He hadn’t, and the contentious subject of market areas underlines the uncertainty and confusion caused by the revised block exemption rules. Franchise market areas and territories no longer exist – they were outlawed as part of European Commissioner Mario Monti’s plans to shake up motor retailing. But speak to dealer group bosses and carmaker executives and most still talk about market areas.
So let’s get this right. EMH may open outlets in the region – it already has a site in Tetbury – but it has not been awarded any territory: and it is not buying Parklands Audi.
Audi has made clear its intentions to reduce the number of dealer partners in the network to 40 – currently about 55 – but has given Parklands Audi unequivocal backing. In fact, Flanagan is considering ways to expand with Audi, which include opening two standalone service and repair outlets in and around Gloucester and Cheltenham. “A TIV of 12,500 units, giving us a 3.5% share of the local market, puts us in a strong position versus any new competition,” he says.
“Cheltenham and Gloucester would not substantiate two full Audi centres. And plcs have a responsibility to their shareholders – they can’t afford to move into a new market and split the business. It wouldn’t be an effective use of their resources.”
That suggests the local independents, with their greater flexibility, could reverse the tables by taking the fight to the plcs: move into their market and pressure them to sell up to maintain shareholder returns.
“That could certainly happen,” says Flanagan. He has acquired a site near Tewkesbury, just north of Cheltenham, to house Parklands’ first authorised service centre. It’s expected to open next month, once Audi has finalised its contract requirements.
A second site will follow in the centre of Cheltenham, within 12-18 months. Not only will it boost aftersales capacity, the expansion will give the Parklands brand name greater presence in the market. Could the sites also sell used cars? “We have the space for about 80,” confirms Flanagan.
It’s possible the facility could also sell new cars once the European Commission scraps the location clause in October 2005, as widely expected. “I am an Audi long-term partner and will expand with Audi because we need the additional capacity now,” he adds. “But we will also look at other brands, in particular at the premium end.”
Flanagan set up Blade in 1995 after a motor trade career working for independents and plcs (including Lex Retail) across all departments – sales manager, aftersales manager, bodyshop, group operations. He took on VW and Audi in Gloucester after the former incumbent went bust and quickly found neither brand had enjoyed a particularly strong representation in the city. The priority was to build awareness, including heavy investment in local radio and press promotions. As an example of what the group faced, in the first 18 month it serviced more Vauxhalls than Audi and VW combined.
That strategy is reaping benefits. In the first quarter of the year, Audi outsold both BMW and Mercedes in Parklands’ area of influence.
In 1997, it was awarded the Cheltenham franchise, taking over from CD Bramall. After a great deal of wrangling with the local council and planning officers that delayed construction by four years, the company opened an Audi showroom on the Gloucester-Cheltenham A40 bypass.
Blade now employs 180 staff at two new car showrooms, a bodyshop business – Westgate Accident Repair Centre – and Blade Specialist Cars, which retails nearly-new high-performance and luxury models. It also has a three-acre storage compound and rents out a petrol forecourt to Esso and has a National Car Rental business. Last year it added a Honda motorcycle outlet in Abingdon, Oxford.
“Our aim is not to be the most profitable dealer group, but to be the best in the eyes of our customers and staff,” says Flanagan. “We are a people company. Our people work with me, not for me.”