Level 2: Dealer

The sub-levels of level 2

Sub-levels are a first draft, being refined. A dealer sells one brand's products as its authorised partner. Within this level, businesses differ in how directly they deal with the brand, how much they do beyond selling (service and spares), and how many outlets or how much territory they run. They are listed roughly in order of money needed, risk, control and value added; real businesses do not always climb in this order.

1. 2.1

   Sub-dealer

   You sell a brand's products in a smaller town or area, but you buy from the brand's authorised dealer or distributor, not from the brand itself. You usually have no direct agreement with the brand.

   Example: TVS Motor's dealer network has this shape: it describes an "authorised dealer" (AD) as a dealer of its "authorised main dealer" (AMD), usually in a town of under 1 lakh people. Similarly, a paint shop may buy from the brand's distributor rather than the brand.

   Money

   Small to moderate: a small outlet and some stock, far less than a main dealership.

   Risk

   Thin margins after the main dealer's share, and terms that the main dealer can change.

   Control

   Low: both the brand and the main dealer set your terms.

   To climb

   Build steady sales and a clean payment record, then apply to the brand for your own authorised dealership.

2. 2.2

   Authorised dealer (sales)

   You have an agreement directly with the brand to sell its products in a territory, following its rules on display, prices, stock and targets.

   Example: An authorised tyre, paint, cement or consumer-durables dealer.

   Money

   Moderate: a showroom to the brand's standards, a security deposit, and the minimum stock the brand asks for.

   Risk

   Sales targets and scheme conditions, stock pushed on you to meet targets, and the brand's decisions on prices and new dealers nearby.

   Control

   Medium: you run the business, but the brand sets the rules.

   To climb

   Add service and genuine spares, where the brand allows it, to earn again from the customers you already have.

3. 2.3

   3S dealer (sales, service, spares)

   You sell the brand's products, service them in your own workshop, and stock its genuine spare parts, all under one roof. "3S" stands for sales, service and spares. It is the usual format for cars, two-wheelers, tractors and commercial vehicles.

   Example: An authorised car or two-wheeler dealership with a showroom, a workshop and a spares counter.

   Money

   Large: showroom, workshop equipment, trained technicians and spares stock.

   Risk

   High fixed costs every month, workshop bays standing idle, and dependence on the brand's sales cycle.

   Control

   Medium, but service and spares bring income that does not depend only on new sales.

   To climb

   Run one outlet profitably and with good systems, then open more outlets or take on a second brand.

4. 2.4

   Multi-outlet dealer group or multi-unit franchisee

   You run several dealerships or franchise outlets, of one brand or several, across towns or a state. (A franchisee runs an outlet under the brand's name and business format, in return for fees.)

   Example: A family business running dealerships of two vehicle brands in several districts; a franchisee running several outlets of one food brand.

   Money

   Very large: several showrooms and their stock, and a management team.

   Risk

   Loans and fixed costs across many outlets: a slowdown or one brand's decision hits them all at once.

   Control

   Higher: spreading across brands and towns reduces dependence on any one of them.

   To climb

   Build managers and systems that run outlets without you, then seek rights to a whole region.

5. 2.5

   Master franchisee or regional distributor

   A brand gives you the right to develop its business across a large region. A master franchisee can appoint, train and support sub-franchisees in that region; a regional distributor appoints and supplies the brand's dealers there.

   Example: A company holding the Indian master franchise of a foreign food brand and granting sub-franchises; a regional distributor appointing dealers for an appliance brand across several states.

   Money

   Very large: the fee for the rights, a regional team, and often outlets of your own to prove the format works.

   Risk

   Development targets you must meet, rights the brand may not renew, and responsibility for the whole network's problems.

   Control

   The most a dealer gets: you shape the brand's network in your region, within the brand's agreement.

   To climb

   The next step is a new level: make products yourself (Level 3) or sell something new of your own (Level 4).