Digital Dealer - August 2018 - 15

incentives that can be qualified for have also significantly increased. Under the prior
program, a Mazda dealership with a dualed sales and
service operation, could still
qualify for all of the earnings elements. Now, with
facility type excluding dualed
dealers as a base qualifier
that has changed. A Mazda
dealership sharing sales and
service space with another
franchise cannot qualify for
ANY Brand Commitment
earning element monies
under this iteration of the
Brand Experience Program.
All other facility types (Retail
Evolution imaged, Exclusive
Sales and Service facility
and Exclusive Showroom)
must also meet the base
qualifiers but are treated
very differently under the
Brand Commitment earning element. The disparity between an Exclusive
Showroom-only dealer and
a Retail Evolution imaged
dealer, using average
Mazda vehicle MSRP, was
approximately $300 under
the prior Program but is now
over $900. The difference
between eligible incentive
money for an Exclusive
Showroom-only dealership
and an Exclusive Sales
and Service facility (but not
Retail Evolution imaged)
dealership is closer to $400
per vehicle.
Likewise, the Customer
Satisfaction earning element
has become much more significant. Dealers who score
80 or above and are in the
top 75% of dealers, qualify
for approximately $500 per
vehicle. This earning component may be reachable for

many dealers but for dealers
in a smaller volume market
the customer satisfaction
element may be unfair.
Dealers who do not sell a
large number of vehicles in
a given month commonly
have what is known as a
"small numbers problem."
If the dealership only has a
handful of surveys returned,
it only takes one or two

control (i.e. metropolitan
market with many BMW
dealers in relatively close
proximity) will have the tools
necessary to challenge this
portion of the BMW Added
Value Program. A Mazda
dealership that cannot justify
providing an exclusive sales
and service facility and/or
the Retail Evolution image,
because for example it is in

CONSIDERING THE
SLIM MARGINS ON
THE SALE OF MAZDA
VEHICLES, THESE
DIFFERENCES IN PER
VEHICLE INCENTIVES
WILL UNDOUBTEDLY
PROVIDE SOME DEALERS
A DISTINCT ADVANTAGE
IN COMPETING FOR
CUSTOMERS..."
unfavorable surveys to
torpedo the overall score.
Technically, this is known
as a statistically inadequate
sample size. Considering
the slim margins on the sale
of Mazda vehicles, these
differences in per vehicle
incentives will undoubtedly
provide some dealers a distinct advantage in competing
for customers over other
Mazda dealers.
The good news for BMW
and Mazda dealers is that
in many states an incentive
program component that is
not practically available to a
dealer is prohibited. A BMW
dealership that can demonstrate it cannot meet the service penetration requirement
within its assigned PMA due
to circumstances out of its

a smaller volume market or
one which does not have
affordable real estate available, does not have the full
Brand Experience Program
incentive amount practically
and reasonable available.
Similarly, if the Mazda
dealership meets the base
qualifiers but is unable to
attain the required customer
satisfaction score due to a
statistically insufficient sample or some other reason out
of the dealership's control,
the dealership will be able to
challenge the loss of those
incentives arguing they are
not practically available.
In a few other states, all
per vehicle incentives must
be paid in the same amount
to all dealers regardless of
qualifiers such as service
D I G I TA L D E A L E R . C O M

penetration. Obviously, in
these states, dealers who do
not qualify for AVP monies
or the earning elements
under the Brand Experience
Program due to the addition
of these new requirements
would be in a very strong
position to argue they should
receive the highest incentive
being offered to any other
dealer in the state. Lastly, in
some other states, an adverse change in an incentive
program qualifies as a "modification" of the franchise for
which a dealership can file
a protest. Again, in those
states, if a BMW or Mazda
dealer can demonstrate that
the changes to the AVP and
Brand Experience Program
cause the dealership to
receive less incentive money
than previously obtained
then it would have a right to
challenge the requirement
as an adverse modification.
Be mindful, however, that
there is typically a fixed time
period following receipt of
notice of the change in the
program within which the
protest must be filed or the
dealership waives its right
to protest. Dealers in those
states must be aware of
the deadline to file such a
protest.
RICHARD SOX is a partner
at Bass Sox Mercer. His
primary area of practice is
automobile franchise law. In
this capacity, Rich provides
counsel to dealers regarding
their rights and obligations
as related to manufacturers.
Rich represents dealers in
both manufacturer-sponsored
and judicial mediation, statemandated administrative
proceedings as well as in state
and federal court. EMAIL:
rsox@dealerlawyer.com

AUGUST 2018

15
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