almost double the industry average. Luxury franchises' rent to gross is currently 13.2%, 28% higher than domestic franchises despite luxury's significantly higher dealership gross profit (see Chart 4). I attribute this high level to the incredible demands for expensive facilities by most luxury OEMs. These demands not only seem tone deaf with current retail trends against brick-andmotor investing, but also economically extravagant and financially irresponsible (see Chart 4). In today's market, image requirements are increasingly pushing dealers to sell their franchises. These dealers are unwilling to invest the capital required to become facility compliant and would rather "cash out" than "lever up" on real estate. Unfortunately for dealership sellers, blue sky discounts for major image construction projects are on the rise in 2018's buy/ sell market. Buyers are increasingly wary of high rent factors and the risks associated with immovable expense structures and operational disruptions from major construction projects. "The new car model is completely broken right now because of the expectations of what these manufacturers have out there in the cost of these facilities. It doesn't pencil, the model doesn't work, and something's got to budge. And right now that's, in my CHART 1 CHART 2 Continued on pg. 20 D I G I TA L D E A L E R . C O M J U LY 2 0 1 8 19http://www.DIGITALDEALER.COM