OFFICIAL PUBLICATION OF THE GREATER LOS ANGELES NEW CAR DEALERS ASSOCIATION PUB. 11, ISSUE 2 | GLANCDA.ORG UNLOCKING THE FULL POTENTIAL OF YOUR DEALERSHIP THE INDISPENSABLE BENEFITS OF GLANCDA MEMBERSHIP
Anticipate every turn In an industry that’s always evolving, your dealership can rely on our Dealer Financial Services team’s 90 years of experience to see what’s around the corner, forward-thinking insights to prepare you, and technology to keep you ahead of the curve. What would you like the power to do?® John Alexander, john.f.alexander@bofa.com business.bofa.com/dealer ©2023 Bank of America Corporation. All rights reserved. DFS-699-AD 5949042 Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, derivatives, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc., which is a registered broker-dealer and Member of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. is a registered futures commission merchant with the CFTC and a member of the NFA.
Originally founded in 1907, the Greater Los Angeles New Car Dealers Association provides valuable educational and philanthropic benefits to the Los Angeles Community. The association believes that involvement with local charitable organizations makes a positive difference for everyone involved. ©2024 Greater Los Angeles New Car Dealers Association | The newsLINK Group LLC. All rights reserved. Los Angeles Dealer is published four times each year by The newsLINK Group LLC for GLANCDA and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and dealer education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of GLANCDA, its board of directors or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. Los Angeles Dealer is a collective work, and as such, some articles are submitted by authors who are independent of GLANCDA. While GLANCDA encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at (855) 747-4003. PRESIDENT Howard Tenenbaum Keyes Automotive Group VICE PRESIDENT Jeanne Brewer Acura of Glendale SECRETARY/TREASURER Evan Ellis Fiat and Alfa Romeo of Glendale IMMEDIATE PAST PRESIDENT David Ellis Ellis Family Stores - Glendale GLANCDA DIRECTORS Tim Smith Pete Smith Ian Thomas Robb Hernandez Brad Mugg Rinaldi Halim Charles Ma Peter Browning 06 | President’s Message Membership in GLANCDA Is a No-Brainer! By Howard Tenenbaum, President, GLANCDA, Keyes Automotive Group 08 | Unlocking the Full Potential of Your Dealership The Indispensable Benefits of GLANCDA Membership By Howard Tenenbaum, President, GLANCDA, Keyes Automotive Group 11 | Los Angeles Auto Outlook 12 | Q1 Achievements and Milestones 14 | High School Automotive Competition 16 | GLANCDA Annual Luncheon 18 | Manning Leaver Legal Lane Dealership Vendor Agreements Roadmap By Joseph Berberich, Manning, Leaver, Bruder & Berberich LLP 23 | Ask Alison Is Your Dealership Compliant? By Alison McCallum, EPIC Insurance Brokers and Consultants 24 | Automotive Buy-Sell Market — As Hot as EVER! By Jayson Crouch, Managing Director, Haig Partners 26 | Climbing the Automotive Industry Ladder of Success By Sharon Kitzman, Dominion DMS GLANCDA BOARD OF DIRECTORS 700 N. Central Ave., Ste. 320 Glendale, CA 91203 (213) 748-0243 | fax (213) 748-0245 We are GLANCDA 4
A Better Core in 2024 DominionDMS.com (866) 928-3210 1515 South Federal Highway, Suite 406 Boca Raton, FL 33432, USA SCHEDULE YOUR DEMO Discover how VUE By Dominion DMS gives your dealership: Hearing the cries of the automotive community, we developed a brand new cloud core DMS, called VUE. This software is flexible, efficient and innovative. Schedule a demo and upgrade to a Better Core in 2024. EFFICIENCY INNOVATION FLEXIBILITY SAVINGS Personalization, Engagement, and Speed – the holy trinity of an amazing customer experience. Being a cloud-core DMS and using agile development methodologies means that we can keep dishing out top-notch solutions for our dealers and partners. Dominion DMS is easy to learn and simple to use. You have easy access from any web connection and you get to choose the apps you want and need to drive your success. Behold, VUE! Waving a magic wand to make DMS core fees vanish into thin air. Franchise dealerships can now save while still enjoying our best in class accounting, parts, sales, and service modules.
PRESIDENT’S MESSAGE As a long-time board member and current president of GLANCDA, I was surprised to find my membership had expired because renewal notice was mistaken for junk mail. This might explain why you’re not currently a member of a dealer association that not only has strong benefits, but also advocates for all the new car dealers in Los Angeles County. Strong government relations are critically important to the overall strength of our industry. Join us now! In a time of rising costs, we’ve managed to keep our membership fees at $300 per rooftop. Benefits include: 1. Two complimentary seats to our annual member luncheon on Nov. 5 at the Universal Sheraton. 2. Important association communications (alerts, newsletters, magazine, annual report, economic impact reports). 3. Access to seminars, webinars and employee education opportunities. 4. Workforce development events for student technicians who make for great prospective employees. 5. Ticket packages for your dealership to the Los Angeles Auto Show! For more in-depth membership information, check out the article on page 8. Thanks for supporting our industry with your membership! Please contact our executive director, Bob Smith, and he will arrange time to share more and look at ways to become more involved. All the best, Howard Tenenbaum GLANCDA President Keyes Automotive Group Howard Tenenbaum, President, GLANCDA, Keyes Automotive Group MEMBERSHIP IN GLANCDA IS A NO-BRAINER! 6
LOS ANGELES | SAN DIEGO | SACRAMENTO | SAN FRANCISCO | scalirasmussen.com Avoiding litigation when it’s possible. Protecting you when it isn’t. •Labor & Employment •Regulatory & Licensing •Complex Litigation •General Counsel Services •Mergers & Acquisitions AV® and AV Preeminent® are Certification Marks used under license in accordance with the Martindale-Hubbell® certification procedures, standards and policies.
The automotive industry in Greater Los Angeles is a dynamic and everevolving landscape, where staying ahead of the curve is not just advantageous but essential. As the president of the Greater Los Angeles New Car Dealers Association (GLANCDA) and a long-time board member, I’ve witnessed firsthand the transformative benefits that our organization offers to its members. However, I recently had an eye-opening experience that underscored the importance of maintaining an active membership. Due to a minor administrative oversight, I allowed my own membership to lapse after mistaking the renewal notice for junk mail. This experience made me realize that some of you might also be missing out on the myriad advantages that come with being part of GLANCDA. Now more than ever is the time to ensure your dealership is reaping the rewards of our association’s robust support network. Why Membership in GLANCDA Is Crucial Advocacy and Government Relations One of the core pillars of GLANCDA is our strong advocacy efforts. Our association actively represents the interests of new car dealers in Los Angeles County at various levels of government. By engaging with policymakers, we work to create a favorable business environment, safeguard your interests and address regulatory challenges that can impact your bottom line. Being a member means you have a powerful voice advocating for your needs and the collective strength of our industry behind you. Cost-Effective Membership In an era where operational costs are rising, GLANCDA has managed to keep its membership fees remarkably affordable. At just $300 per rooftop, this investment is minor compared to the extensive benefits and opportunities it unlocks for your dealership. This fee not only supports the essential work of our association but also provides you with a substantial return on investment through various member-exclusive perks. Membership Benefits: Enhancing Your Dealership’s Success Complimentary Event Access Each year, GLANCDA hosts an annual member luncheon at the Universal Sheraton, a marquee event that brings together industry leaders, policymakers and fellow dealers. Membership includes two complimentary seats to this influential event, offering you unparalleled networking opportunities and insights into industry trends and future projections. Unlocking the Full Potential of Your Dealership THE INDISPENSABLE BENEFITS OF GLANCDA MEMBERSHIP By Howard Tenenbaum, President, GLANCDA, Keyes Automotive Group Continued on page 10 8
Essential Communications Staying informed is key to staying competitive. As a GLANCDA member, you receive a suite of critical communications, including alerts, newsletters, magazines, annual reports and economic impact reports. One of the most significant benefits is our Early Alert System, which notifies you by email of any lawsuits filed against dealers. This proactive approach ensures that you can take necessary precautions and stay ahead of potential legal issues. Educational Opportunities Continuous learning and professional development are vital in the fast-paced automotive sector. Members gain access to a variety of seminars, webinars and employee education opportunities designed to enhance your team’s skills and knowledge. From sales techniques to compliance training, these programs are tailored to address the unique needs of our industry. Workforce Development Attracting and retaining skilled technicians is a common challenge for dealerships. GLANCDA supports workforce development through events aimed at student technicians, creating a pipeline of prospective employees for your dealership. These initiatives not only help address labor shortages but also foster a new generation of automotive professionals. Exclusive Auto Show Access The Los Angeles Auto Show is a premier event in the automotive calendar, and GLANCDA members enjoy exclusive ticket packages for their dealerships. This perk allows you and your team to explore the latest innovations, network with industry peers and engage with potential customers in an exciting and vibrant setting. Strengthening Our Industry Together Your support as a GLANCDA member not only benefits your individual dealership but also contributes to the collective strength and resilience of our industry. By joining forces, we can tackle common challenges, influence policy and drive forward the interests of new car dealers throughout Greater Los Angeles. I encourage you to reach out to our executive director, Bob Smith, who is ready to assist you in renewing your membership or joining our association for the first time. Bob can provide further details on the benefits of membership and discuss how you can become more involved in our initiatives. Contact him at (213) 748-0243 or bob@glancda.org. Together, we can ensure a prosperous future for our industry and continue to drive innovation and success. Don’t miss out on the incredible benefits that GLANCDA membership has to offer — join us today! Continued from page 8 10
Los Angeles Auto Outlook Los Angeles Auto Outlook Published for: Greater Los Angeles New Car Dealers Assoc. 714 W Olympic Boulevard, Suite 601 Los Angeles, CA 90015 Bob Smith, Executive Director Phone: 213-748-0240 Web: www.glancda.org Published by: Auto Outlook, Inc. PO Box 390 Exton, PA 19341 Phone: 610-640-1233 Email: jfoltz@autooutlook.com Copyright Auto Outlook, Inc., July 2024 Los Angeles Auto Outlook is distributed free of charge to all members of Greater Los Angeles New Car Dealers Association. The publication is sponsored and supported by GLANCDA. Los Angeles Auto Outlook is published and edited by Auto Outlook, Inc., an independent automotive market research firm. Opinions expressed in Los Angeles Auto Outlook are solely those of Auto Outlook, Inc., and are not necessarily shared by GLANCDA. Brand Registrations Report Los Angeles County New Retail Car and Light Truck Registrations Second Quarter Year to date thru June Registrations Market Share (%) Registrations Market Share (%) 2Q '23 2Q '24 % change 2Q '23 2Q '24 Change YTD '23 YTD '24 % change YTD '23 YTD '24 Change TOTAL 112,539 112,469 -0.1 213,232 215,301 1.0 Cars 39,110 34,260 -12.4 34.8 30.5 -4.3 73,755 66,636 -9.7 34.6 31.0 -3.6 Light Trucks 73,429 78,209 6.5 65.2 69.5 4.3 139,477 148,665 6.6 65.4 69.0 3.6 Domestic Brands 35,401 30,986 -12.5 31.5 27.6 -3.9 65,117 59,126 -9.2 30.5 27.5 -3.0 European Brands 21,838 20,678 -5.3 19.4 18.4 -1.0 41,174 41,564 0.9 19.3 19.3 0.0 Japanese Brands 44,694 49,487 10.7 39.7 44.0 4.3 86,534 94,292 9.0 40.6 43.8 3.2 Korean Brands 10,606 11,318 6.7 9.4 10.1 0.7 20,407 20,319 -0.4 9.6 9.4 -0.2 Acura 961 725 -24.6 0.9 0.6 -0.3 1,745 1,440 -17.5 0.8 0.7 -0.1 Alfa Romeo 154 108 -29.9 0.1 0.1 0.0 276 297 7.6 0.1 0.1 0.0 Audi 3,169 2,948 -7.0 2.8 2.6 -0.2 5,632 6,356 12.9 2.6 3.0 0.4 BMW 5,912 5,946 0.6 5.3 5.3 0.0 11,184 11,460 2.5 5.2 5.3 0.1 Buick 163 171 4.9 0.1 0.2 0.1 324 335 3.4 0.2 0.2 0.0 Cadillac 770 943 22.5 0.7 0.8 0.1 1,459 1,701 16.6 0.7 0.8 0.1 Chevrolet 4,974 4,392 -11.7 4.4 3.9 -0.5 10,150 8,352 -17.7 4.8 3.9 -0.9 Chrysler 213 174 -18.3 0.2 0.2 0.0 378 368 -2.6 0.2 0.2 0.0 Dodge 820 931 13.5 0.7 0.8 0.1 1,466 1,617 10.3 0.7 0.8 0.1 Ford 5,238 4,962 -5.3 4.7 4.4 -0.3 10,355 9,572 -7.6 4.9 4.4 -0.5 Genesis 568 600 5.6 0.5 0.5 0.0 1,129 1,055 -6.6 0.5 0.5 0.0 GMC 1,199 1,325 10.5 1.1 1.2 0.1 2,299 2,420 5.3 1.1 1.1 0.0 Honda 13,203 14,586 10.5 11.7 13.0 1.3 24,718 27,755 12.3 11.6 12.9 1.3 Hyundai 4,250 5,440 28.0 3.8 4.8 1.0 7,848 9,127 16.3 3.7 4.2 0.5 Infiniti 516 437 -15.3 0.5 0.4 -0.1 958 967 0.9 0.4 0.4 0.0 Jaguar 68 66 -2.9 0.1 0.1 0.0 124 145 16.9 0.1 0.1 0.0 Jeep 2,703 1,756 -35.0 2.4 1.6 -0.8 4,988 3,665 -26.5 2.3 1.7 -0.6 Kia 5,761 5,104 -11.4 5.1 4.5 -0.6 11,403 9,864 -13.5 5.3 4.6 -0.7 Land Rover 1,021 1,215 19.0 0.9 1.1 0.2 2,204 2,448 11.1 1.0 1.1 0.1 Lexus 4,929 5,851 18.7 4.4 5.2 0.8 8,841 11,156 26.2 4.1 5.2 1.1 Lincoln 257 339 31.9 0.2 0.3 0.1 518 609 17.6 0.2 0.3 0.1 Maserati 75 157 109.3 0.1 0.1 0.0 136 299 119.9 0.1 0.1 0.0 Mazda 2,250 2,347 4.3 2.0 2.1 0.1 4,269 4,432 3.8 2.0 2.1 0.1 Mercedes 6,128 5,044 -17.7 5.4 4.5 -0.9 11,349 10,198 -10.1 5.3 4.7 -0.6 MINI 406 274 -32.5 0.4 0.2 -0.2 808 710 -12.1 0.4 0.3 -0.1 Mitsubishi 260 251 -3.5 0.2 0.2 0.0 520 460 -11.5 0.2 0.2 0.0 Nissan 4,041 4,180 3.4 3.6 3.7 0.1 7,755 7,344 -5.3 3.6 3.4 -0.2 Polestar 71 179 152.1 0.1 0.2 0.1 151 286 89.4 0.1 0.1 0.0 Porsche 1,282 1,127 -12.1 1.1 1.0 -0.1 2,474 2,231 -9.8 1.2 1.0 -0.2 Ram 1,161 660 -43.2 1.0 0.6 -0.4 2,111 1,503 -28.8 1.0 0.7 -0.3 Rivian 403 917 127.5 0.4 0.8 0.4 689 1,442 109.3 0.3 0.7 0.4 Subaru 3,214 3,044 -5.3 2.9 2.7 -0.2 6,760 6,123 -9.4 3.2 2.8 -0.4 Tesla 17,360 14,171 -18.4 15.4 12.6 -2.8 30,111 27,077 -10.1 14.1 12.6 -1.5 Toyota 15,320 18,066 17.9 13.6 16.1 2.5 30,968 34,615 11.8 14.5 16.1 1.6 Volkswagen 2,282 2,244 -1.7 2.0 2.0 0.0 4,540 4,504 -0.8 2.1 2.1 0.0 Volvo 1,005 1,004 -0.1 0.9 0.9 0.0 1,799 1,977 9.9 0.8 0.9 0.1 Other 432 785 81.7 0.4 0.7 0.3 793 1,391 75.4 0.4 0.6 0.2 Data sourced from Experian Automotive. Top 10 in percent change are shaded yellow. Los Angeles Auto Outlook 11
The Greater Los Angeles New Car Dealers Association (GLANCDA) hosted several notable events this past spring, drawing significant participation from the local automotive community. Highlighting the season was a two-part high school automotive student technician competition, which saw 18 high schools from across Los Angeles County compete. The written portion of the competition took place in late March at Longo Toyota, where students demonstrated their theoretical knowledge. The hands-on portion followed in April at Cerritos College, challenging students to apply their skills in practical scenarios. This competition showcased the impressive talents of young aspiring technicians and underscored GLANCDA’s commitment to fostering the next generation of automotive professionals. In conjunction with these events, GLANCDA held its annual member meeting and luncheon in late March, hosted at the Universal Sheraton. The gathering attracted nearly 300 attendees, including representatives from dealerships throughout the county. This event served as a significant networking and informational opportunity for industry professionals. One of the highlights of the luncheon was the recognition of LA Car Guy Dealer Mike Sullivan, who received the prestigious Lifetime Service Award. This honor celebrated Sullivan’s enduring contributions to the automotive industry and his community. Additionally, the luncheon featured a keynote address by Father Greg Boyle of Homeboy Industries. His inspiring speech focused on themes of social justice, community building and the importance of providing opportunities for at-risk youth, aligning with GLANCDA’s values of community support and engagement. Q1Achievements and Milestones 12
GLANCDA’s spring events not only celebrated industry achievements and milestones but also underscored the importance of education, community involvement and professional excellence in the automotive sector. Additionally, GLANCDA continued its workforce development efforts by awarding grants to Cerritos College and Citrus College Automotive programs. These grants helped fund a toolbox and tools for the top students in their graduating classes. GLANCDA will continue this support throughout the year at other automotive programs throughout the county. GLANCDA has also been at work identifying local elected officials campaigning for office who embrace the values and vision that GLANCDA believes will best serve the entire membership. Participating in roundtable discussions and attending informational fundraisers are routine parts of this process. Continuing to advocate with current state and local legislators on policy matters that impact dealers is the work at hand. In early June, GLANCDA was represented as part of a delegation of business leaders with an organization called BizFed. This group spent two days in Sacramento and focused on some top-of-mind issues such as PAGA and CEQA reform, Measure HLA, and supporting and opposing other bills that impact the business community. Overall, GLANCDA’s spring events not only celebrated industry achievements and milestones but also underscored the importance of education, community involvement and professional excellence in the automotive sector. Take a look at the pictures on the following pages for a glimpse of the great quarter we’ve had! 13
HIGH SCHOOL Automotive Competition 14
15
GLANCDA Annual Luncheon 16
17
This article covers some general concepts about managing dealership vendor agreements and provides suggestions on areas to cover when negotiating these agreements. In the normal course of operations, an automobile dealership is a party to many types of vendor agreements, such as those relating to dealer management systems (Reynolds, CDK and others), uniform and laundry services, janitorial services, credit card services, employment management systems, environmental health and safety compliance, privacy compliance, warranty processing, customer relationship management, copy machines, postage machines, information services, key tracking, alarm services, telephone systems, Carfax, landscaping, body shop agreements, signs, content providers for websites, website maintenance, digital marketing, advertising and F&I products. These are just some of the many vendor agreements dealers have. Dealers are sometimes surprised to discover how many agreements they have, and their cost. What is sometimes even more surprising is the length of time many contracts run. Dealers can determine what vendor contracts they have by looking at their payables general ledger or subledger, which should identify the agreements. The dealer should have a complete signed copy of each agreement. For ease of access, it is good to have all vendor agreements in one file or computer folder. Often, dealers cannot locate complete, signed copies of the vendor agreements. In that case, it is best for the dealer to contact the vendor and ask for a complete copy. Dealers are often reluctant to do this, believing that vendors will speculate that a buy-sell is being considered. To alleviate this concern, dealers sometimes tell vendors they need copies of the agreement because they are doing an audit of all existing agreements and establishing a contract management system. Each agreement has a specific term showing how long the agreement is effective. It is very common for vendor agreements to contain an “evergreen clause.” An evergreen clause means the agreement automatically renews for a specific period (often the same period as the initial agreement, or longer) unless the dealer gives notice to the vendor within the time specified in the agreement that the dealer is terminating the agreement. Unless a dealer has a system that flags the time when the dealer must give this advance notice, such an “evergreen” renewal may occur. It is very easy for a dealer to miss the advance notice and be stuck for a long term, thus the term “evergreen clause.” Most vendor agreements also have a notice provision that describes to whom notices are to be given and the way they are to be given, such as by overnight delivery, certified mail or another method. It is important that any notices required by the agreement be given in the manner prescribed in the agreement. In a buy-sell of a dealership, vendor agreements are always a somewhat difficult issue. The seller will have agreements with terms that sometimes extend for years beyond the close of the buy-sell. If they are not assumed by the buyer, the seller will be responsible for them and must buy the agreement out or continue to make payments. The agreements the buyer will assume should be included in the sale agreement. It is a mistake to leave this issue open for determination by the buyer and seller after the agreement has been signed because disputes often arise about what agreements the buyer will assume. The time to resolve this is before the sale agreement is signed. The reality, however, is that many parties choose not to address this issue at the time of signing the buy-sell agreement and leave it to be determined during the buy-sell process. If the sale occurs by a stock purchase, rather than an asset sale, the Dealership Vendor Agreements Roadmap By Joseph Berberich, Manning, Leaver, Bruder & Berberich LLP MANNING LEAVER LEGAL LANE 18
buyer of the stock will be assuming all existing agreements unless they are excluded by the agreement. Most dealership sales are by asset purchase agreements, not stock sales. In handling vendor agreements that are not being specifically assumed by the buyer in the buy-sell agreement, the agreement sometimes provides that the buyer will agree to also assume vendor agreements that, for example, cost less than $500 a month and can be canceled with a 90-day notice. For all vendor agreements that won’t be assumed by the buyer in the sale agreement, the seller should give notice to the vendors that agreements will be terminated at the earliest date allowed by the vendor agreement. Sometimes vendors will allow the agreement to be terminated on the date of the sale closing, or will at least agree to a reasonable termination date or buyout of the agreement, considering the business relationship the dealer and vendor have had over the years. To be ready if the time comes when a dealership will be sold, it is a good practice to insist with every vendor when the vendor agreement is signed, or amended, that there be a clause which will give the dealer the right to terminate the agreement on the close of a buy-sell. Such a clause might read: “Notwithstanding anything to the contrary in this agreement, or any amendments or extensions of it at any time after the date of the agreement, if the dealer determines to sell the dealership, the dealer may terminate this agreement by notice to (name of vendor) not less than 30 days before termination, with the termination to be effective the later of the closing date of the dealership sale or 30 days after the termination notice.” Dealers are advised to obtain their own legal counsel about the use of such a clause. Most vendor agreements have been carefully drafted by attorneys for the vendor and include favorable language for the vendors. The vendors will say company policy does not allow for any changes. A dealer’s response to objectionable provisions can be that if the vendor wants your business, some changes must be made. The ultimate decision on objectionable provisions will depend on the negotiating leverage of each party, the size and scope of the transaction, the risk tolerance of each party, and which party is likely to breach the agreement. The following is a checklist that highlights some areas of vendor agreements that need to be considered: Description of Parties and Effective Date. The parties should be identified by their legal names. The effective date of the agreement should be clear. Scope of Services or Products. This section of the agreement should clearly describe in detail what the vendor is providing. Pricing and Payment Terms. The pricing and payment terms, including any taxes, should be clearly provided. The due date of payments should be stated. Any late payment penalty should be reasonable. Definitions. Some agreements will include a list of definitions that will affect the terms of the agreement. Any definitions should be carefully reviewed to show how they impact the agreement and to make sure they are consistent with the terms of the agreement. Reference To Other Documents. Attachments to the agreement must be reviewed. Some agreements will provide a website link that contains part of the agreement which must also be carefully 19
reviewed. A dealer should object to any unfair provision in the agreement that binds the dealer to any changes on the website document whether or not the dealer is aware of or consents to the changes. When possible, it is a good practice to remove references that incorporate documents that are not attached to the vendor agreement, such as agreements on the vendor’s website, and to instead attach those to the vendor agreement so the terms of the entire agreement are clear. Term and Termination. The term of the agreement and termination date are very important provisions. Vendors want to bind the dealer to as long a term as possible. Dealers who don’t pay attention to these provisions will find themselves locked into a term that is far longer than anticipated. A good position for the dealer is to have an initial term that is as short as possible, with a provision that when the term ends, the agreement is terminated, but if the parties continue with the agreement, it goes on a monthto-month basis and can be terminated by either party on 30 days’ notice. A dealer may want to lock in good pricing for a longer period, but when that period ends, the contract goes month-to-month. The dealer should avoid an evergreen clause discussed above because of the risk of failing to give proper notice that would terminate the agreement and prevent the evergreen term from going into effect. Some agreements allow a party to terminate the agreement for convenience at any time without providing a reason. Representations and Warranties. There are usually representations and warranties in vendor agreements whereby each party states that certain matters are true. These create claims against a party if any representations are inaccurate or are breached. The scope and language of the representations are determined by the nature of the agreement, and the dealer should carefully review its representations and warranties to ensure they are true, accurate and reasonable. Compliance With Laws. Every vendor agreement should have a compliance with laws section that provides that the vendor will always comply with all federal, state, local laws, ordinances and regulations applicable to the agreement and the vendor’s business. Indemnification. Vendor agreements should have an indemnity provision which is an agreement to hold the other party to the agreement harmless from certain costs, expenses and damages. It is a risk-shifting tool that can be drafted to cover liability for third-party claims and direct claims of one party against the other. Indemnity clauses should protect both parties to the agreement and should cover all losses of the indemnified party, including attorney and expert witness fees. Vendors typically draft indemnity provisions to be one-sided in the vendor’s favor. Moreover, it is a common practice for vendors to limit their liability under any indemnification they offer as discussed below, so indemnification provisions need to be read in concert with limitation on liability provisions. Limitation on Damages. Vendor agreements presented to dealers will almost always have a provision that severely limits the amount of damages that can be claimed against the vendor if the vendor breaches the agreement. It is not unusual for the limitation clause to state that the vendor will not be liable for any indirect, punitive, incidental, special or consequential damages. In addition, some agreements further provide that any damages suffered by the dealer will not exceed the amount paid to the vendor by the dealer over a defined time period, or some similar unreasonable limitation. In responding to these types of limitations, the dealer should consider what damages would occur if there were a breach and then negotiate a provision that would compensate the dealer for those damages. Damages because of a breach can include lost profits and ideally the limitation clause should not exclude those damages. Most vendor agreements have been carefully drafted by attorneys for the vendor and include favorable language for the vendors. 20
“We have a fantastic relationship with the LSL team. They keep our interests top of mind and maintain a positive reputation in the industry.” —Craig Whetter, President | David Wilson Automotive Group (relationship since 1983) Donald Slater, CPA, Partner Assurance & Advisory donald.slater@lslcpas.com Adam Odom, CPA, Partner Assurance & Advisory adam.odom@lslcpas.com David Myers, MST, CPA, Partner Tax & Advisory dave.myers@lslcpas.com LSL | CPAs & Advisors | Brea, Laguna Hills, Sacramento & Santa Ana, CA | The Woodlands, TX | lslcpas.com/automotive | 714.672.0022 Negligence, Gross Negligence and Willful Misconduct. Vendor agreements will sometimes state that the vendor is not liable for any negligence of the vendor, but rather that the vendor is only liable for conduct described as gross negligence or willful misconduct. This language might be found in the sections of the agreement regarding indemnification, the representations or in some other place. Ordinary negligence is a violation of a reasonable standard of care. Gross negligence is a departure from the reasonable standard and requires conduct which is blatant and reckless. Vendors should be liable for their ordinary negligence, not just liability for gross negligence or willful misconduct. Liquidated Damages. Some agreements have a liquidated damages clause. Liquidated damages are a fixed dollar amount a party breaching the agreement owes to the other party. Parties sometimes negotiate an amount of liquidated damages where it is difficult to estimate what damages a party would suffer if there were a breach. In some instances, liquidated damages can work if the parties make a reasonable attempt to determine the amount that would compensate a party for a breach of the agreement. Force Majeure. Force Majeure is a French term that literally means “greater force.” It relieves parties to the agreement from liability under the agreement due to events beyond their control, sometimes called “acts of God” such as natural disasters, war, pandemics and the like. A force majeure clause is a standard contract provision and should clearly define the events that are considered force majeure. Insurance. If the agreement provides for vendor services which could cause some type of injury or damage, there should be a provision requiring the vendor to provide proof of insurance to cover any liabilities the vendor may have to the dealership and naming the dealership as an additional insured. Audit Rights. There may be a need for a section in some agreements allowing the dealer to audit the vendor’s services. These rights can include access to books, records and other items to verify the vendor’s compliance with the agreement. Confidentiality and Privacy. If confidential matters must be disclosed in certain vendor agreements, it is important to have a confidentiality clause. The clause should describe what is confidential, specify the obligations of the vendor regarding the confidential information, and how the information will be returned to the dealer when the agreement terminates. Many vendors give themselves the right to use customer data for their own purposes. Dealers should resist provisions that allow this. The agreement should ensure that the vendor will comply with all customer data privacy requirements. Notices. There should be a notice section in the agreement stating to whom and where notices are to be sent and the way they are to be sent. Governing Law and Jurisdiction. Many vendor agreements require that if there are any legal disputes over the agreement, the law of the state chosen 21
by the vendor applies and that disputes must be litigated in that same state. This language should be resisted. If a business chooses to do business in California, California law should apply to any dispute and the matter should be litigated in the county where the dealer does business. Entire Agreement. Every agreement should have an “entire agreement” clause. This is a clause that basically states there are no other agreements between the parties other than those stated in the agreement. It is also known as a “merger” or “integration” clause. Dispute Resolution. Every agreement should address how disputes under the agreement will be resolved. This is usually done by court litigation, mediation or arbitration. It is usually best to have a clause that provides that the prevailing party in any legal action will recover attorney and expert witness fees spent pursuing or defending the action. If the agreement requires arbitration of disputes, it is good to have a provision that the arbitrator is bound to follow the law in making decisions because, for example, in California arbitrators are not required to follow the law and can apply their own sense of justice in their decisions. California also has a method of dispute resolution called “judicial reference” which is akin to a private court action that proceeds in the same manner as a court proceeding and is often presided over by a retired judge. Judicial reference requires that the hearing officer follow the law. It also allows an appeal of the decision. Counterparts. There should be a provision allowing the agreement to be signed in counterparts (signatures not all on the same page) and that copies of the signed agreement will be treated as originals for all purposes. Signatures. The signature area of the agreement should include the legal name of the party, the signature of the person signing on behalf of the party, and the printed name and title of the person signing. The signor should not sign as an individual unless that individual has agreed to be personally responsible for obligations under the agreement. Attachments and Exhibits. Ensure that all attachments and exhibits referred to in the agreement are physically attached to it. Manning, Leaver, Bruder & Berberich LLP is a Los Angeles law firm that practices throughout California and has been in existence for over 100 years. It has a strong automobile dealer practice covering all areas related to the automobile dealer industry, including dealership buy-sells, real estate transactions, business and consumer litigation, regulatory compliance, dealer association law and franchise law. See www.manningleaver.com for more information and areas of practice. Nothing in this article may be considered as legal advice. Contact legal counsel for legal advice. EPICBROKERS.COM ©2024 Edgewood Partners Insurance Center. All rights reserved. | CA License: 0B29370 EPIC Insurance Brokers & Consultants is proud of its partnership with more than 300 California dealerships and is the CNCDA’s only licensed broker for health insurance and employee benefits. As the dealers’ consultant, experience what EPIC can do for you, including: • A team producing significant results with decades of experience understanding the specific needs of dealerships • Fully insured and unique alternative funding options to best fit your needs and generate the best possible costs • Full compliance services and HR support for your team LEARN MORE ABOUT OUR SERVICES BY CONTACTING: Alison McCallum (949) 422-6431 alison.mccallum@epicbrokers.com 22
Are you 100% sure your dealership is fully compliant and not at risk for significant penalties and fines? Compliance is a constantly moving target and the penalties associated with non compliance are very significant. When was the last time your dealership had a compliance audit? EPIC provides comprehensive consulting services and indepth education regarding the ever-changing employee benefits compliance landscape. I work with our Compliance team who continuously monitors critical federal legislative, regulatory and judicial developments to provide timely, practical guidance to our dealerships. We effectively guide dealerships through an array of complex compliance requirements. EPIC strives to ensure that our clients thoroughly understand their compliance obligations by distilling complex information into easy-tounderstand guidance that includes any required action steps. Our goal is to enable our clients to establish a compliant culture that minimizes exposure to penalties and plan audits. We are here to help identify and address your dealership’s compliance needs through: • Strategic Affordable Care Act (ACA) advice, including financial and administrative impact analysis. • Practical day-to-day ACA, ERISA, HIPAA, IRC, COBRA and insurance mandate guidance. • Client-specific planning, implementation, administration and remediation support as needed. • Tools and documents to address regulatory requirements. • Processes and procedures aimed at Department of Labor audit avoidance, preparation and assistance. • Customized compliance-related employee communications. If you would like more information, or a compliance review, EPIC will provide details to GLANCDA members at no cost. EPIC ranks among the top 15 retail insurance brokers in the United States and is the largest insurer of auto dealers in the state. Alison McCallum has been in the employee benefits industry for over 20 years and personally works with more than 80 California Dealerships. She is a principal with EPIC insurance Brokers and Consultants, the CNCDA’s only licensed employee benefits broker. With this partnership EPIC offers unique dealership expertise and services available to GLANCDA dealer members at no cost. If you have questions or would like further information, please feel free to contact her at (949) 417-9136 or alison.mccallum@epicbrokers.com. Ask Alison IS YOUR DEALERSHIP COMPLIANT? By Alison McCallum, EPIC Insurance Brokers and Consultants 23
Automotive Buy-Sell Market — As Hot as EVER! By Jayson Crouch, Managing Director, Haig Partners As an LA native and managing director at Haig Partners, I am thrilled to contribute to this edition of the Greater Los Angeles New Car Dealer Association (GLANCDA) newsletter. Haig Partners has facilitated the purchase or sale of over 580 dealerships, including 60 in California and 28 that qualify for the Automotive News Top 150 list, with an industry transaction value exceeding $11 billion. We recently set records for the highest values ever received on an individual brand basis with the sale of Toyota of North Charlotte, South Vista BMW, South Vista Honda and Lake Norman Chrysler Jeep Dodge. Additionally, we achieved the highest value ever for any individual store with the sale of Hendrickson Toyota in Coconut Beach, Florida. The LA market has the potential to set records, too! The Buy-Sell Market is Wide Open! An estimated 151 dealerships traded hands in Q1 2024, marking the highest volume for a Q1 on record. Private dealer groups conducted more than 87% of these transactions. Haig Partners represented almost 20% of the industry’s transactions, and based on our pipeline, we expect this hectic pace to continue. Dealerships deliver outsized return on investment for skilled operators, and the industry remains flush with cash from pandemic profits. This elevated capital and low leverage across our industry drive great demand for assets matched with the right market. Although profits have declined from the peak of 2022, it’s important to recognize that 2022 was more of an anomaly than the percentage declines we see today, and average dealer profits remain significantly elevated over the pre-pandemic period. Financial and Franchise Performance The average store owned by a public dealer group saw a 26% decline in pre-tax income year-over-year during the first quarter. Over the past 12 months, the average public dealership generated $5 million in pre-tax income, reflecting a 6.2% decrease from year-end 2023 and a 25.7% decrease from year-end 2022. We believe profits will continue to decline throughout the remainder of 2024. However, these averages can obscure trends occurring at the franchise level, where we are noticing growing variation in dealership performance. Lexus, Toyota and Honda profits have remained high, partly thanks to tight days’ supply. Conversely, owners of Stellantis, Nissan and Infiniti dealerships have seen profits drop by more than 50% year-over-year. It’s important to note that all franchises go through phases, and an underperforming brand today could present a valuable opportunity tomorrow. The key is matching the right brand to the right market and aligning it with your strategy. We estimate that the average blue-sky value of a publicly owned new car dealership was $19 million in Q1 2024, representing a decline of 5% from year-end 2023 and 18% from 2022. Blue sky values may continue to decrease throughout 2024 at a rate of 1-2% per month. Despite this decline, the implied blue-sky values for stores owned by public companies remain closer to peak today than in 2019 because buyers expect dealership earnings to stay elevated for the foreseeable future. Additionally, the high demand for dealerships — and consequently, their prices — remains robust due to the significant incremental cash flow dealers have generated over the past few years, leaving them with ample funds to invest. The right brand in the right market will still capture peak valuations. 24
Toyota holds the largest market share in Los Angeles, followed by Honda. In the luxury segment, BMW leads, followed by Mercedes and Lexus. Each of these brands has a higher market share in Los Angeles than nationwide, indicating a strong market alignment. These stores will command strong values when they come to market, and only the most competitive bids will win these deals. With the market being this competitive, how do you bid to capture a deal? Competitive bids are usually a function of franchise multiples and the last 12 months of adjusted earnings or a net-to-sales proforma. California and LA Market When speaking with dealers and investors nationwide, concerns sometimes arise about investing in California due to the legislative environment, high taxes and high real estate values. While these factors impact return on investment, public and private buyers view these opportunities differently. A skilled advisor with consistent deal flow can navigate these complexities and execute transactions effectively. The market is characterized by higher real estate values and comparatively higher taxes. Still, we can partner with our associations to help drive favorable legislative changes. GLANCDA and CNCDA achieved an excellent win for the dealer body by passing AB 473. Several tenants to this bill protect the rights of the franchise network, including preventing manufacturers from introducing new vehicle brand names that would directly compete with their dealers, establishing cost sharing on customer-facing DC fast chargers, and placing limitations on post-sale subscriptions for features already in the vehicle. The Private Attorneys General Act (PAGA) is the next big issue. Modifying this act will increase the desirability of dealerships across the state. The Greater LA market remains a hotspot for the AI revolution, venture capital and new business starts while being home to a dense, affluent population that drives — a lot! We recently observed a sizeable public acquisition in our neighboring Orange County, and we have significant interest and success from family office and private equity investment in LA market auto retail. These sophisticated investors recognize the value and potential of this market. I recently interviewed Brian Maas, president of CNCDA, on our Haig Partners Podcast — Riding Shotgun. We discussed the value of operating in California and how the upside far outweighs the perceived challenges. The episode will be published soon, so stay tuned! The Greater LA Market is competitive and nuanced; it remains an exciting time to be a dealer. With the cost of new vehicles rising and interest rates staying “higher for longer,” having a robust economy in our backyard is a distinct advantage. To download the Haig Report, scan the QR code. https://share.hsforms.com/ 1fnbTWTXWSluBA5sfd77sjgnr2vn 25
In the auto industry, there is a gap between the number of women in leadership and those who buy cars. Maintaining that discrepancy is risky because it shows a lack of innovation when serving the market. Interestingly, women buy 62% of all vehicles today. Even if they don’t purchase directly, they influence 85% of car-buying decisions. Yet, while more women are in automotive leadership roles than ever, the statistics are still not great. According to Deloitte’s recent study, women account for 47% of the labor force but only 27% of the auto-industry workforce, even though those who do really enjoy it (Women at the Wheel study). The 330 women surveyed, also in a study by Deloitte and Automotive News, have an average tenure of 15 years at the same company and over 26 years in the industry. More than 80% are senior managers (directors, vice presidents and other C-suite occupants), and almost 60% are in marketing, sales, operations or product development. In most industries, women prefer conducting business with other women. Whether it’s their banker, doctor, lawyer, psychologist or salesperson, most women want to deal with the same gender because they feel more heard than when dealing with a man. Even though most women have done their research, they want someone who can understand them and listen. Can a man do this? Absolutely! But sometimes, women need to see another woman in the business before they will walk through the door in the first place. So why are there not more women in our industry? From the day in 1882, when Bertha Benz became the first person to complete a long-distance automobile trip, women have popularized the automobile and staged and led many noteworthy developments. There are many reasons why the auto industry fits well with women, and perhaps we all need to do a better job of highlighting those: 1. It’s a great industry for a career change. Many people find the need to switch careers, and the auto industry is an exceptional place to land. For many women looking to return to the job market after a leave of absence, the auto industry has many soft-skill jobs that offer a solid career path, from accounting to finance and beyond. 2. The opportunity to learn new skills. The auto industry offers a wide range of positions, each requiring specific skills to be learned and mastered. 3. A wealth of lateral job moves. Not all job moves need to go straight up. The auto industry has many opportunities that zig-zag, yet they still allow for growth. 4. Charting a career path. The auto industry offers excellent opportunities for advancement. It’s a matter of being observant, asking questions and seeking out the opportunities that arise often in most dealerships. One of the best approaches to success in the auto industry is developing a strong network of allies, mentors and good people to know. And I think there’s no better industry than the automotive industry to start your network. Most dealer principals have more than one story about the people who taught them the business and set up their career trajectory for success within the business — and they typically want to return the favor. Another great source for your network is tapping into your vendor relationships, especially if you already work in the auto industry. Strong vendor partnerships are among the greatest strategic growth tactics and best practice resources available to nearly every industry, including the auto industry. By collaborating with suppliers and vendors, within the framework of a true partner relationship, you can multiply success and profits exponentially. And the best part? Everyone benefits. A genuine mutual relationship that promotes problem-solving is an advantage for profit margins and creates a more productive and engaged organization that focuses on quality outcomes. While this should be a best practice for everyone, it’s especially important to women in the auto industry. As women in the auto industry, it’s important to identify what resources you need to do your job successfully, what resources influence your job area and what resources can further your career and connect with them. Climbing the Automotive Industry Ladder of Success By Sharon Kitzman, Dominion DMS 26
www.thenewslinkgroup.orgRkJQdWJsaXNoZXIy MTg3NDExNQ==