We Interrupt This Dealer Program…
I would like to examine dealer programs, again. There are several programs out there to choose from and finding the right fix for you may not be as easy as you think. There can be competing issues that make the selection more or less appealing, depending on what your goals are.
First, let’s start with the proper perspective. The dealer program has been planned, created, initiated, funded and designed to enrich the program itself, at least initially. Hopefully the plan will also consider the dealer’s financial gain and growth. But unless the program is designed as a true cooperative, it’s the program that comes first.
Seems to me you can characterize programs depending on who is sponsoring them. Usually it’s the sponsor that has the primary agenda. For example, a central station sponsor has monitoring in mind; an equipment manufacturer has its equipment to promote; a highly recognizable name has its trademark to generate revenue. I suppose almost any supplier to the alarm industry could design a program that promotes what the sponsor has to offer, and then whatever else can be tacked on.
I have characterized programs in two ways, those that allow its dealers to retain the recurring revenue, and those that require the dealers to sell the revenue to the program. So let me design a program and let’s see how attractive it is to you.
I’m going to have a recognizable name, because otherwise I don’t think I could attract anyone, especially when you consider the rest of the program features. So step one, you can apply to my program. You’ll be authorized to use the program trademark in your advertisements and you will be identifiable as an authorized dealer of the program.
The program will specify:
- Where you are allowed to advertise and sell your alarm services
- Type of systems you can install
- Type of subscribers you can sell to
- Amount you can charge for an installation
Here are some other program requirements:
- You do the installations at rates the program sets
- All monitoring contracts must be sold to the program at 24x multiple
- You are required to provide service if necessary to the account
- The program will pay you for your service at rates set by the program
A few other program features to consider:
- If you don’t sell enough, the program can drop you
- If you stop being a dealer, for any reason, you have business restrictions
- Your territory is restricted, but not exclusive to you
- Other dealers can be authorized in your area
- The program intends to compete against you
- The program owns certain popular lead sources, and you can’t use them
- The program does plan to have a convention each year; you’re invited
So here is the plan. After making your investment you get to present yourself as the program’s authorized dealer. Your cash flow should be better than your competitors, but they are not likely selling off their subscriber contracts as they write them. The program doesn’t offer much in the way of financial management advice, or retirement advice. But that’s OK because you’re most likely going to have to keep working, selling and installing alarm systems and then selling them to the program. Unless you set up an IRA or some other retirement account, you probably won’t be retiring until you qualify for Social Security because you’ll have no equity in your company; it was all sold to the program.
There is of course a very positive aspect to the program, at least from the program’s perspective. The program is healthy and growing; lots of dealers are looking to get authorized and either compete against or replace the current dealers. No, you can’t sell your dealership, but you can drop out, get out of the alarm business and let the program replace you.
So who wants to be first in line for my program?
Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.
The opinions expressed in this column are not necessarily those of SSI, and not intended as legal advice.
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