OEM Approval Criteria

In general , the OEM’s goal is to appoint dealers who can improve sales, maintain profitable dealership operations, achieve high levels of customer satisfaction, and provide the necessary cash and capital structure to properly capitalize and operate the business.  The key approval criteria are as follows:

  • Character: The Dealer candidate(s) and others who will have dealership ownership and/or dealership managerial authority should exhibit ethical, honest, and aggressive merchandising, advertising and trading practices. They must have sound personal and financial reputations as well as the respect of their community.
  • Operational Capacity: Extensive retail franchise automotive knowledge and experience (Dealer and/or General Manager) is necessary in order to be considered as a Dealer candidate, coupled with a proven track record of satisfactory sales performance and successful dealership operation. Approvable candidates are many expected many times to provide management reports that reveal excellent sales effectiveness, customer satisfaction performance, and effective working capital history.
  • Customer Satisfaction: Most OEM’s place a high degree of importance on customer satisfaction in evaluating candidates. The concept of customer satisfaction extends beyond the product and encompasses the vehicle buying process, and the entire ownership experience.   The CSI reports will become a key element of the approval process.
  • Capital: Candidates should have an established history of profitability, demonstrate the financial capacity needed to acquire the franchise(s), and meet or exceed our working capital requirements as determined by their Sales & Profit Forecast for the proposed operations. Sufficient unencumbered capital is critical to the success of a dealership, particularly given the cash required for necessary vehicle inventory, parts inventory, and accounts receivables.  There is a direct relationship between these capital requirements and the volume potential of a dealership.  Many times the Total Dealership Investment (including any paid for Goodwill) must be made on the basis of fifty percent (50%) or more unencumbered (not borrowed) funds and up to fifty percent (50%) borrowed funds. This standard is generally rigid and must be adhered to in all cases.
  • Term Agreement: One of the ways to ensure the OEM improves and maintains industry leadership is to make every effort to appoint new Dealers that have demonstrated the ability to fulfill and sustain mutual goals. Therefore, even with prior exceptional experience and performance that meets the criteria above, many OEMs will initially grant a limited Term Agreement (2,3, or 5 years) to ensure the new dealer delivers on the performance metrics before issuing a longer-term Continuing Agreement.
  • Facility: Independent research indicates that facilities are a key element to improving the consumer retail experience, customer loyalty and brand image in the market. Furthermore, competitive facilities establish a consistent brand image at a retail level and strengthen a brand’s reputation. Therefore, most OEM’s require all dealership facilities to comply with their latest established guides for land and buildings based on the sales and profit forecast. If the present facility is not currently up to OEM guidelines,  a facilty renovation and/or new facility may be part of the Term Agreement deliverables.