By Paul Rachwal
Monday, Mar 17th, 2008 @ 8:14 am

As part of its Image USA II architectural plan, Toyota is asking owners of older dealerships to renovate their shops or risk shorter franchise renewal contracts. The majority of franchise owners are not happy with the idea, as there is not enough incentive to spend millions in upgrades to their store. Toyota reasons the expanded dealerships are necessary to sell and service the growing numbers of its cars on the roads today and in the future.

Typical six-year franchise contracts are becoming two- and six-month contracts, down from two years last year, in cases where dealers are slow to adopt Image USA II, according to Automotive News. “They give you short-term contracts until you are in compliance with what they want you to do,” said a Toyota dealer who wishes to remain nameless. But Toyota executives maintain other factors are involved in “provisional†renewals, including sales performance, working capital and customer service ratings.

Under the plan, dealers are expected to install new furniture, a customer lounge that includes wireless Internet access and flat-screen TVs and a new front entrance that prominently displays the Toyota logo and dealer name, as well as more square footage in both sales and service facilities.

Image USA II, introduced in 2004, is expected to cost a dealer around $1.5 to 2 million as a minimum, or about $150 per square foot, with costs that can soar to over $20 million if relocation is called for, as in dense urban areas. In return, Toyota is offering dealers a more generous allocation of hot-selling models. This may not be enough, as sales are down across the board, with Toyota and Scion sales 1.9 percent lower than they were in the same two-month time period last year. Furthermore, dealers are concerned Toyota is taking a general, all-encompassing approach as opposed to being concerned about individual dealership issues or problems.

Toyota reasons that since the number of cars sold per dealership has increased by over 32 percent since 2000, it needs to have larger dealerships to accommodate them all. Dealers who have made the change-over report increased sales and staff and owner loyalty, among others, according to Toyota executives.

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