Lincoln confers with dealers, restarts program for standalone stores

After extensive back-and-forth with its retail network, Lincoln has relaunched an initiative to persuade some U.S. dealers to build standalone showrooms, a move executives say is vital to improving the brand's sales and standing in the luxury market.

The Lincoln Commitment Program had been on pause since December in response to blowback from dealers worried about store size and the margin that would be withheld from those who didn't comply. The California New Car Dealers Association had publicly voiced concern and asked Ford Motor Co. CEO Jim Hackett to reconsider the demands.

Brand executives, working closely with the Lincoln National Dealer Council, have made the program more flexible on how big a showroom dealers must build, no longer tying store size to market location.

They also reduced by about 20 percent the margin withheld from dealers who don't separate their Lincoln and Ford stores, in order to lessen the gap between those dealers and the ones who comply.

"I think Lincoln went a long way toward doing something that was fair to the dealer body across the board," Tom Lynch, the dealer council's chairman and general manager of North Florida Lincoln in Jacksonville, Fla., told Automotive News. "I think they came out with something even better."

The brand is asking dealers to build showrooms that adhere to its new design theme known as Vitrine, a French word for a glass display case. The exterior of each store is defined by floor-to-ceiling glass windows that illuminate the vehicles inside at night.

Dealers have the option to build a two-vehicle boutique or a four- or six-vehicle showroom. Even the smallest boutique will cost millions of dollars, according to a source with knowledge of the requirements.

The brand also pushed back deadlines for dealers. The retailers have through January to decide whether to enroll in the program and until July 2022 to build the stores. The initial plan called for stores to be completed by July 2021.

According to a memo to dealers viewed by Automotive News, Lincoln is asking for a $20,000 enrollment deposit by Feb. 1 that will be reimbursed once the project is certified.

Lincoln declined to comment on how much the project will cost dealers.

The memo also noted that Lincoln dealers can earn margins of up to 2.75 percent per vehicle sold if they build the new stores, down from its previous offer of 3.5 percent that the California dealer association had opposed. Dealerships can earn payments tied to client experiences in addition to those awarded for the facilities.

Lincoln had targeted dual Ford-Lincoln retailers in the top 30 U.S. luxury markets, but it's now offering the bonuses to dealers outside those markets who choose to decouple the brands.

Dealers still can operate dualed stores but won't receive the extra money from the factory.

The California dealer association also criticized plans to withhold a co-op reimbursement of about $100,000 per year if dealers failed to create distinct names for their separated Ford and Lincoln stores. Lincoln said last week that stipulation is not specific to the commitment program and was part of its digital storefront rules.
The California dealer association did not immediately comment on the revamped program, saying it needed more time to gather feedback.

Lincoln said six dealers have opened Vitrine facilities and 10 more standalone stores will open in the next 12 months.

"We value our dealers' inputs and over the past several months we have listened and made a number of changes to the Lincoln Commitment Program that are reflective of their feedback," Lincoln President Joy Falotico said in a statement. "We are now moving forward with the program and remain committed to brand-exclusive facilities as it is key to our brand transformation by addressing the needs of luxury clients."

Lincoln said sales increase for virtually all dealers who build new stores. Retail sales at the 72 standalone stores open before the program was announced rose 48 percent from 2014 through 2017, compared with 18 percent for the brand overall.

Lynch said, "If we're going to be competitive in the luxury space, we need to be exclusive."