At Charapp & Weiss, LLP, we know that dealership owners face a critical question: what happens if I’m no longer here to run the business? Whether you’re building a long-term legacy or preparing for a sale, planning ahead is not just smart—it’s essential. Recent changes in manufacturer agreements and increasing attention from lenders make it more important than ever to have a strategy in place.
This article breaks down two critical paths for dealers: preparing a sound succession plan and understanding the key considerations before putting your dealership on the market.
Part 1: Succession Planning—Why It Can’t Wait
Why Succession Planning Still Matters—Even Without a Manufacturer Addendum
General Motors recently removed the succession addendum from its dealer agreement. Some dealers took this as a signal that OEMs are stepping back from succession planning. That’s not the case. State franchise laws still protect a dealer’s right to transfer ownership or management upon death or incapacity. But those protections only go so far if your business isn’t ready for the transition.
A carefully structured succession plan ensures business continuity, protects dealership value, reassures financial partners, and—most importantly—safeguards your employees and family.
Assemble the Right Team
Effective planning requires coordination among your estate/tax attorney, dealership attorney, accountant, and possibly a succession planning expert—especially if there are complex family dynamics involved.
Build a Strong Estate and Funding Strategy
Dealers should consider wills, trusts, life insurance, and funding plans for estate taxes. Trusts have become more common and accepted by franchisors for holding equity, and they can help avoid probate complications.
Make Succession Real While You’re Still in Control
Waiting until after your death to implement a plan is a mistake. If competing family interests exist, begin the conversation now. Designate a dealer successor with your franchisor, consider offering them an equity stake, and install incentives to retain key staff through the transition.
Watch for Hidden Pitfalls
- Loan Agreements: Review for “due on death” clauses, which may allow lenders to call loans upon your passing.
- Exit Strategy: If a sale is the endgame, structure the business to appear stable and valuable to buyers. A distressed or unplanned sale often fetches a lower price.
Part 2: Selling Your Dealership—Steps Toward a Clean Transaction
If your succession plan includes selling the store(s), preparation is everything. Whether you’re retiring or shifting focus, the goal is the same: maximize value and minimize friction.
Understand What You’re Selling
Are you selling one store or the entire enterprise? Will you sell the land or lease it back for income? Do non-compete provisions apply? Nail down your structure before entering the market.
Get Your House in Order
- Corporate Documents: Ensure articles of incorporation/organization, bylaws, and operating agreements are up to date.
- Authority to Sell: Confirm you—or your representatives—have the legal right to sell without extra approvals.
- Family Considerations: If gifting or selling within the family, be aware of franchise laws that support family transitions.
Real Estate and Environmental Readiness
- Leases: Know terms, escalations, guarantees, and assignability.
- Owned Property: Have title commitments, environmental records, and surveys ready. Clean up old liens or unresolved title issues early to avoid surprises.
Review Inventory and Assets
- Parts: Buyers usually cap what they’ll purchase—obsolete parts are often excluded.
- New Vehicles: Confirm your manufacturer allocations are appropriate. Poor PMAs can affect valuations.
- Fixed Assets (FF&E): Keep accurate records and speak to your CPA about how FF&E is valued for tax purposes.
Facilities and Franchise Incentives
A recently upgraded facility is attractive to buyers. In states like Virginia, OEMs can’t force a facility upgrade within 10 years of the last one—even in a buy/sell. Understanding these protections may give your buyer more negotiating power (and you more value).
Don’t Forget Vendor Contracts and Liens
- Vendor Contracts: Know renewal dates. Avoid automatic renewals that could trap you in a deal post-closing.
- Encumbrances: Identify all liens on dealership assets. Disclose and plan for payoffs to ensure a clean closing.
Final Thoughts
Whether your goal is to keep the dealership in the family or eventually sell it, your next move begins with planning. At Charapp & Weiss, we help auto dealers nationwide design proactive, customized strategies to protect the value they’ve built—before it’s too late. Don’t wait for a crisis to chart your course. Begin planning today.