Premium brands – like Jaguar Land Rover, Mercedes and BMW – could one day sit alongside each other in one showroom if the ‘multi franchising’ trend takes hold.
While not naming brands specifically, Vertu Motors chief executive Robert Forrester told Car Dealer that he thinks it’s only a matter of time before premium manufacturers come together under one roof.
Multi franchising, a term coined for coupling car sales for different manufacturers in one dealership, has been frowned upon in the past.
Car manufacturers like to set their own standards, insist on certain furniture and a specific look and ‘feel’ for their dealers – but it could be about to change.
Chatting to Car Dealer Live this week, in a video you can watch above, Forrester said he thinks in the next five years we ‘might surprise ourselves’ with the brands that agree to be sold from one single dealership.
He said: ‘My view is that even some of the premium manufacturers will look at this as they rejig their networks.
‘You might have a very large brand centre and you could have other spokes that could be multi franchise.’
Forrester revealed that he is already in talks with some premium brands about coupling them together at digital-led dealerships.
These sites would display a few cars and the rest of the brands’ ranges on huge digital screens.
Vertu Motors is the sixth most profitable dealer group according to our Car Dealer Top 100, with EBITDA of £40.7m.
The group has 147 sales and aftersales outlets across the UK, operating under the Bristol Street, Farnell and Macklin Motors brands. It represents 32 manufacturers including Audi, Mazda, Nissan, Vauxhall, Vollkswagen and Volvo.
Forrester added: ‘We’ve got manufacturers looking at three car showrooms with digital – big digital screens.
‘I have always been slightly amazed by how multi franchising wasn’t a feature of the UK and we have “standards” that stop multi franchising.
‘But if you went abroad they were multi franchising like it was in vogue and I’ve seen some really lovely multi franchising dealerships.
‘I think the economic reality will drive multi franchising.
‘I think we’ll see a decline in the overall number of rooftops of dealerships but actually I am not overly convinced the number of outlets will come down near the same.
‘I think outlet numbers might not decline, but rooftops will and you’ll have more under the one rooftop.’
Fellow listed dealer group boss Daksh Gupta of Marshall Motor Group has less dealerships in his portfolio but represents more premium brands.
Marshall Motor Group is the fifth most profitable dealer group in the UK, finishing fifth in the Car Dealer Top 100, with EBITDA of £43m for 2019.
Marshall has 113 dealerships and represents 22 manufacturers including brands like Audi, BMW, Land Rover and Mercedes.
Gupta isn’t so sure multi-franchising will be a thing for these marques.
‘This is probably one point Robert and I disagree on,’ Gupta said during the Car Dealer Live interview.
‘I think I broadly agree with the economics of what Robert is doing with multi franchising, but I must be honest when I joined this business we had 42 franchises and probably two thirds were dual franchise.
‘I have to be honest – I hate dual franchising with a passion.
‘I really, really hate it. My personal view – and it may be just the way we operate – but you end up becoming jack of all trades and master of none.
‘But I do accept Robert’s point that for smaller brands the economics of sharing one rooftop makes absolute sense.’
Forrester has made it clear that for Vertu multi franchising will become an important part of the group’s future strategy.
In the interview he explained how his site in Morpeth started out as a Ford dealership but now sells Honda and Hyundai models too.
He added: ‘Today it has a very successful Honda business, it’s still got a successful Ford business and Hyundai. If you add up the market shares it will work for us and it will provide throughput and secure that operation.’
I believe multi franchising dealerships has to be pivotal to sustaining profitability of many locations. I am delighted with the progress we are making in this area and which will be implemented by the end of 2021! Busy year ahead!
— Robert Forrester (@vertumotors) January 31, 2021
Forrester said as manufacturer market shares change dramatically, the representation they need will change too.
Ford and Vauxhall have both seen their dominant positions change dramatically in recent years and have both announced dramatic changes to their dealer numbers.
Car Dealer recently revealed Ford has 360 dealers across the UK, but has lost 40 in the last month.
Forrester added: ‘You’ve had some fairly significant shifts in market share that have happened in the last five years and these will continue over the next five.
‘You’ve got manufacturers wanting to reduce distribution costs and you look at some businesses that historically had a 10 per cent market share and they’re edging towards five – you come to the conclusion that there is not enough activity to sustain it.
‘We’ve got some very successful multi franchise outlets and it’s quite clear that actually having more franchises in an outlet, assuming you have the right management, is going to be a feature.
‘I think in the next five years we might surprise ourselves.’
Gupta isn’t quite so convinced – instead he thinks the number of manufacturers selling cars in the UK will diminish.
In recent years Infiniti, and more recently, Mitsubishi have called time on the UK and Gupta doesn’t think they’ll be the last.
He said: ‘I think there will be less OEMs. Some brands will not want to participate in emissions – we’ve seen in recent years Infiniti and Mitsubishi [go] and I think there will be more.
‘That will immediately take a big number of the outlets out and I also think you’ll see a situation where some brands who have far too many retailers and have not been fast enough to take action and desperately need to take it, we’ll see their numbers come down significantly.
‘I don’t see a premium brand sharing with say Mercedes.
‘I just don’t see that happening. For me you are buying into a brand experience, that’s what we do – we deliver our brand partners’ values. I just don’t see it.’
I have always considered there is a powerful retailer opportunity for new-car showrooms that are multi-franchise but market sector specific, for example sport-car specialists or luxury sedan, MPV or bread&butter, and then to consolidate those various specialist showrooms onto an estate development so the ‘backroom’ services can be consolidated, be that service departments, PDI workshops, administration, etc. That was the original conceptual ambition of the company I founded: ‘Motor City’ which was a new vehicle 4×4 specialist dealership (though I lacked the funds and/or acumen to make that bigger picture happen)!