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Toyota dealers get new deal – and certainty

New deal: Toyota dealers have reached agreement with Toyota on a new franchise agreement.

Breakthrough agreement gives Toyota dealers a 10-year term and confidence to invest

Toyota logo17 Mar 2009

TOYOTA and its dealers have struck an industry-leading franchise agreement that will give dealers a decade of certainty and a say in the company’s use of dealer customer data.

The new franchise contract ditches the old three-year term with no automatic renewal and replaces it with a standard five-year term with an automatic renewal subject to performance.

The deal is likely to encourage dealers to invest more in their premises, making the Toyota distribution network even stronger.

And the agreement goes some way to repairing what might have become a fraught relationship between the manufacturer and its retail network.

Both sides have pointed out that the three-year negotiations started from the premise of mutual respect for the position of each other.

The result has been described as a ground-breaker by the president of the National Toyota Dealers Association, Steve Drane, of Noble Toyota, Chullora.

“For dealers, this gives them enormous confidence to invest in their Toyota dealership, knowing they have the time to recoup their investment,” Mr Drane said.

Mr Drane said the new agreement would also eliminate preferential treatment of some dealers.

“There is also additional protection in the areas of prime market area, termination without cause and specialised product lines,” he said.

“The new agreement has a strong emphasis on the dealer representing all of Toyota’s offerings.” One of the five dealers on the negotiating panel, Mark Fitzgerald, of Windsor Toyota, NSW, said the new agreement was a “crucial breakthrough” for dealers.

“It’s a first class agreement that dealers will not want to walk away from,” he said.

“It encourages investment because of the 10-year period. By contrast, the three-year agreements that characterise much of the industry are a disincentive to investment.” Mr Drane said the new framework would see the Toyota network change and develop over the next five to 10 years.

“It will assist in providing a more secure tenure and a more level playing field between dealers.” Mr Drane said a key part of the new deal was an agreement to share customer data.

“This has been an area of concern for dealers, but it is also an area of great opportunity for dealers and (Toyota),” he said “We believe through this agreement we can balance the needs of dealers to protect their goodwill in their data and realise efficiencies and opportunities from this agreement.” The agreement recognises that data is owned collectively (including by customers), and that its use will only occur after agreement is reached with the dealers’ council, which represents both Toyota and the National Toyota Dealers’ Association, Mr Drane said.

Toyota’s corporate manager of the franchise development division, Bernie Smith, said Toyota was “very happy” with the new deal.

It sprang out of a review of the previous, 20-year-old agreement, which had been modified 10 years ago.

“The principles of fairness and equity for all parties formed the basis of the process,” Mr Smith said.

“This included an understanding of the fact that what might be good for an individual dealer could be detrimental to the dealer network overall, so the interests of all parties had to be continually balanced.” “The new dealer agreement enshrines the recognition that, in our business, the customer is king, and any business agreement between Toyota and its dealers must respect that the customer comes first, every time.”

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