A car dealership group is a company that owns and operates automobile dealerships, or franchises. The term can refer to all companies using the franchising model, such as Kia Motors America, Inc., Daimler AG (owner of Mercedes-Benz USA), and Toyota Motor North America, LLC. More generally the term refers to any business that sells goods through distribution channels.
The idea of car dealership groups originated in the United States in 1925 when Henry Ford established a chain of dealerships for his Henry Ford Company.
Since then, companies all over the world have developed similar structures to facilitate their distribution. Here at https://actknw.com/ has some more information about what exactly is a car dealership group.
Car dealerships can be owned through various means. Some car manufacturers provide dealerships to dealers in lieu of royalties; however, most dealerships today are self-financed and operated with the same customer focus as the manufacturer they work for.
The dealer may purchase the car directly from the manufacturer, or they may choose to purchase cars through a wholesale auto auction.
Car dealers and leasing companies need to equip their lots with display and selling space, finance and insurance facilities, and storage areas for unsold vehicles. Most of these services are centralized on one or more sites called sales complexes.
A sales complex is a multiple-story building that houses all of the above facilities under one roof. Sales complexes can also be constructed as modular units in which each element is added on as needed. Car dealerships also require smaller buildings that house only one of these services.
The implementation of car dealership groups generally follows the implementation of the franchise model. The franchisee receives exclusive rights (usually on a geographical basis) to sell company products or services within that territory. The franchisee pays an initial fee, plus ongoing royalties and advertising expenses.
There are two distinguishing characteristics of car dealership groups: they require large capital investments, and they rely on close cooperation between the manufacturer and the dealer (to maintain brand consistency).
- The first characteristic is necessary because manufacturers’ sales forecasts for new vehicles are often too optimistic, which results in unsold vehicles sitting on dealers’ lots at the end of each model year.
- The second characteristic requires the cooperation of the manufacturer and the dealer as they search for dealers that will accept their products.
Many car firms have established dealer groups to overcome these obstacles. Bonhams has done this for Jaguar, Land Rover, Bentley, Rolls-Royce, and Porsche automobiles.
Restaurants typically operate under the concept of franchise model. However, there are some exceptions to this rule, the most notable being McDonald’s Corporation which operates its own chain of restaurants called McDonald’s System Restaurants (MSRs).
People who read the blog may be buying or selling a car soon, or they may just be curious about what goes on behind the scenes at car dealerships. Luckily, we put together this post all about exactly how a dealership group actually works!
You should also know, however, that many dealerships are independently owned and operated (meaning they don’t belong to a “dealership group”) – so this post should not be taken as an implicit endorsement of any specific business.
We hope you find it helpful!
1) Ever wondered what makes one franchise different from another?
It’s not just the number of stores in each location. For instance, there are fewer plants in the “A” group than there are plants in the “D” group.
For example, 26 plants are located in the “A” group.
And 24 plants are located in the “D” Group.
2) Why do some dealerships have more stores than others?
Some franchisees have excellent locations that demand more investment than others – like New York City it is difficult to sell cars to wealthy people because they don’t all want to be seen buying cars where they live (To many buyers it’s an embarrassment to be seen with anything but a Cayenne or Rolls Royce).
Other dealerships are lucky enough to have low-cost locations that allow them to invest more in their stores.
3) Back in 2000, there were 12 “A” group dealerships.
Why the drop? The “A” group has suffered from too much investment, which has led to declines in sales and profit. Many of these franchisees have closed down their locations one by one or shifted into a multitude of subsidiaries – sometimes they even left the car business altogether!
4) The “D” group wouldn’t be able to function without its dealerships either.
The “D” group is the only one of the 3 groups that has absolutely no franchisees. They are entirely franchised. There are more of these franchised dealerships than A or B group dealerships!
5) For some reason, more of the “B” group stores have closed their locations recently!
As of last count, there were just over 67 plants in the “B” group – 28 less than there were 10 years ago. Others have already declined to less than half their original number. And more plants may close in the near future as well.