Stricter franchise laws could hinder outsiders coming
into local territory
High fuel prices and a slow economy fail to disturb Keith Grumbine.
Franchise laws affecting motor-home dealers are another matter. The owner of Grumbine’s RV Center Inc. grew agitated as he tried to explain in an interview why state laws should be strengthened.
“It’s a very sore subject for me,” Grumbine said, throwing up his hands.
Grumbine and other motor-home dealers fear they are being squeezed out of an annual trade show in September in Harrisburg, one of the industry’s largest gatherings. New York dealers are taking up more and more space each year, the local dealers said.
“The next thing you know, there’s not going to be any local dealers in it,” said Grumbine. To protect the locals’ turf, stronger laws are needed, he argued. Grumbine’s dealership is in West Hanover Township, Dauphin County.
Grumbine, 46, has taken his complaints to the show’s sponsor, the Pennsylvania Recreation Vehicle & Camping Association. The Hampden Township, Cumberland County-based group represents dealers, manufacturers, campgrounds and others in the industry. He hopes to present his case to the association’s board at an upcoming meeting in May or August.
The association’s executive vice president, Rebecca Lenington, said Grumbine’s fears are inflated. Out of more than 50 dealers at the 2001 Pennsylvania RV & Camping Show, nine were from New York, she said. “I would think it would be very difficult to say that this show has been taken over.”
Grumbine agreed that the numbers might be small. But, he said, based on a walk through the show last year, New York dealers covered 40 percent of the floor space, up from an estimated 10 percent five years ago.
“It was like a New York show last year,” said Joe Miller, a sales representative for Stag-Parkway Inc., an Atlanta-based wholesale distributor of RV parts.
Held at the Farm Show complex in Harrisburg, the Pennsylvania RV & Camping show brings together dealers and suppliers. Then, doors open for consumers. About 25,000 people attend each year, some from as far away as Canada and Florida.
RV manufacturers lease display space and then pick dealers to sell different product lines. One dealer can sell several product lines.
First, dealers must buy manufacturers’ displays, which include a set number of vehicles. Manufacturers are enlarging their displays, so prices may be climbing higher than some small dealers want to pay, said Larry Mellott Jr., sales manager at Mellott Trailer Sales Inc. in West Lampeter Township, Lancaster County.
If local companies refuse to buy a display, manufacturers may choose larger dealers from New York or other states.
“It is a problem, but it’s caused by Pennsylvania dealers not stepping up to the plate,” said Mellott, 40. His family’s dealership had sales of $18 million in 2001, down from $22 million in 2000, largely due to the slow economy and high gas prices last spring.
In comparison, Grumbine RV had sales of $8.2 million in 2001, up from $8 million in 2000, Grumbine said.
At the RV show, Mellott traditionally represents the Holiday Rambler line, made by Monaco Coach Corp. of Coburg, Ore.
In 2000, the Holiday Rambler display included about 26 vehicles, Mellott said. His dealership bought them all. Last year, Holiday Rambler brought 36 vehicles.
Because Mellott’s sales were off, the dealership balked at adding 36 vehicles to its inventory. Rather than walk away, the company split the display in half with a New York dealer. “It turned out to be a smart decision,” Mellott said. Not everyone in the company agreed, he added. “We had the exclusive display for so many years, and then all of a sudden to be sharing it was just out of character.”
Mellott said his company had no problems with its New York peers.
Grumbine said such splits benefit New York companies because they gain entry, at low cost, to the Central Pennsylvania market. The New Yorkers can thus set lower prices, he said.
Out-of-state competition didn’t seem to hurt Grumbine at the 2001 show. The dealership’s sales goal was 20 vehicles. Grumbine sold 19, even though the event was held the same week as the terrorist attacks in New York City and Washington, D.C.
For Grumbine, the issue is fairness. He said he would back off if he had a chance to sell at a similarly big show in New York.
Moreover, Grumbine resents that local dealers are often stuck making unprofitable warranty repairs for Central Pennsylvanians who buy at the show from New York dealers.
Mellott said that such repairs, while money-losing, may be a chance to win new customers.
The solution, Grumbine said, is a stricter franchise law that makes it harder for manufacturers to bring outsiders into the territories of local dealers. The current state law has no teeth, he said, pounding his desk.
Ed Lerch, owner of Lerch RV in Armaugh Township, Mifflin County, agreed. “We have no franchise agreements,” he said. “We have sales agreements, which carry no clout.”
Larger dealers generally can prevail in winning space at the Harrisburg show, Lerch said. His dealership has annual sales between $5 million and $6 million. “I think the manufacturers sometimes are even bullied into it,” Lerch said.
Phil Ingrassia, spokesman for the Recreation Vehicle Dealers Association in Fairfax, Va., said laws vary from state to state. “In some states, you must be a licensed dealer to sell, no exception,” he said. “In others, you have reciprocity where other dealers can come in. It’s kind of a patchwork.”
Lenington of the state association said that Pennsylvania law allows in dealers from bordering states. Dealers backed the existing law when it was written years ago, she said.
Grumbine said he had no problem with the regulations until recently, when he saw how powerfully state rules protect auto dealers.
About two years ago, Grumbine displayed two Geo Trackers on his lot to show cars that people might use to tow trailers. The Geos, however, came from a dealer that didn’t have the exclusive franchise in Grumbine’s area. The dealer that did complained, and Grumbine said he had to remove the vehicles.
Around the same time, an Ohio-based manufacturer, Thor Industries Inc., chose a New York dealer over Grumbine to represent its products at the Harrisburg show, Grumbine said.
He hopes eventually to persuade state lawmakers that stronger protection is needed. “When you’ve got a smaller dealer that represents this market area, why should he be pushed out?” Grumbine asked.