Braman Dealerships, of Miami, has sued BMW and Audi, saying changes to each brand’s incentive program amounts to unfair and illegal alterations to their franchise agreements.
At the core of the two lawsuits are claims that each automaker, as the suit against Audi puts it, “has unlawfully enhanced its control over dealer operations by unilaterally changing its contractual relationship with the dealers, imposing arbitrary business practices that reduced dealer profit.”
The incentive programs, the suits say, effectively alter how much dealerships pay for new vehicles and were imposed without the advance notice of franchise-agreement changes Florida law requires.
BMW of North America did not respond to requests for comment. An Audi of America spokesman said the company doesn’t comment on ongoing litigation.
The filings come on the heels of a similar New York lawsuit last month. In that case, an administrative law judge sided with Wide World Maserati, in Spring Valley, N.Y., which argued that when Maserati North America reduced holdback payments to the dealership on sold vehicles, the change qualified as a franchise-agreement modification.
In the lawsuit filed against BMW of North America, Braman Motors BMW of Miami and Braman Motorcars BMW of West Palm Beach argue that the franchise agreement was altered by a 2016 program which set out four new goals dealerships must reach to receive incentives. A dealership could receive up to 5 percent of the sticker price of each new vehicle sold if it met all four, effectively lowering the vehicle’s wholesale price, the suit says.
The first target was for used-vehicle sales. BMW’s franchise agreement speaks “almost exclusively” of new-vehicle sales and service, the suit states, and “mentions used-vehicle sales briefly and in passing.”
The second required each dealership to hire “BMW Geniuses,” who can answer product questions but cannot sell cars. That, the suit says, led to “customer dissatisfaction, lost sales and increasing dealer costs.”
Each store employed at least seven full-time Geniuses who “added little value to the dealership, as only one or two at a time are being utilized in their primary function,” the suit says, adding that Braman Miami spends “almost $350,000 and Braman [West Palm Beach] almost $250,000 per year to staff BMW Geniuses.”
The suit, filed Sept. 6 in the U.S. District Court for the Southern District of Florida, also said BMW planned two additional goals tied to bonuses, which were to take effect Sunday, Oct. 1. One would employ new methods of tracking the number of service customers relative to the number of BMW vehicles in operation in that market, and the other would track customer defections to other brands. The latter, the suit said, could penalize the dealership even if the customer bought a pickup; BMW doesn’t sell pickups.
In addition, the suit says BMW has demanded “broad access to Braman’s internal database of customer leads, sales information and service write-ups in real time” as a condition of qualifying for incentives. “BMW’s demands for access to Braman’s customer database directly violate Florida law, which prohibits distributors like BMW from requiring direct or indirect access to Braman’s internal databases,” the suit says.
Separately, Braman Audi and Braman’s Palm Beach Imports Inc. sued Audi of America over changes in its incentive program. The program is “deceptively described as voluntary ‘bonuses’ or ‘incentives,'” but “are actually unilaterally and coercively-imposed conditions set by Audi,” the suit says.
Among other claims, the suit, filed Sept. 5 in the same court, says Audi inflated sales targets for some dealers more than others. “At certain times, for example, Audi increased Braman’s [target] more than that of its closest competitors,” it reads.
Audi also is “coercing its dealers to purchase vehicles that they would not have purchased voluntarily” under a service-loaner program, the suit says. Audi expects its dealers to lease new Audis to serve as loaners from Audi Financial Services, but those vehicles are not eligible for any gross margin, incentive payments or holdback, the lawsuit says. Failure to take those vehicles can prevent a dealer from reaching its Audi-set sales objective, it adds.
The dealer is required to buy the vehicle at the end of the lease term. Audi does not permit those leases to exceed 12 months, and they “typically” are for six months, the suit says.
“Braman conservatively estimates that it has lost over $900,000 from various loaner vehicle expenses from 2013 through 2015 alone,” the suit says.
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