Becoming A Harley-Davidson Dealer

(Comment September 2022: This is an interesting story from 2017 that marked perhaps the last truly strong point of optimism in dealership creation. Policaro Harley-Davidson exited the Harley-Davidson marketplace only a few year later having opened one of their two planned locations. Sadly, many other smaller market and a few large market Harley-Davidson dealers followed suit. Of other dealers mentioned in the story, Kane’s Harley-Davidson in Calgary left the Harley fold to become an independent dealer of used bikes, parts and accessories. The Barnes Group added to their Harley-Davidson dealers in Alberta after purchasing Heritage Harley-Davidson in Edmonton. Barnes also had a foray into other brands after buying Action Motorcycles in Victoria, a dealership selling Yamaha, Honda, Kawasaki, KTM, Husqvarna among other brands.

Also interesting is the plan Harley-Davidson announced in 2017. Were those goals achievable or overly optimistic? What of the two plans that have come since that plan? It is always good to have a plan but, more importantly, a plan that works.

What has not changed, other than to accelerate, is the consolidation of dealerships into fewer and fewer larger corporations. It may be one of the only ways to streamline expenses and gain economies of scale. Is this a good outcome? That has become irrelevant as in many cases it may be the only way forward.)

All In The Family

Harley-Davidson has been selling motorcycles in Canada for over a century. But on this important anniversary The Motor Company has announced a 10-year plan that will be spearheaded by a new generation of Harley-Davidson dealer.

Even as Harley-Davidson celebrated its 100th anniversary of operations in Canada, a new trend has clearly emerged in The Motor Company’s business model. Increasingly, it’s possible to see a pattern of consolidation in which H-D stores are now being built or purchased by corporate entities that are much larger than classic first-gen mom-and-pop style dealers. The United States is peppered with examples such as the Revolution Motorsports Group, which picked up its sixth Bar & Shield outlet with the acquisition in early May of Alabama’s Mobile Bay Harley-Davidson.

Often now, the new breed of Harley-Davidson dealer is an established auto group that may not have any true emotional ties to the brand but does bring an enviable track record and the leverage of economy of scale to the business of selling vehicles.

Remove emotion from the equation. From a practical perspective the big difference between operating an auto dealership and owning a Harley store is volume. If a successful H-D outlet sells, say, between 300-600 new bikes per year, that number is still far below what any good auto dealer moves in the same time frame.

In Canada, the Barnes Wheaton Auto Group has six locations throughout the province of British Columbia, and three are Harley-Davidson stores. Last fall, Pfaff Automotive Partners added to its portfolio of brands that includes BMW, Porsche, and McLaren when it purchased Davies Harley-Davidson located in Richmond Hill, Ontario.

And consider the Policaros of Toronto—Basil, Paul, and Tony—who emigrated from Italy to Canada in the mid-1960s, found employment in the auto repair business, and eventually parlayed their entrepreneurial spirits, Old Country work ethics, and intense loyalty to each other into a brand. Today the Policaro Automotive Family owns multiple dealerships in the GTA selling high-end marques such as BMW, Lexus, and Porsche.

Respected in the community and in business, the Policaros are a success story by any metric. What they don’t have though is a motorcycle background or any two-wheel experience. Yet, the Policaro Automotive Family is precisely what Harley-Davidson Inc. is looking for. Indeed, a press release issued from that group in April confirmed it has added the Harley-Davidson brand to its roster and will soon open two stores, both of which are currently under construction: Policaro Harley-Davidson Oakville and Policaro Harley-Davidson Brampton.

This rising new order may not be an entirely welcome prospect for traditionalist customers who rather liked things the way they were, but from the corporate perspective of Harley-Davidson, decisions had to be made to overturn a decade of declining volume sales. Like most major OEMs, it’s been a tough ride for Harley-Davidson, which posted record high global shipments of 350,000 units in 2006 but watched that number fall in increments to about 262,000 units worldwide by 2016. The numbers for the first quarter of 2017 aren’t much cheerier: worldwide Harley-Davidson retail motorcycle sales were down 4.2 per cent compared to the same period in 2016.

The 2017 Harley Plan

But in its Q1-2017 statement the company presented a long-term strategy to combat this downward trending pattern. It’s a 10-year plan through 2027 focused on five objectives:

Build two million new Harley-Davidson riders in the US

Grow international business to 50 per cent of annual volume

Launch 100 new motorcycles

Deliver superior return on invested capital for Harley-Davidson Motor Company (S&P 500 top 25 per cent)

Grow the business without growing its environmental impact.

Objectives 1-3 of that plan obviously raise a number of difficult questions.

Even by Harley’s normally prolific standard of new model releases, it’s hard to envision 10 per year for the next decade. Without doubt the upcoming era will see entirely new platforms of liquid-cooled, smaller displacement, and possibly alternative energy vehicles. Today’s Street platform is certainly just one insight to new models yet to surface.

But especially difficult to grasp is the specification for millions of new customers. Where are they supposed to come from? Like most manufacturers, Harley’s growth plan includes somehow luring the elusive “youth demographic” and to that end there are a number of outreach initiatives largely driven by social media campaigns. On the Facebook page of Barnes H-D for example, viewers are encouraged to follow the exploits of two young female bloggers as they experience life as new riders. Harley-Davidson has also crowdsourced design concepts—again through social media—and makes appeals to a wider spread audience through events such as the dealer-hosted Garage Parties, which are exclusive to women.

Some Harley-Davidson dealers, such as Kane’s H-D in Calgary, feature a Harley-Davidson Riding Academy that is intended to create the prized “new rider.” For $600, the prospective student is put on a Street model as part of the process and learns how to ride a motorcycle from scratch. Whether efforts such as these are enough to spawn two million new Harley-Davidson enthusiasts in the next 10 years is open to debate.

In the United States, there’s been a push by Harley-Davidson to expand its customer base by reaching out to young adults (18-34) in African-American and Hispanic populations.

The company has enjoyed at least some success in this regard. According to one study, sales to outreach customers have outpaced sales to the core customer base for the fifth consecutive year in 2016, with purchases of new H-D motorcycles by that demographic hitting a compound annual growth rate of five per cent between 2010-2016.

With a stated intent to dramatically grow business in foreign markets Harley-Davidson does have a base to work with, including a plant in India where the Street 500/750 models are assembled. According to the company’s reporting, internationally, there were 176 new dealers added between 2008-2015 and in 2015, 36 per cent of its retail motorcycle sales were in international markets.

So, with significant growth projected (or at least on the wish list) for the decade to come, Harley-Davidson needs to repurpose its worldwide network of approximately 1,500 dealerships. Essentially that means upping the game of individual dealers though this is not a new concept for many. The Harley dealer network faced a similar challenge nearly 20 years ago when stores were mandated to a uniform look with specific signage, floor space and layout, and inventory. For many dealers, this translated into an investment of millions of dollars either in the wholesale revamp of their existing structures or the construction of entirely new ones. Some dealers were priced out of the game while still others received notification that their stores would no longer be official H-D outlets. It was a tumultuous time.

Social media and new rider programs aside, it will be the mandate of the Harley dealer network to sell, sell, sell as never before and few can rise to that task better than savvy auto dealers with long histories of running polished operations moving marquis lines.

“We embody the requirements that Harley-Davidson is looking for [in a new dealer],” says Francesco Policaro, who was brought into the auto business at an early age by his father Basil and today is the highly regarded general manager of Porsche Centre Oakville, and front-line spokesman for the pending Policaro H-D retail outlets.

A polite, soft-spoken man, Policaro is not being boastful in this claim but merely expressing confidence that with the family’s long experience, and its 540 combined staff, the Policaro Automotive Family has what it takes to move the Bar & Shield brand forward with a new generation of clients while remaining “mindful of the core customer.” To help get there, they are currently head-hunting approximately 85 unique individuals to staff their H-D stores and bring the necessary expertise to the sales and service departments.

This is where the economies of scale enter the discussion. Larger groups such as the Policaros are able to spread the human assets of their operations around in tactical ways that the mom-and-pop stores of old never could. The accounting talents on the auto side for example will be shared assets with the new motorcycle branch. Service and sales, systems and procedures and the softer “tribal knowledge” acquired through the years of selling fleets of four-wheel vehicles will theoretically benefit the managers of the upstart Harley stores.

Policaro says neither he nor anyone in his family has much history with motorcycles, and that the allure in acquiring a Harley-Davidson franchise was in “aligning ourselves with a leading brand.”

The Policaros weren’t interested in a motorcycle dealership, per se, but specifically in a Harley-Davidson franchise because the potential is there for far greater gross margins on the sale of new product than even any luxury car can bring.

In keeping with the Harley-Davidson dealers forward-facing vision, the Policaros are on point in simply all regards as they fill what has been a gaping hole in a critical market. They bring sharp business acumen, a long history of success moving high-end product, they have the social chops to communicate effectively with the GTA’s broad ethnic mix and they’re sufficiently well-heeled in terms of infrastructure and liquidity. Though the company does not charge a franchising fee as such, the company’s 10-page Harley-Davidson Dealers Ownership Policy does mandate two important financial requirements:

$2,000,000 net worth

$1,000,000 in liquid assets

The family also owns the properties on which the new Harley dealers are being built—so there’s that.

Famously, it was the Deeley family of Vancouver—Fred, Fred Jr. and grandson Trevor—who served as the Canadian distribution beachhead for the brand after Fred Sr. began selling Harley-Davidsons from his small Granville Street bike shop in 1917.

Over the decades “family” has remained an essential part of Harley-Davidson branding. It’s well known the founders of the Milwaukee firm were themselves childhood friends and brothers, hundreds of dealers across North America have typically been family-owned and operated affairs, and successive generations of riders have been inculcated with the dogma of “brotherhood.”

Countless ad materials from the company’s earliest days feature touching home and hearth scenarios where a Harley-Davidson motorcycle is portrayed as a central family member. The bikes themselves are grouped into ‘Families’ as opposed to lines: e.g. the Sportster Family. This unshakeable sense of family has taken more than a century of careful fostering for Harley-Davidson to build.

Today, as the company refocuses its network of Harley-Davidson dealers to facilitate faster, more polished growth, Auto Groups have become the newest family members. Their presence at the table will surely bring change to the house. What remains to be seen is how they will also change the culture of the brand.

Motor Company Responds

We contacted Milwaukee to ask Harley-Davidson PR person Matthew King if he could speak about the growing trend of auto groups in the dealer network, and he responded with this:

“Harley-Davidson dealers come from all walks of life and business backgrounds and we have found that there is no single factor or experience that makes a successful dealer. Our goal is to select the best operator for the specific location and we focus on an overall set of criteria when evaluating any potential new dealer, including passion for our brand, understanding of how to deliver a great customer experience, business and management capabilities, financial means, and partnership fit.

While we do have some dealers in the US and Canada with automotive background, we also have dealers with a wide range of business and entrepreneurial backgrounds in many other industries. This diligent process is just one reason why we believe we have the best dealer network in the industry…”

by John Campbell Canadian Biker Issue #331

BACK TO THE MOTORCYCLE GRAB BAG

Keep independent motorcycle journalism alive! If you found this article interesting or useful, please consider sharing.

All In The Family

The 2017 Harley Plan

Motor Company Responds

BACK TO THE MOTORCYCLE GRAB BAG

Related Stories and Pages: