Couterier's handling of the jet ski rebate problem described in Finding of Fact 102, and their desire that Mr. Couterier call at the DFM dealership more often than he does. Mr. Capps refused Mr. Gray's request to replace Mr. Couterier as KMC's district sales manager and refused to provide Mr. Gray with a written job description for Mr. Couterier. It was not demonstrated how these refusals impeded KMC sales by DFM, or even if they did. It is not KMC's policy to require that any of its district managers visit each dealership on any regular schedule. If Mr. Couterier were to visit each of his 45 dealers on a regular rotation, he would see each one approximately every six weeks to two months, but that would not necessarily be effective management. Many of KMC's district managers' functions are performed by telephone. KMC provides its district managers with two telephones, two answering machines, a fax machine, and computers so that dealers can reach their district manager at all times. KMC also provides a telephone number for direct orders by dealers at all times. KMC will take any order for any vehicle at any time but will not guarantee delivery unless the order fits certain parameters. KMC "builds to order." Mr. Gray never complained that Mr. Couterier or KMC refused or failed to return his phone calls. Mr. Gray has never complained about motorcycle ordering problems with KMC. Mr. Gray has never complained about his cooperative advertising arrangement with KMC. Every year, Mr. Gray is issued a notebook outlining how he can take advantage of that arrangement. Mr. Gray does not always use all his advertising budget provided by KMC. Mr. Gray has never complained about extent or quality of KMC training pursuant to the dealership agreement. Mr. Gray never complained that he had trouble obtaining motorcycles from KMC. He even asserted that at all times he kept on DFM's floor one of every model motorcycle made by KMC, in every color. There was evidence that promotional events advertised by DFM were not well-coordinated by KMC and that the lack of coordination caused embarrassment to Mr. Gray and DFM. Mr. Gray's construction is accepted that the failure of celebrities to appear as promised by KMC made DFM "look like idiots," but no intentional act of KMC, Mr. Capps, or Mr. Couterier was demonstrated, and no nexus between these clearly egregious events and any DFM sales figures was shown to exist. Mr. Gray also contended that KMC breached its contract (statutory factor eight) with him and denied his opportunity for growth and expansion (statutory factor four) by failing to evaluate and review DFM's market share and evaluate it in comparison with other dealers and by not providing assistance in promoting the sale (assistance in marketing) of KMC products, but Mr. Capps and Mr. Couterier testified credibly that KMC provided DFM market share data monthly and more market share data at least two times a year at sales meetings. They did concede that no one from KMC sat down with Mr. Gray and specifically did subtractions and comparisons using that data; that no one specifically warned Mr. Gray that DFM was below KMC's expectation of a 15 percent market share; and that no one from KMC specifically advised Mr. Gray that he was experiencing in-sell problems. Mr. Capps, at least, felt these types of assistance should have been provided by KMC to DFM. However, with the exception of the in-sell problem, the other analyses could have been done by Mr. Gray himself from the data regularly `provided by KMC, and he is an independent businessperson. See Finding of Fact 75. Accordingly, it is found that KMC was in substantial compliance with its dealership agreement and that it was not demonstrated that anything Mr. Couterier or Mr. Capps did or did not do with regard to Respondent DFM accounted for DFM's sales not meeting KMC's expectations or a reasonably expected market share as demonstrated in the Open Point Study.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Highway Safety and Motor Vehicles enter its final order approving the establishment of Fun By Land and Sea, Inc., as a Kawasaki dealership at 3566 U.S. 92, Daytona Beach, Florida. DONE AND ENTERED this 4th day of June, 2001, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS 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 4th day of June, 2001.
The Issue Whether the application of Petitioner, Kay-Jo's Motorcycle Services, Inc., for a license to serve as a Vespa motor scooter franchised dealer in Boca Raton should be granted, on the ground that existing Vespa dealers are not adequately representing Vespa in the territory involved.
Findings Of Fact Based upon the evidence presented at hearing, the following facts are determined: The Parties Applicant operates a business at 152 Northwest 20th Street, Boca Raton, which sells and services mopeds, motorcycles, and motor scooters. It now seeks a Department license which would allow it to sell and service Vespa motor scooters at is existing business location. (Testimony of T. Hoover; P-10). On January 30, 1980, Applicant executed a standard dealership franchise agreement with Vespa. Since Applicant was already a licensed motor vehicle dealer, Applicant erroneously believed it could proceed to sell Vespa motor scooters without further licensing action by the Department. As a result, Applicant promoted and sold Vespa motor scooters at its Boca Raton location from February 1980 until August 1980 when the Department requested that it cease and desist such activity until final Department licensing action. (Testimony of T. Hoover; P-14, P-15.) Vespa was formed in 1975, and is the exclusive distributor of Vespa motor scooters, parts, and accessories in the United States. It has concluded that Florida is a key Vespa scooter market with high potential for increased sales, and seeks to increase the number of Vespa dealerships in Florida. It supports the licensing of a new Vespa dealership in Boca Raton. (Testimony of Beamer; P-6, P-15.) Del Rey operates an automobile repair and parts distribution business at 2532 Okeechobee Boulevard, West Palm Beach, Florida. It also sells and services a variety of mopeds and motor scooters, including Vespa, Motobecane, Puch, and Carabala; since 1978, it has been the only franchised Vespa dealership in Palm Beach County. It now protests the licensing of a second Vespa dealership in the county, as proposed by Applicant. Community or Territory involved. The Applicant seeks to operate a Vespa dealership in Boca Raton to satisfy what it perceives as a potential market demand for Vespa scooters in that area. The closest Vespa dealerships are located in West Palm Beach, 34 miles to the north, and in Fort Lauderdale, 27 miles to the south. Boca Raton is located 3-4 miles from the boundary between Palm Beach and Broward Counties and has experienced rapid population growth. (Testimony of T. Hoover.) The primary market territory which would be served by Applicant's proposed Vespa dealership encompasses Boca Raton, and communities within the immediate vicinity, including Deerfield Beach, 4 1/2 miles to the south, and Pompano Beach, 10 miles to the south, both in Broward County, and Delray Beach, 10 miles to the north in Palm Beach County. (Testimony of T. Hoover, K. Hoover; R-1.) Adequacy of Existing Dealers' Representation of Vespa in Territory Involved 7 The sole issue in this case is whether existing Vespa dealers are adequately representing Vespa in the territory involved, infra, which centers on Boca Raton and extends from Pompano Beach northward to Delray Beach. Neither Vespa nor Applicant contend that Del Rey has failed to comply with its franchise agreement. (Stipulation of counsel.) As compared with motorcycles, Vespa motor scooters are sold in low volume and targeted to a narrow segment of the motoring public. For example, in the year prior to Del Rey opening its Vespa dealership in 1978, 30 motor scooters were sold in Palm Beach County while 7,700 motorcycles were sold. Because of its limited appeal, Vespa dealers require a larger market area than would dealers of popular brands of motorcycles. There are only 27 Vespa dealers in Florida--which averages one dealer for each 2.481 counties. (Testimony of Beamer, Simonson; R-1.) Prior to the opening of the Del Rey Vespa dealership in 1978, there were virtually no Vespa motor scooter sales in Palm Beach County. Del Rey thus embarked on an aggressive Vespa advertising and market development program. It spent over $9,500 in Vespa advertising. Its market development plan envisioned that a loss would be sustained during the first three years of Vespa sales, due to intense advertising costs; a break-even point would then be reached, to be followed by profitable operations during the fourth and fifth years of Vespa sales. 1980 is the first year during which Del Rey's Vespa sales reached a break-even point. Del Rey contends that the opening of Applicant's Vespa dealership in Boca Raton will siphon off sales which it would otherwise enjoy, thereby significantly delaying its realization of profit from its Vespa sales. (Testimony of Simonson.) Although its dealership agreement does not expressly grant Del Ray an exclusive right to market Vespa products within a particular geographical area, Del Rey considers its market area to be Palm Beach County. Its advertising and marketing efforts have been concentrated within Palm Beach County. It is now one of the largest Vespa dealers within Florida. Because of Del Rey's efforts, Palm Beach County has a significantly higher Vespa "saturation factor" than any other county in south Florida: as of November 1980 registration showed one Vespa scooter for each 6,980 people. In contrast, Broward County has one of the lowest "saturation factors"--one Vespa for each 124,020 people. Although Vespa sales declined in south Florida from 1979 to 1980, Del Rey increased its 1980 sales to 60, as compared with 51 during 1979. The only other existing Vespa dealership in the vicinity is located in Fort Lauderdale. Its Vespa scooter sales declined from 69 during 1979, to 5 during 1980. (Testimony of Simonson; P-15.) Del Rey contends that it should have the right to sell Vespa scooters in Palm Beach County, to the exclusion of all others, because of oral promises to that effect purportedly made by two Vespa agents. Whether or not such promises were made, are not germane here. Del Rey admits that the promises were not placed in writing. And the Vespa-Del Rey dealership agreement expressly provides that it incorporates all understandings of the parties and supersedes all prior communications regarding the subject matter. However, the following testimony sheds light on Del Rey's opposition to the licensing of Applicant: [Attorney for Petitioner] Q: Are you objecting to Kay-Jo's [Applicant] having a dealership because Vespa has breached the [dealership[ agreement with you? [Rush Simonson, President of Del Rey] A: Yes. Not in writing. It is a verbal agreement. (Tr. 125.) Del Rey also indicated that if the Applicant was located 3-5 miles further south, below the Palm Beach County line, it "would not have any basis for an objection because I was not promised anything in Broward county." (Tr. 125.) (Testimony of Simonson.) Seventy-five to eighty percent of Del Rey's Vespa scooter sales are made to customers located in West Palm Beach and communities in northern Palm Beach County. During 1979, Del Rey sold only three Vespa scooters to customers in Boca Raton. (Testimony of Beamer, Simonson; P-2.) The Applicant sold nine Vespa scooters during the five to six month period during which it operated a Vespa dealership in Boca Raton during 1980. Of the nine customers, seven lived in the Boca Raton area, one in Pompano, and one in Boynton Beach.2 The Applicant also participated in promotional displays of Vespa scooters at malls in Boca Raton and Pompano Beach. Four hundred ninety-four written responses were received from persons indicating an interest in Vespa products. Applicant discovered an interest in and demand for Vespa products because of their superiority over competing products--such as Lambretta and Bajaj. It did not advertise or promote Vespa sales north of Boca Raton. Instead, it focused its sales efforts in the Boca Raton area, and communities immediately south in Broward County. (Testimony of K. Hoover.) The foregoing evidentiary facts support an ultimate finding that the existing dealers, Del Rey and the unnamed Ft. Lauderdale dealership, are not adequately representing Vespa within the territory and market area identified in Section II above. Although market studies and expert analysts are helpful in determining adequacy of market penetration, such evidence is not essential. Here, the evidence consists of comparative sales made by existing dealers and the Applicant in the territory involved. Applicant's sales, in Boca Raton alone, if annualized over a 12-month period, would total 14. During all of 1979, Del Rey sold only three Vespa scooters in Boca Raton. In sum, Applicant's promotional efforts and proximity to customers in the Boca Raton area resulted in almost a 500 percent increase in Vespa sales over Del Rey's sales in the same area the previous years. As for the unnamed Ft. Lauderdale dealership, it sold a total of only five Vespa scooters during 1980, so it is concluded that it does not adequately represent Vespa in the territory involved. (Testimony of Beamer, Simonson, T. Hoover, K. Hoover.)
Conclusions Petitioners have met the burden of proof imposed by Section 320.642, Florida Statutes, and established that the existing Vespa dealers serving the territory involved are not providing adequate representation of Vespa. Therefore, the application for a motor vehicle dealer's license should be granted.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Kay-Jo's Motorcycle Services, Inc., for a motor vehicle license be GRANTED. DONE AND ENTERED this 13th day of February 1981 in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of February 1981.
