What Manufacturer Approval Means for Your Sale Timeline
When a dealer principal signs a Letter of Intent, blue sky value guide it is natural to start counting days to closing. In a franchised store, though, the calendar is not set only by the buyer and the seller. The manufacturer has to approve the incoming operator, and that review shapes the whole timeline. A good dealership buy sell advisor plans around it from the first conversation, not after the paperwork is signed.
MD Johnson, Inc., the sell-side advisory firm at mdjohnsoninc.com, lists due diligence and factory submission as the fourth of its five steps, after valuation, strategy and buyer management, and before an onsite closing. Seeing approval as one stage in a sequence helps owners set realistic expectations with family, managers and lenders.
Why the factory has a say at all
A franchised dealership operates under a sales and service agreement with each brand it sells. Those agreements usually give the manufacturer a right to review and approve a new owner or operator. The factory wants to know the buyer can capitalize the store, meet facility and performance standards, and represent the brand well. The details differ by brand and by state franchise law, so your attorney should read the specific agreements early.
For the seller, this means a signed deal is not yet a closed deal. Until the factory says yes, the transaction is still conditional.
How a dealership buy sell advisor builds the timeline
The practical job is to work backward from the approval stage. Several things tend to slow it down, and most of them can be prepared in advance:
- Buyer qualification. A buyer with existing stores of the same brand may have an established relationship with the factory. A first-time buyer may face a longer review. Qualifying buyers before sharing confidential details saves time later.
- Complete submission packages. Manufacturers ask for financial, ownership and operating information about the buyer. Gaps or slow responses can add weeks.
- Facility questions. If the brand has image or facility expectations, the buyer may need to commit to a plan. That conversation is easier when it is raised before the Asset Purchase Agreement is final.
- Right of first refusal. Some agreements give the manufacturer rights that can affect who ultimately buys. Counsel should flag these before the LOI stage.
- Multi-brand stores. Each brand may run its own review. Two franchises can mean two separate approval tracks moving at different speeds.
What the seller can do during the wait
Approval periods are not idle time. Store performance still matters, and buyers notice if the business drifts. Keep these points steady:
- Run the store as if you are keeping it. Sales, fixed operations and customer satisfaction should not slide.
- Protect confidentiality. Staff and vendors should hear about the sale on a plan, not through rumor.
- Keep working with your CPA and attorney on closing items, such as real estate terms, inventory counts and the treatment of parts and used vehicles.
- Respond quickly to buyer and factory requests passed through your advisor.
The approval stage and closing
Once approval arrives, the remaining steps move faster when they have been prepared. A dealership buy sell advisor keeps the buyer, the attorneys and the CPAs on one shared checklist so nothing waits on the last day. MD Johnson describes a fifth step of onsite closing with the seller's attorneys and CPAs. In general terms, that is where final inventory, title work and funds come together. The firm also reports what it calls a "100% closing success" record; as with any advisor, owners should ask for the details behind such claims in their own interviews.
A realistic way to think about timing
There is no single standard number of days for manufacturer approval. It depends on the brand, the buyer, the market and how complete the paperwork is. Rather than promising a date, a sensible plan lists the stages, the documents each stage needs, and who is responsible. Industry groups such as the National Automobile Dealers Association are a helpful starting point for understanding the dealer-manufacturer relationship in general.
Quick questions
Can I close before the manufacturer approves?
In a typical franchised buy-sell, approval is a closing condition, so the answer is usually no. Your attorney can confirm what your agreements say.
Does the buyer or the seller handle the submission?
The buyer generally submits its own application, but the seller's side supports it with store information. An advisor coordinates both sides so nothing stalls.
This article is general information, not legal advice. Review your franchise agreements and timing with your own attorney.