If you are a budding entrepreneur who love automobiles then opening your own car dealership may be the perfect venture for you. But before you make the decision to invest in car dealership or open a new car dealership of Toyota or Hyundai or Ford, it is important to thoroughly research your options and have adequate financing in place. In this post you will find complete guide to open a Toyota Dealership or a new car dealership.
The initial cost to open a Toyota Dealership is $500,000. However, the price can vary according to the size of the dealership. In order to open a dealership up from scratch, you will require an investment of up to $11.3 million, including working capital, physical facilities, land and inventory. For qualifying to get a Toyota Dealership in your country, you need to apply for a new dealership, get dealer license and permits, surety bonds and register your business to sell Toyota Cars. You’ll find each of these points explained in detail below.
First of all you’ll have to decide what type of car dealership you want to open, whether you want to open used car dealership or New Car Dealership and plan for licensing fees, business set-up costs, location and inventory acquisition, and staffing requirements, accordingly. Since, we are discussing, how to get Toyota Dealership in post, we’re assuming that you want to open a new car dealership.
- The cost of starting a New car dealership is around $30,000 which does not include building, inventory and workshop equipment. If you include these costs a New car dealership franchise cost would be $150,000 – $250,000.
Brief History Toyota Motor Corporation
Toyota is a Japanese multinational corporation which is into automotive manufacturing, mainly cars and it also has a high-end luxury brand ‘Lexus’. It is headquartered in, Aichi, Japan and have over 364,445 employees all over the world. Toyota is the sixth largest company i the world by revenue. As at 2017, Toyota is the second largest automotive manufacturer in the world. Like every car manufacturer, Toyota also sells its cars through its dealership franchise network. If you want to get a Toyota car dealership franchise then here’s a complete guide on how to open Toyota dealership franchise and cost to start Toyota Dealership.
Toyota is a Publicly traded company and it’s Stock Symbols:
- TYO: 7203
- NAG: 7203
- LSE: TYT
- NYSE: TM
Interesting Facts about Toyota
- Toyota Motor Corporation was founded by Kiichiro Toyoda in 1937 as a division of Toyoda Automatic Loom Works. While the Toyota Group is now best known for its cars, they are still in the textile business as well.
- It’s monthly vehicle sales in the U.S. is approx. 207,000.
- Toyota makes most of revenues from Japan.
- Toyota first came to America in 1957.
- It has 15% U.S. car market share.
- Eighty percent of Toyotas sold 20 years ago are still on the road today!
- Toyota is the world’s leading manufacturer of hybrid vehicles, and there are more tan 1,700,000 Toyota hybrids on the road right now.
- For getting a Toyota Dealership Franchise cost is US $500,000 plus an overall investment of US $11.3 million is required to meet other costs.
- The largest Toyota Dealership in the U.S. is Longo Toyota in El Monte, California. It is over 50 acres in size and was selling over 20,000 vehicles in 2005.
- The first Toyota dealership in the United States was established on October 31, 1957.
Cost of Opening Toyota Dealership Franchise
The initial investment to open Toyota Dealership is US $500,000 and you will require an additional investment of up to $11.3 million to meet other costs such as working capital expenses, land costs, workshop equipment and inventory to open a Toyota Dealership.
Having such as huge market share in the automotive market, Toyota is an undisputed leader and sold around10.7 million vehicles between January and December 2019 across the world. Looking at the sales figures, we can why many entrepreneurs want to open a Toyota dealership franchise. No matter how lucrative this franchise might be but starting a Toyota dealership franchise is a lot more complex than simply starting your own dealership. However, you will find that it will be somewhat easier to be granted a Toyota franchise if you already have prior experience in running used car sales business or other forms of auto-related businesses.
The process of getting a Toyota dealership franchise is also quite competitive compared to other car companies. In addition to having experience in car sales business or automotive business, you must also have the sufficient capital to meet the investment requirements of Toyota Franchise and must have never been involved in any criminal activity. In addition, finding an available franchise in a choice location may also be a hurdle because Toyota only allows a certain number of dealerships in a geographical location. It’s same as any other car company dealership.
Here you can find Toyota Dealership across the world.
With growing competition in the global car market, the company has suffered some losses in its profits and therefore, Toyota has not set its focus firmly on global markets where it can get the best new franchise opportunities. Complete details about how you can get a Toyota dealership franchise and how much it cost to open a Toyota Franchise but first let’s check out some interesting facts about Toyota.
Here’s How you can Get Toyota Dealership Franchise in the U.S.
1. Prepare a Business Plan
The first step to get a Toyota dealership franchise is preparing a business plan which will be submitted to the company. A business plan will help to give you a sense of direction of where you would like to take you dealership and the route you would take. It will also help the company understand your business goals and experience.
In fact, drafting up a business plan can help you identify the potential flaws in your business, give you an in-depth look on your revenue stream potential and reveal your marketing needs to grow your business. In addition, a business plan is a must if you would like to seek for funding from almost any source whether bank loan or private investors.
2. Make an application to Toyota for starting a Dealership Franchise
In order to get a Toyota dealership franchise, you must first apply for it through the company. A prior experience in car sales business is needed for your application to be considered in addition to thorough knowledge of parts and service. If you have owned a car dealership previously, this can be quite helpful, though it is not necessary. Mostly, car companies including Toyota look for experienced franchise owners.
Also a college degree in business, marketing, finances or accounting can really help your application.
Another way to buy a Toyota franchise will be to first buy into a smaller dealer that sell a variety of cars including Toyota. This will help to boost your experience level, thereby getting your feet into the door for when you will apply for an exclusive Toyota dealership franchise. The list of available dealerships can be gotten through the National Business Brokers.
Here’s an Explanatory Video on how to get a Car dealership in the U.S.
3. Clean Financial and Criminal Background is required to get Toyota Dealership
Like it was mentioned previously, in order to be considered for a Toyota dealership franchise, you must have a clean criminal record. A thorough background check will be done to this effect.
Toyota will also carry out background checks to find out your credit histories, including if you have had any bankruptcies. Your credit records will however be obtained with your consent. If you had a criminal record or a poor credit history, then your application can be denied on those basis.
4. Check State Laws and Regulations
There are some states in the U.S. that regulate franchise sales. If you would like to buy an already existing Toyota dealership franchise in the United States, then it is advisable to call your Attorney’s office so as to know what the law says regarding franchising in your state.
5. Learn about Toyota Franchise Terms & Conditions
Before you buy a Toyota dealership franchise and signing an agreement with the company, you should try your best to find out as much information as possible. You can do this by talking to other owners of a Toyota dealership franchise; inquire about how much they invested, how long the business lasted before it started turning in profit, and how satisfied they feel about owning the dealership. Their experience will give you a lot of insight and help you move in the right direction to get a Toyota Dealership Franchise.
Also, go through the franchise terms carefully, sublease and any other applicable documents, such as relating to advertising payments, royalties, operating licenses, real estate improvements, training, legal fees, insurance and employee salaries and benefits. If you are stuck with a clause in the terms & conditions document that you do not fully understand, do well to ask Toyota to clarify it for you or take help from an attorney.
6. Hire a Franchise Lawyer
With any franchise there are binding legal terms and conditions that franchise owners may not understand completely and for this reason, owner should hire a lawyer. The franchise agreement will be drafted by Toyota so if you see anything that you consider to be undesirable, you will have to ask them to adjust it accordingly. This is where the service of a franchise lawyer comes in. They can help you to get the best possible deal and also advise you about the legal terms and conditions put forward by the Toyota.
7. Register your Car Dealership Business
Like any business, you will have to register your car dealership business in the U.S. and form an LLC or a corporation and get a Federal Tax ID for your dealership business. Here’s a complete guide to setting up a company in the U.S.
8. Dealer Licenses and Surety Bonds required to open Toyota Dealership
No matter whether you plan to open a new car dealership or an used car dealership, there are various other legal items and permits that you are required to obtain before you can operate a dealership such as:
- Dealer License: A car dealer is required to have a dealer license for each type of vehicle that he sells as per the state laws. Whether you sell used or new cars, trucks or any other type of vehicle, you will require a dealer license. The average cost for each is $100 to $200, however, in Texas the cost is around $700.
- Dealer Plates: Cars that are available for test drive purpose at a dealership need an attached dealer license plate. Average cost is $90 per plate.
- Surety Bonds: A surety bond is required for operating a car dealership as it provides a safety net for consumers, so they can be confident that their interests are protected while doing business with your company. Car Dealers are typically required to obtain a $25,000 surety bond. The cost of surety bond varies from 1 to 3 percent of the value of the bond, so you might pay around $250 to $750.
Latest News, Tweets and Updates from Toyota USA
How to Open a New Car Dealership Franchise?
As mentioned above, there are two types of car dealership options from that you can choose from New car dealership franchises are typically more costly to set up, and they operate on a larger scale. On the other hand Used car dealerships are run on a smaller scale and often work well as a small business, because they require less capital and lower operating costs.
As you know, new automobiles sales is regulated by the federal and state laws and all new cars must be sold through authorized company dealership only. You have to apply for a car dealership franchise opportunity to the car manufacturer of your choice, it could be a Toyota Dealership, Ford Dealership or Hyundai Dealership or any other and fulfil it’s requirements to get a dealership.
If a dealership does particularly well, it may branch out and have multiple franchises and have several locations selling different brands.
Cost of Starting a New Car Dealership
The initial investment costs for starting a new car dealership franchise is a costly affair. The initial franchise fee can range from $30,000 for Ford to $500,000 for Toyota Dealership or a Hyundai Dealership. The big five auto manufacturers offering franchises in the U.S. are General Motors, Ford, Honda, Hyundai and Toyota. However, Ford’s low dealership franchise fee does not include capital for a building, purchasing inventory or workshop equipment. Adding in those costs could bring the total initial costs up to $150,000 – $250,000.
Other Costs involved in starting a New Car Dealership
- Business Formation Fees – Business owners must form a business entity and then register for a business license with the state department of revenue. Legal fees for forming an LLC, a partnership or a corporation vary from state to state, but could be close to $1,000. The application fee for a business license will depend on the type of entity you’ve formed as well as your state. For example, in Texas the fees range from $300 to $750.
Startup Costs – Independent business owners must also plan for all their startup expenses. These will vary widely by not only state, but areas within each state. For example, a dealer setting up shop in a rural area can expect to pay less per square foot for a property and building, whereas a dealer in a metropolitan location will pay much higher rates. Some expected startup costs include:
- Rental property for displaying vehicles, including space for a garage and business office ($0.50 per SF to $4.00 per SF)
- Beginning inventory ($25,000 to $100,000)
- Computers, printers, phones ($4,000)
- Employees, including mechanic, salesperson, bookkeeper (three months’ initial salary)
- Advertising ($1,000)
- Business liability insurance ($50 per month)
General Terms and Conditions mentioned on FORM OF TOYOTA DEALER AGRMT. WITH TOYOTA MOTOR CO.
I. RIGHTS GRANTED TO THE DEALER Subject to the terms of this Agreement, DISTRIBUTOR hereby grants DEALER the non-exclusive right:
A. To buy and resell the Toyota Products identified in the Toyota Product Addendum hereto which may be periodically revised by IMPORTER;
B. To identify itself as an authorized Toyota dealer utilizing approved signage at the location(s) approved herein;
C. To use the name Toyota and the Toyota Marks in the advertising, promotion, sale and servicing of Toyota Products in the manner herein provided.
DISTRIBUTOR reserves the unrestricted right to sell Toyota Products and to grant the privilege of using the name Toyota or the Toyota Marks to other dealers or entities, wherever they may be located.
I. RESPONSIBILITIES ACCEPTED BY THE DEALER DEALER accepts its appointment as an authorized Toyota dealer and agrees to:
A. Sell and promote Toyota Products subject to the terms and conditions of this Agreement;
B. Service Toyota Products subject to the terms and conditions of this Agreement;
C. Establish and maintain satisfactory dealership facilities at the location(s) set forth herein; and D. Make all payments to DISTRIBUTOR when due.
FAQs about Car Dealership Franchise
- How much does a car dealership owner make?
A: The average Car Dealership Owner in the US makes $97,790. Car Dealership Owners make the most in San Francisco at $147,548, averaging total compensation 51% greater than the US.
- How much money do you need to start a used car dealership?
A: The initial cost to open a used car dealer license can run anywhere between $3,000 to $10,000 or more depending on your state.
- How much is the cost to Open Toyota Dealership in the U.S.?
A: The cost of Toyota dealership franchise is at least $500,000 in fee. Other costs for opening your first dealership could go up to US $11.3 million including working capital, physical facilities, land and inventory.
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