Auto Tips from a Classic Car Lover

Buying A Dealership Franchise? Here's What You Need To Know

Would you like to get into the car dealership business but are unsure of where to start? You aren't alone. Many dealmakers have found themselves in the same position due to a tough economy and other factors. Buying a franchise unfortunately has some potential to be an expensive, time-consuming, and ultimately disappointing experience. If you are considering purchasing a dealership and want to make the process positive and as easy as possible, keep reading.

Find the Perfect Dealership Location

The best location for your dealership is one that meets all your needs and is within budget. You might want to look into leasing an existing franchise location instead of building a new one from scratch because it will be less expensive and will not take up as much time and energy.

Some things to consider when looking at potential locations include:

  • The size of the building
  • The cost per square foot (or acre)
  • How many people work there now? And how many employees could it accommodate in the future?
  • What types of businesses are nearby?  

When looking for a location, you want to have established businesses, as well as some competitors nearby. 

Know Your Customers

If you're interested in building your own dealership, be sure you know your customers. To figure out who your customers are, take a look at the demographics of your sales on a monthly basis. You can use a tool like Google Analytics to track some of these numbers. From there, it's just a matter of analyzing the data and identifying trends.

It's important to understand what things influence your buyers' purchasing decisions. Find out what makes them tick and use it to find out if they're likely to buy from you. Once you have all the information, use that knowledge to make better sales pitches, marketing materials, and more effective customer relations.

Create a Marketing Plan

If you're a business owner and you want to buy a franchise, it's probably because you have a passion for your product or service. That's great, but when you're going through the process of buying a franchise, make sure that your passion is aligned with the needs of the company that's selling it to you.

Before you buy a franchise, you must create a marketing plan. Franchise marketing plans include:

  • Define your target market for your franchise.
  • Define the primary methods of communication with this target market (email, social media, phone calls, and direct mailings).
  • Decide what type of business model works best for your business (affiliates vs. franchising).
  • Decide whether you'll operate independently or through an entity (franchisee corporation vs. a sole proprietorship).

These are things that will help you with your franchise and marketing to build a more successful business. 

Consider Financing

If you're considering buying a franchise, you might be wondering what financing options are available. Many dealerships are independently owned and operated. That means that buyers need to secure their own financing to make the purchase.

Obtaining financing to purchase an auto dealership is unique compared to other businesses because of the multiple types of inventory held by the dealership. Many sellers may offer some amount of seller financing for the real estate portion of an auto dealership purchase. Most lenders will consider both real estate and personal property as collateral when issuing a loan. However, it's very important to understand the lender's position on how they will value each piece of collateral in relation to their loan amount.

Understand the Franchise Agreement

The most important document you'll sign when you purchase a dealership is the franchise agreement. This is essentially a contract that regulates the relationship between you and the franchisor. It will specify how long you can use the brand name and what fees you owe. Make sure you understand every detail of this agreement before signing it.

Buying a car dealership franchise may be easier than you think. Contact a car dealership franchise service to start discussing your options to buy dealership franchises and open your new business.