Passing the torch can be tricky for dealership owners

Bob Attrell

TADA PRESIDENT

If I had to guess, I'd say that 30 per cent of new-car dealerships in the GTA are run by second- and third-generation family members.

Is this a good thing for the car industry and for consumers? If the succeeding family member has the right qualifications and business acumen, it can be a win-win for a dealership and its customers.

I know cases where the progeny of an owner has built on the success of the dealership and grown the business considerably.

On the other hand, I've known cases where a next-generation owner has not fared so well and, through mismanagement and/or apathy, allowed the business to flounder or fail altogether.

Owners often feel compelled to include their offspring in their succession plans, if there is sufficient interest and desire on the part of the child.

In the coming years, as baby boomers age, there will be a large transfer of ownership to next-generation owners. Obviously, dealer principals will have to deal head-on with this sensitive issue (if they haven't already).

But, passing the reins of a dealership on to a family member is a tricky and complex process. In most cases, it takes years to properly groom an heir to assume an ownership role at a dealership.

Second-generation owners often serve long apprenticeships – working in different areas within the car industry and attending post secondary institutions – in order to gain the knowledge and experience necessary to successfully operate a dealership.

There are no hard and fast rules about when, or if, an owner should entrust a family member to take over the business. That's a decision each owner must make for himself.

When a dealer principal decides to cede control, or sell his dealership to a family member, it creates a complex set of issues.

Does the son/daughter really want the job? Or are they doing so because it's expected of them? Do they possess the right skills?

Sometimes, the appointment of a successor is implicit, and the transfer is seamless. Other times, it creates conflict and hard feelings within a family.

The issue becomes more complex if more than one candidate is vying for the job. What if two children both feel entitled to become the dealer principal?

Complications might also arise if an in-law or a long-time employee feels entitled to an ownership stake, or if a buy-out option presents itself that appears too good to turn down.

Sometimes, owners look outside their immediate families in succession planning. An owner might want to avoid showing preference for one family member over another. Or, he might feel that an outsider brings stronger management skills and industry experience to the table.

Ultimately, the goal of any succession plan is to ensure that the business continues to meet the needs of its stakeholders, including investors, manufacturers, employees and customers. This can only occur when leadership is strong.

Do customers need to know that a dealership has changed hands? That depends.

If a dealership is well run and successful, then making a big announcement about an ownership change is probably unnecessary.

If a dealership has been poorly run, then a new owner may wish to promote the fact the business is under new management, delivering a message to customers that things will change for the better.

There is a lot at stake when a dealer principal passes the torch to a son, daughter or successor.

If, as a customer, your automotive needs continue to be addressed in a professional and positive manner, then a change in ownership shouldn't be an issue.

This column represents the views of TADA. Email: president@tada.ca or visit www.tada.ca.

Bob Attrell, president of the Toronto Automobile Dealers' Association, is a new-car dealer in the GTA.

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