The New General Motors Franchise Model?

General Motors has been reconfiguring its franchised dealer model. How will it look? What will be its impact on the dealers’ financial model? Where did this new franchise model come from?

For many years, GM dealers have, through sound business practices, made fortunes for themselves and their families. During this period, the anything but professional grade people at GM have watched the dealers thrive while they frittered away the revenue at their end through sloth and ineptitude. Up to now the GM management philosophy has been “God will provide.”

They are wrong. God does not reward sloth and ineptitude. General Motors is in bankruptcy. It is now announcing a new dealership franchise model. These are the same people who brought the company to its current circumstances. They believe that the dealers have been stealing from them and that dealer opportunism is to blame for the current circumstances, not their stupidity.

Accordingly one may now ask, are they intending by this new dealership franchise model to get even? Where did they get this new model?

We should look to the non automotive franchise industry to ascertain where the new GM dealership agreement model came from.

GM management looked there and saw agreements with large front end fees; continuing extraneous revenue streams called royalties and advertising fund payments; the ability to impose other terms from time to time that serve to transfer dealer net income upstream.

We should carefully observe whether this is the new GM model and the degree to which GM opportunism now degrades the investment worthiness of the GM dealership as something to consider. I think we will be in for some very sadly entertaining developments.

Will the GM dealers spot that this is what is in store for them? Will they just sign on the dotted line and march into franchise financial hell as did the franchisees of so many other franchise systems?

Le plus ca change, le plus c’est la meme chose.