Jim Peruto, president of Keenan Motor Group in Doylestown, Pa., is about to buy property to build a Mercedes-Benz dealership -- reluctantly. It will replace an existing store that cost $20 million to build just six years ago.
"Mercedes-Benz told me it was their most beautiful dealership in the world before they told me that I didn't conform," said Peruto, who plans to move his Honda store into the existing Mercedes facility.
Peruto says he will never see an increase in business to justify the investment in the new store, which meets Mercedes' Autohaus dealership design standards. But he feels he must spend the money to qualify for a per-vehicle incentive that can mean the difference between profit and loss.
"I am not happy," Peruto said. "But over the long run, I feel the Mercedes-Benz franchise is valuable and this will work out over time."
Because thousands of American dealers face similar dilemmas, 15 states are bolstering franchise laws to shield dealers from such demands by manufacturers, according to the Alliance of Automobile Manufacturers and the National Automobile Dealers Association. More states are expected to take up the issue in 2012. At stake are the hundreds of thousands, even millions of dollars, it can cost a dealership to satisfy a factory program.
"States are struggling with ways to try to level the playing field for dealers," said Mike Charapp, a dealer lawyer in McLean, Va., who calls facility programs the No. 1 priority among dealers when it comes to franchise laws. "We're going to see a lot more of this next session. This is a continuing burr under the saddle for dealers."
Automakers also expect more activity in 2012.
"It's obviously a trend that we're seeing in franchise bills," said Dan Gage, spokesman for the Alliance.
It's not unexpected. Automakers refocused on facility programs after they "took the pedal off the big push" for such improvements during the recession, Gage said. Even so, manufacturers still want to curb the restrictions and have lobbied against the changes in some states. Gage declined to name the state provisions that most concern manufacturers.