DETROIT -- Ask automotive retail experts about manufacturer-mandated facility upgrades and you will find no shortage of opinions, says analyst Glenn Mercer.
Ask them to back their opinion with research, and you will find a shortage.
"Franchise economics have been studied well," says Mercer, an auto industry analyst for more than 25 years.
"What hasn't been covered much is automotive dealer franchise economics as they relate to the facilities, which is not surprising because the average dealer is about five businesses at once: new-car sales, used-car sales, parts and tech labor, financing to get [the deal] done and, in some cases, a body shop."
Mercer, a former partner in the management and consulting firm McKinsey & Co., was hired in October by the National Automobile Dealers Association to lead a study on the value of dealership showroom renovations.
Factory-mandated improvements have long riled dealers. To keep up with their respective manufacturer's ever-changing image to the consumer, the burden often falls on the dealership to finance the "image program."
In a fragile economy still emerging from the weakest U.S. auto market in nearly 30 years, the factory demands have hit some dealers hard. Some say the requirements have forced them out of business. But in such a competitive atmosphere, automakers have said the first impression they make could be the most vital.
"There's a lot of moving pieces to what we're looking at," said Michael Regan, vice president of industry affairs for NADA. "We're trying to get some answers there. Glenn's background certainly gives him the ability to understand not only the manufacturer's process but also the dealers."