Talking Points on the Franchise System (Updated)
NADA STATEMENT: The National Automobile Dealers Association (NADA) supports a state’s right to control how new vehicles are distributed, sold and serviced in their states and to enact licensing laws to protect their citizens. The franchise network promotes public safety and instills confidence in the consumer that there will be someone there when help is needed. State governments require the dealer to invest in brick-and-mortar facilities to ensure there is an independent franchised dealer available to car owners for the life of the vehicle, not just at the point of sale. Buying a car on the Internet is not like any other product. When you have a problem with your iPad, for example, it affects only you. When you have a problem with your car, it affects you and the driving public. It’s a matter of public safety.
Key Messages:
1. It’s up to the states to control how new vehicles are distributed, sold and serviced. States should decide who is licensed to sell cars to consumers. States have the right to license many important retail industries, from alcoholic beverages to eyewear.
2. When it comes to auto retail, one size does not fit all: states regulate the auto retail marketplace differently. Some allow automakers to sell direct, while others require a local licensee.
3. For more than 100 years, automakers have contracted with franchised dealers to sell and service their vehicles because it’s the most efficient and cost effective option.
4. Ford and General Motors tried owning their own dealerships and failed. Factory stores do not deliver better customer service and they do not reduce customer cost. Auto dealers’ total investment in land, equipment and facilities exceeds $200 billion. Without the franchise system, auto manufacturers would shoulder these expenses themselves.
5. Most buyers value a combination of online service, personal service and physical locations over standalone web distribution, says the Harvard Business Review. That’s what franchised dealers provide every day.
6. Consumers win when they are served by multiple retailers who compete for their business. (A Ford dealer’s biggest competitor is usually the other Ford dealer down the street.)
7. Franchised dealerships are vital American businesses that are at the heart of our economy, and are the backbone of communities. Dealers also employ nearly 1 million Americans, and provide stable jobs that can’t be shipped overseas.
8. Franchised auto dealers are projected to sell more than 15 million new cars and trucks this year, and that includes electric, natural gas, hybrid and other alternative technology vehicles. Auto retailing is a leading factor in America’s economic recovery.
July 2013