Deciding to start a used car dealer franchise is a huge decision, and one that shouldn’t be made lightly. One of the first questions you’ll ask yourself is: “how do I get started?” While starting a franchise might be easier than building a new business from scratch, that doesn’t mean the process isn’t daunting. From learning the industry to the investment cost, pre-opening support, your grand opening, and continuing education to stay abreast of industry trends, there’s a lot to wrap your mind around when you start a franchise. We’re here to make the process a little less daunting, and ease your transition into our franchise family.
What Costs Can I Expect When I start a Car Finance Franchise?
When you start an auto loan franchise with Byrider, you will need a credit line of approximately 5,000,000 dollars when your portfolio of receivables reaches maturity — normally a three-year time frame.
The initial franchise fee is 50,000 dollars, with 35,000 dollars required for each additional franchise purchased. However, there are many other costs associated with acquiring a suitable location, such as hiring employees, and properly funding your business. Since your franchise could ultimately generate a $10 million portfolio of automotive receivables, it is important to understand that the capitalization needed from a new franchisee can easily reach 1 million dollars.
It’s also important to note the monthly royalty fee, which is 2.5% of gross sales (vehicle sales price) and 1% of gross receipts (repayment of debt). Monthly royalties are capped at 12,000 dollars. Royalty caps decline with the opening of additional locations.
Byrider Franchising does not directly provide, or guarantee, any financing to its franchisees, but we do maintain relationships with many banks and lending institutions that are familiar with both the financing of subprime automotive receivables and our particular business model. We are happy to help make introductions to those lenders.
Other than the information contained in our Franchise Disclosure Document, Byrider does not make revenue or profit forecasts when you start an auto loan franchise with us. Results are subject to far too many variables such as market demographics, competition, the level of capitalization in the business, and the effectiveness of management in executing the business plan to provide an accurate prognosis.
The Franchise Disclosure Document provides more detailed information regarding the fees, contractual relationships with Byrider Franchising, Inc., and the corporately-owned units profit experience. Please refer to that information for a more detailed understanding of the franchise offering and business model.
What Does the Process Look Like?
The process of starting a used car dealer franchise is multifaceted and can seem daunting, but it’s easier than you think – especially with our help. We lay out each step in the process clearly, in advance, so franchisees know exactly what they’re getting into.
Your first step is making a trip to our corporate headquarters in Carmel, Indiana, for Discovery Day. This is a day for you to meet the senior management team, learn insightful information from each department head, and view the phenomenal expertise available to you within the Byrider franchising system. This is your opportunity to learn everything you can about this small business franchise and be able to ask questions of some of the highest-skilled and most-experienced people in this industry.
When you are approved as a franchisee, we will prepare franchise agreement documents along with an area development agreement if you wish to gain rights to a larger territory for additional store development. Once you sign a franchise agreement, we will help you through the steps of finding financing for your new venture, acquiring the appropriate real estate, gaining the knowledge to successfully operate your new business, and helping you open your new unit.
It can generally take between nine to 12 months to open a used car franchise. Many factors influence the timing for development of a dealership. Your commitment to finding and developing a site is the main key to opening a store quickly. Your ability to obtain financing will help to limit delays as well.
Once you do open your business, you won’t simply be floating out there in the auto world by yourself, disconnected from the rest of the franchise community. Byrider franchisees meet three times each year. In addition to an annual convention in November — featuring an update on the state of the company, an opportunity to participate in a variety of instructional seminars, and a chance to network with fellow dealers — franchisees gather in early spring and late summer. The spring and summer meetings address new information, procedures, and systems provided by Byrider Franchising. They also serve as forums for policy development for the Dealer’s Association, and the sharing of ideas for process improvement and profit maximization.
“As a new car dealer, it was great to have Byrider share their proprietary technology and best practices. The support is fantastic.” ~Aaron Zeigler, multi-unit franchise owner, Michigan/Illinois