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Responding to Factory Requests for an Action Plan

Jason T Allen.

The steady year over year sales gains that occurred over the last several years may have slowed some, but factory activity regarding dealer sales performance has not. The most common factory activity comes in the form of meetings, letters, and assorted notices alleging that dealers are not meeting the factory’s sales requirements.  These notices often conclude with a factory request that the dealer submit an “action plan” describing how the dealer plans to address the alleged sales deficiency identified by the factory.  The question then becomes whether you should respond to the factory’s request for an action plan, and if so, what should the response contain?  The answer depends on several factors that will be unique to each dealer.

First, the dealer should determine if a response is required or merely voluntary.  Generally, unless the dealer has previously agreed to submit an action plan in response to a factory request or the dealer agreement contains a similar provision, a response is voluntary.

Second, if a response is not mandatory, the dealer should consider whether or not to submit an action plan.  Typically, and not surprisingly, the decision often turns on whether the creation and submission of an action plan would better position the dealer to respond to the factory’s concerns.

That decision often turns on whether a response that would satisfy the factory is actually feasible for the dealer to achieve.  For example, if there is no disagreement that the dealer should increase advertising and sales staff and those changes are feasible, the submission of an action plan that details how those changes will be implemented could be beneficial.  In that instance, the dealer would be responding with changes the factory agrees with and if the changes do not rectify the alleged sales performance issues, the dealer can rightfully point to its achievement of its plan and the manufacturer’s agreement with the plan.

In contrast, if the dealer is experiencing difficulty obtaining sufficient inventory to meet customer demand, the submission of an action plan that projects sales growth that would only be achievable if significant additional inventory was available could be problematic.  In this scenario, the dealer’s action plan may serve to satisfy the factory in the short term by projecting sales increases, but turn out to be an instance the factory can use later to show that the dealer did not live up to expectations.

In short, action plans can be a double edged sword.  If the factory has provided suggestions for the dealer to improve its operation and the dealer submits an action plan implementing those changes the action plan may be beneficial regardless of whether the plan was successful.  On the other hand, if the dealer overpromises and under delivers the action plan can actually be harmful regardless of if it was requested by the factory.

When evaluating a request for an action plan determine whether the plan is required, and even if it is not, evaluate whether the action plan would benefit the dealer or whether the action plan could ultimately be used against the dealer.

  • Determine whether the action plan is mandatory or voluntary
  • Identify whether the contents of an action plan are feasible
  • Avoid an action plan that is not obtainable and could harm the dealer later