How to Franchise a Car Dealership 

Franchising is a popular business model in the automotive industry. In the UK, some car manufacturers offer franchise opportunities. Ford, for example, has a sprawling franchise network across the country. These manufacturers allow dealership businesses to sell their vehicles. However, the franchising model can also work for those already owning a car dealership, whether they sell brand-new or second-hand vehicles. If you own a business selling vehicles and think your business model has further market potential, consider franchising. This article will explain how car dealership owners can franchise their businesses.

1. Consider Franchisability

If you want to set up a car dealership franchise network, consider the franchiseability of your existing business model. Adopting the franchising approach allows others to copy your business model and run a business under your franchised car dealership brand. For this reason, your business model should be successful and easily replicable. A successful car dealership can leverage brand recognition to attract franchisees and customers in new markets. 

Assess market demand for your car dealership model elsewhere. Franchising can help expand your brand’s reach, but you should ensure that there are further customer bases to tap into by expansion through franchising. Define your franchise business model once you have established replicability and market demand. This includes standardising aspects such as operations and branding. 

2. Draft a Franchise Operations Manual 

Drafting a franchise operations manual is one of the first steps in franchising your business. This manual is a comprehensive document that outlines the guidelines, procedures, and standards for operating a franchise business. It serves as a training and reference tool for franchisees, providing detailed instructions on everything from business practices in day-to-day operations to standards and expectations for brand consistency. 

At this point, you should think about the standards you will require franchisees to uphold, for example:

• showroom upkeep;
• customer service; 
• suppliers; 
• the type of vehicles they will stock; and
• the quality of those vehicles.

Be as detailed as you can when writing the manual. Explain your business model clearly so that franchisees can understand and replicate it. 

3. Seek Legal Advice and Draft the Franchise Agreement

The next step is to draft the franchise agreement. This contract forms the basis of the franchisor’s relationship with franchisees. The document should protect fundamental aspects of your brand, such as its standards and intellectual property. 

You should seek legal advice to ensure that the franchise agreement sufficiently protects these elements and is legally sound. A lawyer can also advise you on other aspects of your franchise business journey, such as registering trademarks and ensuring compliance with relevant laws. Professional legal advice can be crucial in navigating the complexities of franchising. 

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4. Develop a Training Program 

Develop a training program to educate new franchisees on your business model and how they will operate their businesses. For example, the program can include practical training on customer service standards and classroom-based training on brand values and procedures. 

Beyond the initial training program, you must ensure a support structure is in place for franchisees. The support structure will include systems to assist franchisees on an ongoing basis with operations, marketing, and troubleshooting.

5. Franchisee Recruitment 

The next step is recruiting franchisees. Before you actively recruit, develop a screening and selection process that ensures prospective franchisees align with your brand’s values. Once you identify the characteristics you require in your franchisees, advertise franchise opportunities and attract potential candidates to your car dealership franchise.

You should interview each candidate and conduct thorough background checks to ensure suitability. These checks form the basis of your due diligence. Consider whether you would work well together and whether each candidate has suitable experience for their role. 

6. Continuous Improvement 

Continuously refine your franchise model, keeping it up to date with industry changes and market trends. Once your franchise network is up and running, establish mechanisms for gathering feedback from franchisees. For example, you might collect their thoughts through regular meetings or surveys. This feedback can provide valuable insights into their challenges and potential improvement areas. 

Key Takeaways

The franchising model can be an excellent way to scale a car dealership business. This article has broken down the steps a car dealership owner would follow to franchise their business. These include the following: 

• considering whether their business model is replicable; 
• drafting a detailed franchise operations manual; 
• seeking legal advice;
• drafting a franchise agreement; 
• developing an initial franchisee training program and ongoing support systems; 
• recruiting franchisees; and
• establishing mechanisms such as feedback loops to ensure the franchise network is continuously improving. 

If you need help franchising your car dealership business, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.