Manufacturer Dealer Agreements and Brand Approval When Buying an RV Dealership
A franchised RV dealership’s right to sell a manufacturer’s travel trailers, fifth wheels or motorhomes usually comes from a written dealer agreement for each brand or product line. Those agreements may describe where the dealer can sell, what inventory it is expected to stock, which facility and staffing standards apply and what happens when ownership changes. For buyers, RV manufacturer approval can be one of the deciding factors in whether a deal closes, and it should be addressed early rather than treated as paperwork.
This article is general information about how dealer agreements may affect the sale of an existing, operating RV dealership. Agreements vary by manufacturer and product line, and state dealer laws differ. Rights under a dealer agreement should not be assumed to transfer to a buyer. Buyers and sellers should have every agreement reviewed by qualified attorneys. Nothing here is legal advice.
Why Dealer Agreements Matter in a Sale
Much of a franchised dealership’s goodwill depends on the brands it carries. If a manufacturer declines to approve the buyer, the buyer may be left with a used-unit and service business rather than the dealership it expected to own. Lenders understand this, and many will want to see evidence of approval, or a clear path to it, before funding.
What Buyers Should Look For in Each Agreement
- Change-of-ownership terms: whether the manufacturer must consent to a sale or a transfer of ownership interests
- Market area: whether the dealer has an assigned area and how protected it is
- Performance expectations: sales, stocking or market share expectations and any recent shortfalls
- Facility and signage standards: requirements a new owner may be asked to meet
- Term and renewal: when the agreement expires and how it renews
- Termination rights: the circumstances in which either side may end the relationship
How the Approval Process May Work
Manufacturers may ask a prospective owner for financial statements, a description of experience, a business plan, proof of a floor plan arrangement and details about who will manage the store. Some may meet with the buyer or visit the dealership. Timing and requirements vary, and approval is at the manufacturer’s discretion within the terms of the agreement and applicable law.
Link Between Approval and the Floor Plan
Manufacturers and floor plan lenders frequently work together. A manufacturer may want to know the buyer has a floor plan line before approving, while a floor plan lender may want evidence of brand approval before extending credit. Buyers should start both conversations early. See our article on the RV dealer floor plan in an acquisition.
When One Brand Is Not Approved
A dealership with several brands may face approval for some and not others. The purchase agreement can address what happens in that case, such as a price adjustment, a condition to closing or the right to walk away. Buyers should also consider how losing one brand would affect service work and parts sales.
Independent Used Dealers
Dealers that sell only used and consignment units may not have manufacturer agreements at all, but they may still have service authorizations, supplier accounts and retail finance relationships that do not automatically transfer.
Questions for Due Diligence
- Has the seller received any notices of default or performance concerns?
- Are there pending facility requirements a buyer would inherit?
- Has the manufacturer indicated any plans for the market area?
- Will the seller cooperate with introductions and the approval process?
Our RV dealership due diligence checklist covers the broader review, and our article on RV dealer loan requirements explains how lenders treat approval status.
For Established Dealers and Sellers
Dealers that already hold agreements with a manufacturer may find the approval process different when acquiring another store. See our guide to buying a second RV dealership. Sellers can review our article on how to sell an RV dealership for ways to prepare agreement files for buyers.
US Professional Funding helps buyers finance the acquisition of existing, operating RV dealerships and can help plan financing around the approval process. Learn more about our RV dealership acquisition financing.
