Selling Car Dealers to Public Companies-Effects of Framework Contracts

Framework contracts provide the basis for business relationships between factories and public companies (public). This includes terms and conditions regarding the acquisition and ownership of new car dealers by the general public. Each factory has its own limits on the ability of the general public to acquire and operate a dealer.

Most framework contracts are confidential due to their own terms. However, if you expect your dealer to sell to the public, it’s wise to understand the framework contract and how it affects potential sales.

When I was negotiating the sale of Stephen Creek’s Lexus, the public said he wanted to buy a dealer, but he already owned four Lexus stores (the largest number allowed nationwide at the time). The public told the factory that it would sell it once it started buying and selling with my dealer.But the factory told them they had to sell it Before It put together a deal.

The relationship between the public and the factory was a remarkable and interesting transformation. When the public first came to the scene, the factory kicked and shouted. The proceedings were filed and the concept of public ownership of car dealerships was strongly opposed by manufacturers.

The confrontation then subsided, and the factory accepted citizens as a way to replace certain dealers and as a means of building new facilities. When many civilians didn’t work the way the factory wanted, the brilliance went out of the relationship: poor CSI, broken promises, poor sales performance.

For factories and the general public, drafting the original framework agreement was like creating a prenuptial agreement without getting married or divorced. As the factory learned from experience, the agreement was massaged and amended.

A few years ago, while the Indian state was helping to get the first factory approval to become a dealer, general sales and service contracts were not enough to cover the uniqueness of the tribe and needed to be modified. had.

The factory knew how to deal with large groups of dealers, both public and private, but with a sovereign state (Native American tribe) that was exempt from proceedings and did not have to pay taxes. Do you trade in? These were some of the issues that had to be addressed (with factories, state dealership associations, and dealers). In retrospect, as with the Agreed Framework, some of the anticipated problems were imaginary and some were overlooked.

Citizens are rated daily according to the market value of their stock. This market value was dramatically affected by the increase in corporate sales due to the acquisition of new dealers when they first started buying dealers.

Dealers, on the other hand, are valued by the situation when the game ends and the store is sold. Therefore, it may be good for the general public to sell a fictitious dealer property to a REIT (Real Estate Investment Trust), but even under the same conditions, a private dealer may sell the same property. It may be wise. vice versa.

Private and public have different rules and different motivations, and until recently, some publics didn’t think they needed to act like dealers. However, as acquisitions slowed, the general public needed to act like dealers and get the most out of each store. As most dealers agree, the job of running a car dealer well is a lot harder than buying it with someone’s money.

In the long run, framework contracts are good because they prevent the general public from controlling most of the manufacturer’s distribution channels and at the same time force them to operate like car dealers.

Framework contracts are sometimes redefined, but at one time or another, the following factories had the following requirements:

Toyota / Lexus

1. There was a limit to the number of Toyota and Lexus dealers that the general public could own. (A) National level. (B) Each geographic area or distributor area defined by Toyota. (C) Each metropolitan market defined by Toyota or Lexus.

2. Prohibited ownership of adjacent dealers in the same market.

3. Nationally, the dealership restrictions were for a specific period of time and were based on a certain percentage of Toyota’s total sales in the United States.

4. In geographic or distributor areas, publicly owned distributor restrictions were specified by the applicable Toyota Regional Restriction Policy or the distributor policy in force at the time.

5. In the metropolitan market, publicly owned dealer limits were based on Toyota’s then-effective Metro Market Limit Policy, which provides limits based on the total number of Toyota dealers in a particular market.

For Lexus, the general public can own one or less Lexus dealerships in one Lexus-defined metropolitan market and five or less Lexus dealerships nationwide.

Honda

1. Honda has limited the number of Honda and Acura dealers that the general public can own. (B) Each geographical zone defined by Honda and Acura. (C) Honda-defined metropolitan markets.

2. Nationally, the limits for Honda dealers owned by Publics were based on a certain percentage of Honda’s total sales in the United States.

3. In Honda-defined geographic zones, the limits of Honda dealers owned by Publics were based on the specified percentage of Honda’s total sales in each of the 10 Honda-defined geographic zones.

4. In the big city market defined by Honda, the limit of Honda dealers owned by Publics is the specified number of dealers in each market, and the numerical limit depends mainly on the total number of Honda dealers in a particular market.

5. Regarding Acura, the general public is (a) two Acura dealers in the big city market defined by Honda, (b) three Acura dealers in any of the six Honda-defined geographical zones, and (c) I could only own 5 Acura dealers. Nationwide.

6. Honda also banned the ownership of adjacent dealers.

Mercedes-Benz

Mercedes has restricted companies to own Mercedes dealers with sales of more than 3% of total Mercedes vehicle sales in the United States in the previous calendar year.

Ford Motor Company

1. 80% of public Ford dealers had to meet Ford performance standards.

2. We were unable to make an acquisition that would result in owning a Ford or Lincoln Mercury dealer with sales of more than 5% of total Ford or Lincoln Mercury new car retail sales in the United States in the previous calendar year.

3. If an additional Ford or Lincoln Mercury dealer could not be acquired in a particular state, such an acquisition would own a Ford or Lincoln Mercury dealer and either Ford’s total sales or Lincoln Mercury’s total retail of new cars. Public corporations with more than 5% of sales are in that state in the previous calendar year.

4. If Ford fails to acquire additional Ford dealers in the market area defined by Ford, such acquisitions will either own multiple Ford dealers in a market with a total of 3 or less Ford dealers or exceed 25%. You will own a Ford dealer. Ford dealers in the market with a total of 4 or more Ford dealers. The same market area restrictions apply to Lincoln Mercury dealers.

5. The factory may impose conditions such as requesting improvement of the facility at the acquired dealer.

General Motors

General Motors limits the maximum number of General Motors dealers available to the public to 50% of General Motors dealers per brand line in a General Motors-defined geographical market area with multiple General Motors dealers. did.

Subaru

Subaru has restricted the public to (a) no more than two Subaru dealers within a particular designated market area. (B) Four Subaru dealers in Central America. (C) 12 dealers throughout Subaru’s distribution area.

BMW

BMW bans publicly traded companies from owning (a) more than 10% of BMW’s total sales in the United States, or (b) more than 50% of BMW dealers in certain metropolitan markets Did.

Other manufacturers may impose different restrictions and conditions that may or may not be stricter.

As a condition of consenting to the acquisition, many manufacturers have requested additional restrictions or conditions, such as a ban on:

1. Special changes such as material changes to the public, or mergers, the sale of significant amounts of assets, or changes in the image or reputation of the manufacturer, or changes in the public board or management. It is practically incompatible with the profits of various corporate trading manufacturers.

2. Dismiss the dealer’s general manager without the manufacturer’s consent.

3. Duplex with another brand without factory consent.

If the purchaser fails to comply with the limits of the framework contract with the factory, it will not be approved. Therefore, when selling a dealer to the general public, it is wise to know the requirements of the framework agreement before spending a considerable amount of time and effort negotiating with the general public.