Open Road Auto Group’s $300K lesson in vendor contract management

When vendor oversight grows a bit lax, dealership expenses can surge, and put a strain on the bottom line. That's what Michael Morais, President of Open Road Auto Group discovered when a Carfax representative mentioned that she signed up every store in his group for a recall notification service—without him knowing.

Driving the news: A routine vendor interaction revealed that managers across Morais's 20-dealership Northeast operation had approved $300,000 in annual services without proper authorization.

Between the lines: The discovery triggered a comprehensive contract audit that revealed systematic pricing increases.

The problem escalated when Morais recently discovered CarGurus had deployed a 90-day beta test of a pricing tool across five stores without his approval. His BDC managers had been trained on the system and were using it operationally.

• CarGurus justified the program as "absolutely free," but Morais saw it differently.

• The vendor had used his employees' time, his customers as test subjects, and his dealership operations as a development laboratory without compensation or consent.

• When CarGurus declined Morais request for compensation covering the testing period plus six months of free service, he terminated their $600,000 annual partnership entirely.

Why it matters: By deploying unauthorized programs, vendors can harvest operational data, test pricing strategies, and develop products using dealer resources as free R&D facilities. This is a new category of vendor overreach that standard contracts don't address.

The solution: Morais restructured Open Road's vendor relationship agreements around five core principles:

1. All vendor decisions flow through the president's office, regardless of store or manager seniority.

2. Systematic review of all agreements comparing original terms with current charges and service scope.

3. Future vendor agreements must be signed by regional managers or CEOs, not local sales representatives.

4. Any service modifications require dealer principal approval or trigger immediate contract cancellation.

5. Complete relationship termination for protocol violations, regardless of account size.

Big picture: Vendor relationships can add real value, but without strict oversight they can also introduce costs, risks, and operational surprises.