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Access to capital for African American automotive dealership acquisition

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Access to capital for African American automotive dealership acquisition

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Access to Capital for African American Automotive Dealership Acquisition
by
Andrew Mario Leone

Rossier School of Education
University of Southern California
A dissertation submitted to the faculty
in partial fulfilment of the requirements for the degree of
Doctor of Education

December 2022

© Copyright by Andrew Mario Leone 2022
All Rights Reserved

The Committee for Andrew Mario Leone certifies the approval of this Dissertation

Wayne Combs
Douglas Eugene Lynch
Lawrence Picus, Committee Chair

Rossier School of Education
University of Southern California
2022

iv
Abstract
This study evaluated the perspectives of successful African American entrepreneurs who work in
the automotive industry and who leveraged a manufacturer, captive lender, or bank program to
launch and grow their businesses. Qualitative research was conducted via interviews with nine
participating African American dealers with over 160 years of combined dealer ownership
experience in 28 various domestic U.S. and import franchises. Qualitative interviews also
explored participants’ experiences in obtaining capital and their unique contributions to the
industry and their communities. Results were analyzed in the context of the Burke-Litwin (1992)
model of organizational change. Meaningful support from original equipment manufacturers
(OEMs) and lenders was available to African American entrepreneurs at personal and individual
levels through various forms, including training, tools, management support, and networking
opportunities. Due to the limited supply of new dealer franchises, rising costs of dealership
goodwill, and limited access to capital, there are transactional barriers to dealer ownership for
African Americans. The primary recommendations are focused on the transformational factors
for leaders of lenders in partnership with relevant associations.
Keywords: automotive dealerships, access to capital, African American entrepreneurs

v
Dedication
To my wife Natalie, who has continued to support me, step by step, in all my endeavors, since
the day we first met.
To my two daughters, Tianna and Scarlett—the light of my life. If this work finds you in the
future, please know that my great hope is for both of you to have the opportunity to contribute to
making our world and universe a better place for all, as you pursue your dreams.
To the Lord my inspiration, who, in Matthew 12:26, tells us, “With God, all things are possible.”

vi
Acknowledgments
I would like to thank my dissertation committee: Dr. Wayne Combs, Dr. Douglas Lynch,
and Dr. Lawrence Picus. Thank you for all the support and guidance throughout the research
process, leading to completion. Dr. Lynch, thank you for your wisdom in helping me see the big-
picture themes, which were the foundation for the approach. Dr. Combs, thank you for your
support in identifying rich and deep qualitative insights while seeking to understand the lived
experiences and perspectives of others. Finally, Dr. Picus, it has been a pleasure to work under
you. Beyond all the feedback and learnings, I truly appreciate the passion and curiosity for
learning. I would also like to thank Randy Parker, Chief Executive Officer of Hyundai Motors
America, who planted the seed that blossomed into the research focus when he provided a
challenge: “If we don’t increase the diversity of our dealer network, we’re going to lose our
entrepreneurial spirit.” Finally, I would like to thank several colleagues who supported this
research, including Marguerite Watanabe, Mitchell Rosenberg, Tim Devine, Dawn Peters, and
Brian Fallon.

vii
Table of Contents
Abstract .......................................................................................................................................... iv
Dedication ....................................................................................................................................... v
Acknowledgments.......................................................................................................................... vi
List of Tables ................................................................................................................................. ix
List of Figures ................................................................................................................................. x
Chapter One: Overview of the Study .............................................................................................. 1
Background of the Problem ................................................................................................ 2
Statement of the Problem .................................................................................................... 3
Purpose of the Study ........................................................................................................... 4
Research Questions ............................................................................................................. 5
Significance of the Study .................................................................................................... 6
Limitations and Delimitations ............................................................................................. 7
Definition of Terms............................................................................................................. 8
Organization of the Study ................................................................................................. 10
Chapter Two: Literature Review .................................................................................................. 11
State of Diversity in the Automotive Industry and Benefits ............................................. 11
Structural Factors Adversely African American Entrepreneurs ....................................... 12
Impacts of Limited Capital Access on the African American Community ...................... 18
Factors Supporting Diversity, Equity, and Inclusion in Financial Services ..................... 22
Theoretical Framework ..................................................................................................... 27
Conceptual Framework ..................................................................................................... 30
Chapter Three: Methodology ............................................................................................ 32
Research Questions ........................................................................................................... 33
Research Design................................................................................................................ 33

viii
Sample and Population ..................................................................................................... 34
Instrumentation ................................................................................................................. 35
Data Collection ................................................................................................................. 36
Validity and Reliability ..................................................................................................... 37
Ethical Considerations ...................................................................................................... 38
Chapter Four: Results and Findings .............................................................................................. 40
Participating Stakeholders ................................................................................................ 40
Qualitative Findings .......................................................................................................... 44
Artifact Analysis ............................................................................................................. 105
Findings Related to Transformational Factors ................................................................ 122
Findings Related to Transactional Factors ...................................................................... 124
Findings Related to Individual and Personal Factors ..................................................... 127
Recommendations for Practice ....................................................................................... 128
Limitation and Delimitations .......................................................................................... 136
Suggestions for Future Research .................................................................................... 136
Conclusions ..................................................................................................................... 137
References ................................................................................................................................... 138
Appendix A: Interview Questions .............................................................................................. 151
Appendix B: Survey Questions ................................................................................................... 153

ix
List of Tables
Table 1: Characteristics of Interview Participants ........................................................................ 43
Table 2: Top OEMs by Market Share and Dealer Development DEI Statements ...................... 106
Table 3: Dealer Count by OEM and African American Ownership Mix by Year ..................... 110
Table 4: Minority Dealer Support by OEM ................................................................................ 112
Table 5: Estimated Capital Needs for an Average Dealership Acquisition ................................ 113
Table 6: Summary of Qualifications by Program Option ........................................................... 118
Table 7: Summary of Program Structure and Impact on Entrepreneur Capital Needs ............... 125
Table A1: Interview Questions ............................................................................................... 12552
Table B1: Survey Questions ................................................................................................... 12553

x
List of Figures
Figure 1: Conceptual Framework ................................................................................................. 31
Figure 2: Implementation Strategy Using the Kellogg Theory Approach Model ...................... 130

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Chapter One: Overview of the Study
Financial services firms are uniquely positioned to support positive business
outcomes, while lessening structural racism in the United States, via lending that
improves the diversity, equity, and inclusion (DEI) of dealer ownership by African
American entrepreneurs in the automotive industry. Through a presentation of key
statistics in their annual report, the National Automotive Dealers Association (NADA,
2019) demonstrated the importance of dealers to the wealth of communities: 17,000 new
vehicle dealers in the United States generated over $1 trillion U.S. dollars in revenue,
employed over 1 million individuals via $62 billion in payroll, and generated an average
annual profit of $1.4 million per rooftop. Data from the National Association of Minority
Automotive Dealers (NAMAD, 2015) showed dealers’ demographics do not reflect the
diversity of the nation, as African American entrepreneurs owned less than 2% of all new
vehicle franchises, despite comprising 13.6% of the population (U.S. Census Bureau,
2021).
Per Damon Lester, president of NAMAD, insufficient access to capital is a root hurdle
hindering growth in the number of African American-owned dealerships (McKinney, 2018).
This is an important issue because of the size and importance of the automotive sector and the
wealth gap. Weller and Hank (2018) found the median European American U.S. household
wealth of $142,000 was over 10 times higher than the median African American U.S. household
wealth of $13,000.
This dissertation explored positive cases, where lender programs, provided by banks or
manufacturer captive lenders, helped new African American entrepreneurs successfully launch
and sustain their dealer ventures. The framework for this analysis was the Burke-Litwin (1992)
2

model of organizational change, which looked at individual and organization performance based
on relations between the external environment, transformational, and transactional factors. In
addition, research efforts were made to quantify the pool of potentially qualified candidates in
need of funding and lender partnerships.
Background of the Problem
Friedline and West (2016) demonstrated that, unlike European Americans, wealth for
African Americans is related to self-employment. The primary issue for many African
Americans is not having sufficient internal capital to start a business, and they face more
obstacles in raising capital then their European American counterparts do. Using a statistical
sample of 21,200 small businesses from the 2003 Survey of Small Business Finances, Bohdan et
al. (2014) found underrepresented groups were subject to more serious capital constraints than
European American counterparts were, and as a result, underrepresented groups were less likely
to apply and obtain approval for loans. According to Bohdan et al.’s work, businesses from
underrepresented groups that did not apply for loans were less risky than those that successfully
obtained loans, as evidenced by adjusted debt-to-equity ratios, which were 18.4% less on average
compared to European American-owned businesses. Chatterji (2012) focused on the critical
deregulation case of the Marquette National Bank of Minneapolis v. First Omaha Service
Corporation (1978) and demonstrated the importance of improving capital access because
African American entrepreneurs’ confidence about control of credit access is positively
correlated to increased business starts.
Bowman (2016) examined the influences of human capital and social connections on
wealth and asset decision-making through interviews with 29 middle-class African Americans
from three metropolitan cites and found functional value in increasing knowledge and
3

connections. Furthermore, the research indicated when connections were not shared throughout a
community, some groups maintained excess power, while other groups, such as the African
American community, did not gain access to that power.
In their work on financial bricolage, Kariv and Coleman (2015) revealed African
Americans and European Americans commonly used micro sources of funding, such as friends
and family, during the early first year to launch businesses. Considering this common
environmental characteristic of all entrepreneurs, design tasks and achievement settings should
be applied to encourage entrepreneurial activity. Kariv and Coleman noted the major difference
between African Americans and European Americans in raising capital occurs after the third
year of operation, where firms must be able to raise funds through venture capital and banks,
versus micro sources. The ability to raise funds through venture capital firms or banks may not
be salient to the initial acquisition of a capital-intensive business, specifically a dealership, but it
is an influential factor for future growth.
Statement of the Problem
This dissertation focused on successful cases of African American automotive dealers
who leveraged manufacturer or lender capital programs to launch their businesses. It also
examined the unique contributions of the dealers to their respective communities. Automotive
manufacturers desire diversity of ownership in their dealer networks to foster innovation and
growth; however, they have struggled to increase diversity due to underrepresented groups’
capital constraints in conjunction with increased consolidation mergers and acquisitions from
public and large private dealership groups, leading to efforts by manufacturers to find new ways
to encourage investment. In addition, efforts were made to quantify the pool of qualified African
American dealer candidates in partnership with NAMAD, as dealer ownership provides a
4

meaningful path to close the wealth gap for African Americans and provides other social
benefits, such as job creation.
The literature review is comprised of industry context, regulatory environment, historical
precedent, and overall financial structural elements, including bias in credit reporting and usage,
and DEI issues in financial service firm management and leadership. The literature review also
incorporated other contributing structural factors impacting African American capital access.
Finally, the research employed the open-system Burke-Litwin (1992) model of organizational
change and performance as the theoretical framework, with a focus on environment and
transformational factors, including leadership, mission and strategy, and organizational culture,
as the primary drivers of change.
Purpose of the Study
The primary purpose of this study was to explore cases of how original equipment
manufacturers (OEMs), captive finance companies (OEM subsidiaries), and lender programs, in
the context of the economic environment of the time, attracted qualified African American
entrepreneurs who successfully acquired their first automotive dealerships and developed
profitable businesses.
The participating entrepreneurs' automotive experience ranged from 12 to 50 years and
spanned 5 decades. The research incorporated qualitative interviews and analysis of other related
artifacts. Recent events that impacted the African American community, including the death of
George Floyd, increased sensitivity in OEMs and lenders to DEI financial support in
communities, due to the voices of consumers, dealers, and organizational employees.
The Burke-Litwin (1992) model of organizational performance and change was applied
to evaluate opportunities to improve DEI in automotive finance. The model was relevant because
5

it reflected the external environment as the primary change stimulus in organizations. The
external environment included factors such as the political and regulatory environment, intensity
of business competition, and societal issues. The Burke-Litwin model has been described as an
open-system model, where there are 12 interconnected drivers grouped by transformational,
transactional, and individual performance factors. Outside of external stimulus, the best
opportunity to influence change was to focus on transformational factors, comprised of
leadership, mission and strategy, and organizational culture. External environment and
transformational factors influenced the transactional factors, including management practices,
structure, systems and work unit climate, and ultimately individual performance. The secondary
purpose of the study was to quantitatively describe the profile of the potential candidate pool of
qualified African American candidates, including experience, history, education, capital, and
other resource needs.
Research Questions
Three research questions guided this study:
1. How do African American entrepreneurs view OEM, captive and lender programs,
and their ability to make capital accessible and attractive to dealer candidates?
2. How do African American entrepreneurs describe their experiences in obtaining
capital and support needed to successfully start and grow their dealer automotive
businesses?
3. What unique contributions have African American dealers made to the industry, their
respective vehicle brands, and communities?
6

Significance of the Study
Brammer et al. (2011) illustrated the conditions necessary for firms to have a positive
impact on issues of corporate social responsibility and the necessity for the public to ensure
corporations are governed appropriately, due to the large influence they exert in areas such as
unemployment, the environment, and DEI. The impact of the mortgage crisis on the African
American community from the Great Recession and subsequent changes in government and
organizations illustrated how the external environment can drive change in the financial services
industry. Phillips (2010) summarized the decades of changes in regulation and practices that
failed to adequately decrease discrimination in mortgage lending to African Americans dating
back to the 1930s. As of 2009, African Americans paid three points higher than their European
American counterparts did, adding approximately $100,000 to each loan in interest. The Great
Recession provided the necessary external environment stimulus required to drive impactful
change through the creation of the Consumer Financial Protection Bureau (CFPB). Calomiris
(2018) highlighted that the CFPB’s broad powers have forced organizations to make dramatic
changes to their transactional practices, due to fines that can range upwards of 100s of millions
of dollars. The CFPB leveraged its broad mandate through the larger participant enactment of
2015 to extend its oversight of minority disparate treatment from mortgage to automotive finance
companies, one reason why it is increasingly important for lenders to improve capital access to
underrepresented groups.
The output of the study benefits automotive manufacturers, finance companies, African
American entrepreneurs, and the communities they serve. In lieu of recent current events,
evidence of significant change in the automotive finance market, state and federal regulatory
oversight, and economic and competitive changes are examined and presented. Cole and
7

Salimath (2012) highlighted extreme diversity management, either inadequate or excessive, can
be counterproductive, and organizations need to balance diversity identity with other
organizational components to ensure harmony, reduce threats to legitimacy and promote
diversity. Marques’s (2017) review of research revealed firms can either selfishly lobby for the
interests of a small group of business owners or support greater social needs through member
negotiation, policy influence, practice sharing, etc. Marques also showed the full spectrum of
associations, ranging from institutions characterized by special interest groups that serve at the
expense of society to institutions that balance the needs of society, with business owners. The
research brought forward the current state of diversity management among automotive lenders
and evidence of successful diversity management that translated to success in the transactional
and performance elements of the Burke-Litwin (1992) model. Where possible, the research also
identified a correlation between visible artifacts incorporating diversity, equity, and inclusion in
the mission statements of automotive finance companies and firm performance. As an example,
one automotive industry benchmark survey was the annual Rainbow Push (2019) Automotive
Survey of leadership from 12 major enterprises. The survey reflected Toyota as the highest-rated
firm. A review of Toyota’s online presence in the United States displayed their DEI success
factors and tangible initiatives including an innovative DEI bond launched by their affiliated
finance company, Toyota Financial Services.
Limitations and Delimitations
There were three primary limitations to the study. It was unknown if ideal African
American dealer candidates could be identified and would be willing to participate. Ideal
candidates were defined as experienced African American entrepreneurs who leveraged OEMs,
captive programs, or lender programs, as their initial means of capitalization for their
8

dealerships. Through the research efforts, ideal candidates were identified and encompassed a
diverse range of experience levels, brands represented, and sources of capital; however, not all
candidates were will willing to participate. Despite efforts made, all the participants were males.
Second, outside of publicly available information, it was difficult to obtain artifacts such
as policies. Based on my position in the industry, the decision was made not to request or obtain
any proprietary information. This decision was made to avoid anything that would frame an
organization negatively and to respect the proprietary information of competitors.
Third, access to the population of existing African American dealers or prospective
dealer candidates relied exclusively on the industry association NAMAD, due to the lack of any
alternative source of access to the population. Discussions were conducted with NAMAD
leadership, but despite a willingness to support the research, the association was unable to deploy
a survey instrument to the African American members only.
Relative to delimitations, the findings and insights are applicable to African American
entrepreneurs pursuing other franchise opportunities or capital-intensive ventures with
supporting lender partners.
Definition of Terms
Carter (2015) highlighted individuals are motivated to acquire automotive dealerships to
generate profit and accumulate wealth through four primary areas: (a) new sales, (b) used sales,
(c) fixed operations, and (d) parts and service. Key automotive definitions, including the dealer,
dealerships, and manufacturers are summarized in this section (Carter, 2015).
Blue sky is the amount of a company’s value greater than the value of the tangible assets
alone. For African American entrepreneurs looking for capital to acquire a dealership, obtaining
bank capital for tangible assets such as real estate or vehicle inventory is available; however,
9

intangible blue sky financing, unless the borrower has generational wealth, is extremely difficult,
despite the profit potential.
Capital includes the monies used by entrepreneurs and businesses to fund the acquisition
of assets for use in business operations or to fund day-to-day business expenses. Capital can be
raised through personal assets, equity, or debt.
A dealer is the individual, individuals, or legal entities that operate automotive
dealerships.
A dealership is an entire enterprise related to a dealership property, which encompasses
real property (which may be owned or leased) and business operations.
Disparate treatment or disparate impact occurs if a group of people with a shared racial
identity receive different average outcomes, such as loan approval or denial rates. The disparate
impact may be unintentional or lack evidence of differences in treatment and occurs when
policies, practices, or structures appear to result in differential treatment of a racial group
(Calomiris, 2016).
Open points: Established OEMs assign an extremely limited number of brand-new
franchises in select markets on an annual basis. They are highly valued by new and potential
dealer owners because they represent the opportunity to acquire a new vehicle franchise without
having to pay for Blue Sky or goodwill.
Original equipment manufacturers (OEMs) focus on vehicle design, manufacturing, and
brand promotion. Dealers receive exclusive franchises for specific trade areas and act as
representatives of the manufacturer to the buying public.
10

Structural racism includes racial inequities in the wealth holdings of contemporary
cohorts that are shaped by the cumulative effects of various forms of institutional racism over
time (Brown, 2016).
Organization of the Study
The focus of this study was to identify ways of increase lending to African American
dealers or potential dealers. Owning and operating an automotive dealership is capital intensive,
including upfront money for long-term investments, such as land, facilities, and recurring needs
(e.g., vehicle inventory and business working capital). The study was organized into five
chapters. Chapter 1 provides the reader with key concepts and terminology commonly found in
the automotive industry, dealer business models, and commercial lending. The industry situation
facing African American entrepreneurs and a review of the evaluation framework were also
discussed. Chapter 2 provides a review of the current literature surrounding the scope of the
study. Chapter 3 details the methodology of the study, including the choice of participants, data
collection, and analysis. In Chapter 4, data and results are presented, followed by Chapter 5,
which includes the practice, implementation, and evaluation plan.

11

Chapter Two: Literature Review
This dissertation explored African American capital access in the automotive industry to
acquire, own, and operate new car franchise dealerships. The review started with a brief
overview of the automotive industry, terms, and the benefits of diversity in the industry. Then,
the work transitioned to cover inequities for African Americans in accessing the necessary
capital to acquire a dealership and contributing factors such as financial services firm leadership
diversity, financial socialization, and the income and wealth gap faced by African Americans.
Afterward, the review discussed potential strategies for addressing the issues before providing an
overview of the theoretical and conceptual frameworks.
State of Diversity in the Automotive Industry and Benefits
OEMs must increase dealer diversity to improve business results and for social and moral
reasons. Bond (2019) cited proprietary IHS Markit analysis from 2017 vehicle registration as
evidence reflecting the incremental sales generated by dealerships owned by entrepreneurs from
underrepresented groups:
 African Americans represented 8% of U.S. new vehicle sales and 16% of sales at
African American-owned dealerships.
 Asian Americans represented 6% of U.S. new vehicle sales and 10% of sales at Asian
American-owned dealerships.
 Hispanics made up 14% of U.S. new vehicle sales and 33% of Hispanic-owned sales.
Bond used this data as part of the rational for why OEMs such as Fiat Chrysler (FCA), through
its partnership with Santander Chrysler Capital and Ally Bank, invested in special programs that
included features such as low-interest working capital loans, providing up to 85% of funds
needed to close a transaction and real estate loans up to 95% loan-to-value (LTV). Additionally,
12

the FCA assessed dealers and provided required management support to ensure success.
Although the number of dealerships owned by underrepresented groups increased year over year
in 2019, from 29 dealerships to 1,243, the overall number was still 31% lower than the peak in
2005. General Motors (GM) has the highest number of minority dealers with 287 (6.7% of total
dealerships), followed by FCA with 181 dealerships (7.2% of total dealerships)
Diversity of ownership in business firms is a strategic asset that offers financial and
social benefits. Nathan and Lee (2013) reviewed the links between diversity and
entrepreneurship of 7,600 London-based firms between 2005 and 2007 and found significant
advantages, including a higher propensity to introduce new products, increased market reach,
and economic benefits. In research on 143 U.S. law firms between 2008 and 2012, higher racial
diversity at all levels was associated with greater profitability (Smulowitz et al., 2019). A
multivariate analysis of 1,700 business startups using Kauffman Firm Survey data showed
diversity in ownership teams leads to higher net worth for the owners of underrepresented
groups. (Henderson et al., 2017). Finally, Cummings and Bridgman (2016) examined the
geographic location and temporal setting of 2,065 business, 2,152 medical, and 1,351
architectural journal articles and found management history to have a far more limited
geographic and temporal perspective than the other two comparator fields did. Results linked
diversity of perspective as a means of countering the effects of dominant logic, spurring
creativity and innovation via the ability to draw ideas from a broader spectrum of perspectives.
Structural Factors Adversely African American Entrepreneurs
Inequities in African American Capital Access
There should be ample lenders willing to support the acquisition and development of
businesses of underrepresented groups through access to the capital required for success.
13

Furthermore the U.S. legal system, such as Regulation B of the Equal Opportunity Credit Act
(2018), was designed to protect individuals or firms against discrimination based on race in
financial services; however, research has demonstrated the continued presence of discrimination
in lending. Salient research work examples include McDonald and Rojc (2017) case review of
CFPB and DOJ determination of discriminatory practices against Hispanics and African
Americans by the Fifth Third bank, or Lindsey-Taliefero and Kelly (2021) findings of
statistically significant differences in reverse mortgage underwriting based on race and ethnicity.
Discrimination in lending was notably true against the African American community with
relevant examples summarized in the following paragraphs.
Palia (2016) demonstrated discrimination in lending was a problem as loan rejection rates
for African American firms were 30% higher than European American-owned firms were,
despite comparable expected loss performance. Additional evidence underscored higher African
American denial rates versus European American counterparts for longer duration bank products,
such as lines of credit or loans, were 47% higher (Mitchell & Pearce, 2011). Furthermore, even
when African American-owned firms could obtain formal financial resources, loan amounts were
20% lower than the mean for all firms (Casey, 2012). From the perspective of the African
American consumer, through two case studies of major automotive lenders, McDonald and Rojc
(2016) demonstrated that discrimination in lending was a problem, as these lenders received
penalties above $100 million combined, for practices that resulted in charging African American
customers 29 to 36 basis points more ($250–300 higher interest charges) than European
American customers of similar characteristics on loans were charged. Despite the regulatory
requirements and business benefits, discrimination in lending was also an important issue to
address due to the socioeconomic benefits of promoting minority business ownership, including
14

lower unemployment, increased economic growth, and increased individual opportunity for
social mobility and wealth (Mavoothu, 2009).
Historical Precedent
Key historical factors inhibiting the success of African American entrepreneurs,
including capital access and relationship with lenders, continue to be an issue. Green and
Houchins (2017) reviewed the 1930’s unpublished work of Joseph Houchins, a member of
President Franklin Roosevelt’s African American Cabinet and leader of the Division of Negro
Affairs for the U.S. Department of Congress. His research identified access to capital as one of
the six primary root causes of business failure. He also identified improved network
opportunities as a relevant factor to reduce business isolation. Rueben and Queen (2015)
demonstrated how a recessionary environment, such as the real estate crisis of 2008–2009 can
exacerbate the capital access issue for African American business owners. During that period,
African American families had a median net worth of $20,600, versus a median net worth of
$93,100 for all U.S. families. Furthermore, African American families had a higher proportion of
wealth in residential real estate, 77% versus the U.S. median at 40%, hindering the ability to
raise fresh capital needed for business sustainability, as many firms depend on personal wealth
and assets.
The issues are worse for female African American entrepreneurs, who comprised 19% of
11.6 million firms owned by women in the United States (National Association of Women
Business Owners, 2017). A study of 253 small and medium enterprise founders, where 10%
were African Americans, found female entrepreneurs were more likely to take advantage of
family financial support, possibly due to the impact of marriage, from a financial standpoint.
Given that traditional spousal roles may have facilitated this finding, it is important to consider
15

African American marriage rates are estimated at 40%, demonstrating that the majority may be
single parents, and therefore incur lower income levels and available assets that could be used for
business purposes (Awadzi, 2019).
Bias in Credit Reporting System
Credit scores permeate society in the United States and are used by lenders and others to
make various decisions when assessing an individual’s credit-risk profile. For example, per the
Fair Isaac Company’s (FICO Score, n.d.) website, proprietary scores were generated on over 190
million Americans and were used in over 90% of lending decisions including mortgages, credit
cards, and business loans. In empirical research on the Freddie Mac survey of 12,000 households
of individuals between 20 and 40 years old with an income less than $75,000, Ards et al. (2015)
revealed the dangers of blindly taking credit scores at face value. Data indicated racial gaps in
loan rejection rates that were largely due to credit scores, with African American rejection rates
67% higher than European American rates. Ards et al. found African Americans with good credit
characteristics underestimated their credit worthiness and applied for loans at lesser amounts.
Using panel study of income dynamics (PSID) data from 1980–2009, Killewald (2013) found
despite having positive net worth, approximately two-thirds of young African Americans held
20% fewer assets on average than European American counterparts held; however, median
European Americans in the study held 60% more debt than their African American counterparts,
implying increased access to credit. In a Monte Carlo simulation analysis on the use of credit
scores in hiring practice, Volpone et al. (2014) showed, in a sample of 10,000 participants, 12%
of whom were African American, credit scores can lead to disparate impact against African
Americans.
16

Avery et al. (2012) used the Federal Reserve Board’s model with a nationally
representative sample of 285,793 individuals from the TransUnion Credit Bureau and
demographic information from the U.S. Social Security Administration. Avery et al. found little
evidence to support credit characteristics used in credit history scoring models acted as proxies
for race or ethnicity; however, Gillborn et al. (2017) discovered qualitative and experience
knowledge were important sources of insights in statistical or big data scores such as FICO, as
human biases were used upfront in the creation of algorithms or the interpretation of the output.
Lack of African Americans in Financial Services Industry Leadership
The underrepresentation of African Americans in management and leadership positions
in the financial services industry contributes to structural racism. The U.S. Equal Employment
Opportunity Commission (2006) showed diversity in management and leadership positions was a
problem through an odds ratio, which calculated differences in the chances of African American
and European American males being an official or manager, based on data obtained from the
EE0-1 compliance reports companies submitted to the Equal Employment Opportunity
Commission per Title VII of the Civil Rights Act of 1964. The mean log of the ratio between
African American and European American groups had negative values across all five industry
segments—(a) central banking, (b) retail banking and credit, (c) securities, (d) insurance, and (e)
funds—indicating African American odds of being in a management or leadership role were
lower than European American counterparts’ odds. The research also pointed out disparities
between the percentages of leaders and managers, compared to professionals. Workforce data
obtained from EE0-1 employer reports from 2007-2017 from the U.S. Government
Accountability Office (2019) indicated while underrepresented groups’ overall proportions in
management and leadership positions increased by 3.7%, African American percentage of
17

management and leadership positions decreased from 6.5% to 6.3%. The research also pointed
out the low results cannot be attributed to a lack of qualified candidates. From 2011 through
2015, minorities’ representation among those who attained Master’s in Business Administration
(MBA) degrees increased from 35.6% to 39.2%.
The lack of management and leadership diversity at financial services institutions
negatively impacted the African American community and individual entrepreneurs’ access to
capital. Turco (2010) noted the lack of African American representation in the highly
compensated leveraged buyout segment of the finance industry and estimated senior leadership
representation at less than 1%. Turco’s survey work of 117 participants highlighted the barriers
to entry for African Americans created by racism, including limited representation in feeder
industries, such as investment banking, how the network nature of industry hiring practices made
it feel like a “country club,” and perceived importance of firm “fit,” which could connect to
discrimination. In a PSID study of 1,697 full-time workers from 2007 to 2011, Wilson and Lagae
(2017) illustrated discrimination experienced by African Americans seeking to advance careers
to management ranks. They found African Americans have lower career mobility, as a result of
having to follow formal and structured career paths, versus informal, less structured paths that
allow European Americans to reach management levels quickly. Pollitt (2011) illustrated the
value of DEI training to improve hiring practices for Lloyds TSB Banking in the United
Kingdom, which improved service to start-ups owned by underrepresented groups that
previously believed 80% of needs were not being met.
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Impacts of Limited Capital Access on the African American Community
Financial Socialization
The lack of African American representation in financial services management and
leadership roles has adverse downstream community impacts. Hudson et al. (2017) researched
African American financial socialization and literacy through primary survey data from 1,819
educated African Americans and secondary data from the Financial Industry Regulatory
Authority (FINRA) on 897 African Americans and 7,785 European Americans. They provided
key insights in support of the idea that community mentors helped support self-directed financial
learning leading to career development and wealth creation. First, African Americans whose
primary influence was self-directed were 2.2 times more likely to be financially knowledgeable
than those influenced by others including family, life experiences, and formal education.
Secondly, the types of knowledge for the self-directed influence showed stark differences in
financial sophistication understanding topics such as interest rates, investing, and wills, versus
simpler topics, such as budgeting, record keeping, and credit.
White and Stuart (2016) showed the market is underserved, and there was a lack of
African Americans in the financial services industry. While 13.2% of the population is African
American, only 8% of financial advisors were African American. White and Stuart also found
African Americans were less likely to use bankers or take comprehensive approaches when using
financial planners.
African American Income and Wealth Inequality Gap
Relative to the wealth disparity between African Americans and European American
counterparts, data from the 2013 Survey of Consumer Finances illustrated the magnitude of the
gap and contributing factors (Herring & Henderson, 2016). Herring and Henderson’s (2016)
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model suggested the median financial wealth for African Americans was $156,115 less than
European Americans with similar characteristics. Furthermore, through multivariate and
regression analysis, they found statistically significant differences in key variables, such as
inheritance, stock ownership, home ownership, income, and education attainment, reflecting
more favorably on European Americans than on African American counterparts. Herring and
Henderson argued wealth disparities may be an outcome of discrimination and cited examples,
including discouraging the pursuit of advanced degrees, obtaining real estate mortgages, and
business ownership.
Weller and Hanks (2016) used data from the Federal Reserve System Board of
Governors’ Survey of Consumer Finances of all households for those aged 25 or over and
demonstrated the wealth gap between African Americans and European Americans has widened.
Per Federal Reserve data from the Survey of Consumer Finances, following the Great Recession,
median African American wealth was reduced by half from $25,841 to $13,460, between 2007
and 2016, while European American median wealth was reduced by only a quarter over the same
time period, dropping from $188,756 to $142,180 (Board of Governors of the Federal Reserve
Systems, 2016). Weller and Hank (2016) provided several systemic obstacles faced by African
Americans, including tax code disadvantages, high costs of debt, less access to key housing or
retirement assets, and low propensity to own business assets. They also observed African
Americans have been unable to close the gap via income alone, as the top fifth of African
Americans has one-third the wealth of European Americans. Much of the research from the
Survey of Consumer Finances was based on cross-sectional data and, as a result, was limited in
its ability to identify the causes of wealth (level required to acquire or start a business) versus the
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results of the wealth (income generated from assets or investment; Board of Governors of the
Federal Reserve, 2016).
African American women face several disparities in the workplace that perpetuate
structural racism. Malveaux (2013) highlighted a multitude of issues. African American women
faced a large pay gap and earned only 85 cents for every dollar earned by European American
women and only 63 cents for every dollar earned by European American men. The average net
worth of a single, middle-aged European American woman was $42,600, versus a single,
middle-aged African American woman at $5. Since the Great Recession, the focus on balancing
the federal budget and cutting the workforce has disproportionally impacted African American
women, as 22% of African American women worked for the government, versus 17% for
European Americans. The social impact was significant, as 44% of African American women
with children were the primary income sources for their families. Insufficient resources to fall
back on during downturns in the economy led to the potential for health and other issues. Prior to
2009, there were no instances of African American women leading a Fortune 500 corporation.
Beckwith and Peters (2016) illustrated African American female intersectionality in the
workplace. In 2014, only 14% of executive leaders were women. African American women
executives comprised an even lower percentage at 5.3%. Research indicated social networking
was the most important factor for those looking for career advancement. Key benefits included
gaining the visibility necessary for promotion and developing the skills and confidence required
at the next level.
Regarding entrepreneurs, Adkins and Samaras (2013) surveyed 448 business owners and
found African American female small business owners placed greater importance on training
than did European American female small business owners. The authors believed training can
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help close the social gap by helping African American female entrepreneurs to increase their
understanding of business opportunities, obtaining capital, and networking.
Shank et al. (2014) researched Michigan’s Saving for Education, Entrepreneurship, and
Down (SEED) payment program and showed while African American households enrolled in the
program at a similar rate to others, only 24% of African American households made additional
deposits after opening their accounts, versus 45% for non-African Americans. Despite additional
deposit matching incentives, average quarterly investments for participating African Americans
were $3.12, versus the non-European American quarterly investment average of $20.62. While
the intent of the program was to improve future mobility by creating an investment opportunity
for children, factors cited as reasons prohibiting further deposits included low-income levels or
unemployment, limited experience with financial institutions, and unfamiliarity with the account
product offered.
African American Financial Systems Issues
Bank deserts, defined as underbanked areas lacking common economic services,
represented a systemic issue facing African Americans. Relationships are a component of
lending that can impact mortgages or business loans. Kashian et al. (2018) used FDIC bank data
and American Community Act data and found that African Americans were overall and
increasingly likely to live in a bank desert, contributing to the number of unbanked and
underbanked. For example, urban communities that were 60% African American were located
16% farther from banking locations than non-African American communities. Internet banking
was not bridging the gap and findings were similar to the physical banks. Although the presence
of bank deserts was evident in the data, there are debates about how best to reduce them. For
example, it is uncertain if it is better to subsidize bank offices or focus resources on job
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development or housing solutions. Using a longitudinal time study of bank office openings and
closing, alternative financial services (AFS) activity, and other variables are warranted to
understand available options.
The bank desert void is often filled by AFS, such as payday loans, title loans, rent-to-own
services, and pawnshops. Using data from the 2015 National Financial Capability Study, Kim et
al. (2019) showed African Americans were more likely to use AFS than European Americans.
Disparities were impacted by the absence of traditional financial services and objective financial
knowledge. Kim et al. showed the odds of using title loans, payday loans, pawnshops, and rent-
to-own decreased from 24.3% to 14.7%, based on the loan type, with a 1% increase in objective
knowledge. Although the data showed correlation, there were some shortcomings surrounding
the causality and specifically what factors affect the trends.
Factors Supporting Diversity, Equity, and Inclusion in Financial Services
Relevant African American Cases and Success Factors
While recent data from the U.S. Equal Employment Opportunity Commission (2016)
reflects African American diversity in the financial services industry has not improved since the
Great Recession, relevant success cases and practices exist. These can be used to dispel myths or
prejudices and leveraged to replicate success in the future. Myers (2017) reviewed the success of
African American PhD students of economics at Harvard University during a period in the 1950s
when the students were not expected to succeed due to state enforcement of segregation. Three
critical practices fostered African American student success during the period: (a) ample
financial aid through the Rosenwald Fund, (b) early introduction of economics to students,
including contributions of African American economists with practical applications, and (c)
access to a community of African American economists.
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Holtom et al. (2014) researched the racial differential in compensation from a sample of
7,006 GMAT test candidates and found MBA placement centers have more of a positive career
impact on African American students than on European Americans. This finding was attributed
to the signal theory in hiring as a means to compensate for access to influential individuals,
which African Americans may lack. The study had several limitations, including the impact of
informal networks and the long-term impact recruiting sources have on career success.
Patel (2018) examined the parents of chartered financial analysts (CFA), who work in
science, technology, engineering, and mathematics (STEM) occupations, including finance and
economics. Results showed a strong correlation between early role models and achievement of
the prestigious CFA industry certification and careers in finance versus the general population.
Obstacles Faced by African Americans Not Economically Rational
Economic theory argues against the rationality of African American financial
discrimination, yet empirical evidence continues to demonstrate its presence in different forms.
For example, research by Krosch and Amodio (2017) on the effects of race on economics found
the psychological perception of scarcity can produce racial bias in the distribution of resources.
Nobel-winning American economist Gary Becker’s argued it is not financially rational for
European Americans to discriminate against African Americans because it reduces revenue or
increases costs. In addition, market forces could lessen the impact of discrimination (Ikeda,
2018). Becker (1993) further supported the irrationality of discrimination in mortgage lending
Studies on whether banks discriminate in their mortgage lending against Blacks and other
minorities compare the likelihood of getting a loan. … If banks discriminate against
minority applications; they should earn greater profits on the loans actually made.
(Becker, 1993, p. 389)
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Ikeda (2018) researched investment portfolios between 1989 through 2006 and showed
they exhibited the discriminatory treatment African American enterprises face. Despite
controlling for multiple variables, African American investments generated considerably higher
internal rates of return (IRR) at 16.3% compared to 4.2% for European American firms,
suggesting discriminatory pricing and superior management by African American entrepreneurs.
From the perspective of the African American firm, the inequity was that they pay higher
implicit rates than counterparts with comparable risk levels. Also, if markets were perfectly
efficient, more lenders would enter the market to provide loans to African American firms based
on the higher returns for the associated risk levels, which in theory would equalize the IRRs over
time.
Findings by Ikeda (2018) attributed the racial differences to high search costs, as African
American owners seeking debt or equity receive greater scrutiny with less support from lenders,
resulting in higher rates. High search costs were synonymous with the lack of established lender
relationships and insufficient networks. In addition to discriminatory judgment, resulting from a
lack of established relationships, African American firms were also adversely impacted by the
credit scoring system Paydex (Henderson et al., 2015). In their work on the impartiality of
business credit scores by race and the impact of credit lines, Henderson et al. (2015) concluded
that while bureaus do not specifically contain race, evidence shows there are proxies. After
statistically controlling for factors, Paydex credit scores were 5.3 points lower for African
American firms (p < 0.1). The lower Paydex scores had a dramatic impact on the credit lines that
startup firms depend on for survival (p < 0.01), as African American credit lines were $11,826
less than European American-owned start-ups’ lines.
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Improved Regulation Needed to Improve Industry Participation
Overall, these credit risk factors, including disparate treatment in loan approval and
lender relationships, impacted the types of firms African Americans can access or create.
Policies, due to governance limitations, have not sufficiently corrected the issues. For example,
research by Casey and Beeman (2011) found that African-American loan applicants were less
likely to pursue mortgage credit for home ownership from regulated lenders under the
Community Reinvestment Act than European American counterparts. Rueben and Queen (2015)
showed African American entrepreneurs migrated to labor-intensive versus capital-intensive
industries, which were more competitive and showed higher failure rates. Data from the 2007
U.S. Census Bureau’s Survey of Business Owners reflected the highest revenue industries,
including wholesale trade, manufacturing, and utilities, had a low percentage of African
American participation. Conversely, the data indicated African American firms had high
ownership representation in labor-intensive areas, such as retail trade (18%), health care / social
assistance (12%), and construction (10%).
Without equal access to capital, African American firms are not able to enter the high-
revenue markets and are mitigated to the low-yield, high-labor intensive industries. The
Consumer Finance Protection Board, which regulates on behalf of consumers and business
clients, litigates against lenders when policies were deemed to have a disparate impact on groups
of borrowers such as African Americans owned firms, whether the impact was unintentional or
not (Davidson, 2012). McDonald and Rojc (2016) showed the impact of institutional racism on
African American consumers through the findings of the Consumer Finance Protection Board
and the U.S. Department of Justice’s enactment of the 2015 larger market participant rule, which
expanded oversight to include automotive finance companies. For example, American Honda
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Finance agreed to pay a $24 million fine to thousands of African American consumers who were
harmed by dealer compensation policies and practices enabled by the finance company. African
American customers of American Honda Finance were charged 29 basis points higher rates (the
equivalent of $250 in extra interest) than similarly situated White borrowers. Ally (formerly GM
Acceptance Corporation, n.d.) paid $80 million in damages for the same issue and cited over
100,000 African American impacted clients that paid on average $300 more in interest.
Research by Bates and Robb (2015) on the Community Reinvestment Act (CRA) policy
demonstrated the Federal Reserve Board has not been effectively governing. Bates and Robb
illustrated the point through a Philadelphia case that found 11 loans per 100 firms in
predominately European American neighborhoods, versus 1.2 loans per 100 firms in African
American neighborhoods. Opportunities cited to improve the results of this relevant policy
include publishing bank ratings based on their African American CRA lending performance.
Another would be to have the Federal Reserve Board, responsible for enforcing the Equal Credit
Opportunity Act (2018), collect racial patterns in business lending.
Importance to Equitable Lending
African American firms tend to migrate to labor-intensive versus capital-intensive
industries characterized by increased competition and higher failure rates (Rueben & Queen,
2015). To break in without established relationships requires over-leveraging personal assets
leading to questionable long-term viability. Ekanem (2013) showed African American and
minority enterprises tend to focus on the consequences of taking on excess debt, versus
managing debt, resulting in a chronic debt burden. Thus, African American entrepreneurs need
support to establish business and lender relationships. Otherwise, they continue to undergo undue
scrutiny and remain locked out of high-revenue, capital-intensive industries. Per Walker and
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Garrett-Scott (2016), of 2.5 million African American-owned firms, only five had receipts above
$1 billion. These firms were in sports and entertainment, which leverage aspects of African
American culture, where relationships allow access to capital. Lending criteria and evaluation
tools must also undergo an evaluation to ensure fairness. Finally, to succeed, bank accountability
must improve, and banks themselves must reassess their practices to avoid missing the
opportunity to participate in the industry as a fair lender.
Theoretical Framework
The theory used to explore this problem of practice was the Burke-Litwin (1992)
organizational model. Burke and Litwin developed a causal model of organizational performance
and change, based on an open-system framework, for use in diagnosing organizations and in
planning and managing change. Burke and Litwin proposed transformational change occurs
primarily due to responses to the external environment, which influences transactional factors.
Taken together, the transformational and transactional factors affect motivation and performance.
Burke and Litwin segmented 12 organizational variables, which are linked via bidirectional
arrows to illustrate the open-system principle.
This model was suitable based on the timeliness of the environment, including social
factors such as the death of George Floyd, to influence organizational leadership to drive change.
Second, to address structural racism impacting African Americans in financial services, the
Burke-Litwin (1992) model focuses attention away from the managerial and transactional factors
to the transformational and leadership factors.
Of the model’s 12 segmented variables, four are considered transformational, as they
impact all aspects of organizations. the most important driver of transformational factors is the
external environment, which encompasses areas such as economics, government, and the
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competitive landscape. At an institutional level, the other transformational drivers, which include
mission and vision, leadership, and organizational culture, can also dramatically impact issues of
diversity, equity, and inclusion in the broader organization. The transformational factors are
 External environment: Any outside condition or situation that influences the
performance of the organization, which would include OEMs, captives, and other
lenders
 Leadership: Executives who provide the overall organizational direction and serve as
behavioral role models for all employees
 Vision, mission, and strategy: What an organization’s top management believes and
has decided is the organization’s mission and strategy, and what employees think the
central purpose of the organization is
 Organizational culture: The collection of overt and covert rules, values, and principles
that are enduring and guide organizational behavior.
The transactional factors are
 Management practices: What managers do in the normal course of events to use the
human and material resources at their disposal to carry out the organization’s strategy
 Structure: Arrangement of functions and people into specific areas and levels of
responsibility, decision-making authority, communication, and relationship to assure
effective implementation of the organizational mission and strategy
 Systems (policies and procedures): The standardized policies and mechanisms that
facilitate work, primarily manifested in the organization’s systems including
management information systems, reward systems, performance appraisal systems,
goal and budget development, and human resource allocation
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 Work group climate: The collective current impressions, expectations, and other
feelings that members of local work units have that affect their relations with their
boss, one another, and other units
 Task requirements and individual skills/abilities: The required behavior for task
effectiveness, including specific skills and knowledge required of people to
accomplish the work for which they have been assigned
 Individual needs and values: The outcome of the result and the indicator of effort and
achievement.
Two other key factors are
 Motivation: aroused behavior tendencies to move toward goals, take needed action,
and persist until satisfaction is attained.
 Individual and organizational performance: The outcome or result and the indicator of
effort and achievement.
The open-system, causal Burke-Litwin (1992) framework has been used to assess an
organization’s effectiveness and to plan and execute desired change. Martins and Coetzee (2009)
demonstrated the use of the Burke-Litwin model as a diagnostic framework for assessing cross-
cultural organizational effectiveness through their qualitative interviews of 147 purposely
sampled employees representing 17 different nationalities for an international hotel group. Stone
(2015) used the Burke-Litwin Organizational Survey, providing another example of how the
model has been applied to understand current organizational dynamics while driving
performance improvements. Results found strong content validity for the instrument structure
through factorial analysis and good internal consistency and reliability of all 12 model factors,
excluding the external environment. Stone et al.’s (2018) longitudinal consulting engagement for
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a medium-sized, bureaucratically structured Midwestern, U.S.-based organization from 2011 to
2014 provides an example of an applied case. The Burke-Litwin Organizational Assessment
Survey was used to diagnosis the current-state, while the Burke-Litwin organizational
performance and change model was used as the theoretical framework to summarize findings
and direct organizational leadership on where to focus efforts together with process consulting.
Despite the model’s effectiveness, it should not be viewed as all-encompassing.
Spangenberg and Theron (2013) highlighted two concerns: (a) relevance, as the model has not
been updated in a major way since 1992, and (b) failure to incorporate change management as a
standard organizational feature that ensures continuous adaptation to the external environment.
Spangenberg and Theron recommended several changes to the model, including positioning
leadership at the top of the model to emphasize acceptance of future responsibility, the inclusion
of human capital as critical to strategy implementation and creation of competitive advantage,
and a comprehensive view of the influence of the external environment.
Conceptual Framework
The current study focused on successful African American dealer cases, where the initial
dealer acquisition was made using an OEM, captive, or lender capital program. The open system
Burke-Litwin (1992) model was used, as it takes the external environment as an input. Given the
recent social events and growing social awareness in corporations, the belief was that the timing
was appropriate to reexamine programs that helped launch African American first-time dealers.
The research focused on the relevant processes, experiences, and best practices. As outlined in
Figure 1, when African American candidates request the blue sky financing necessary to acquire
a dealership due to the current bank or lender transaction factors, such as systems (policies and
procedures), management practices, and work unit climate, the request is likely to result in a
31

rejection. Disparate treatment and impact are evident from the low percentage of African
American-owned dealerships and could perpetuate a vicious cycle as generational wealth is not
created; however, bringing forward successful African American cases to the leadership in
lender organizations may result in shifting transformational factors (e.g., mission and strategy,
culture) that influence the organization and transactions areas. By building break through
programs, OEMs, captives, and lenders can disrupt structural racism and lead to the creation of a
virtuous cycle.

Figure 1
Conceptual Framework

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Chapter Three: Methodology
The research focused on successful African American entrepreneur cases, where the first
dealership acquisition was made using an OEM or captive lender capital program. The open
system Burke-Litwin (1992) model was used, as it took the external environment as a critical
input. Given recent social events, such as the death of George Floyd, and growing social
awareness in corporations, the belief was that the timing was appropriate to reexamine programs
that helped launch African American first-time dealers. The research included examining
relevant processes, experiences, and best practices.
Due to the current bank or lender transaction factors, such as systems (policies and
procedures), management practices, and work unit climate, when African American candidates
requested the blue sky or goodwill financing necessary to acquire a dealership, the request was
likely declined, unless the candidates already had high net worth. The marketplace structure did
not facilitate diverse dealer networks, as evident from the low percentage of African American-
owned dealerships, and perpetuated a cycle where generational wealth was not created. Bringing
forward successful African American cases to leadership in OEMs and lender organizations may
result in shifting transformational factors (e.g., mission, strategy, culture) that influence the
organization and transactions areas. The hope is that building breakthrough programs can disrupt
structural racism and lead to the creation of a virtuous cycle.
The secondary purpose of this study was to understand the characteristics of the potential
pool of African American dealer candidates. Key information that the research attempted to
obtain included the size of the African American NAMAD population, experience levels of
members, knowledge of programs, interest in transitioning from dealer employee to owner, etc.
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Research Questions
1. How do African American entrepreneurs view OEM, captive and lender programs,
and their abilities to make capital accessible and attractive to dealer candidates?
2. How do African American entrepreneurs describe their experiences in obtaining
capital and support needed to successfully start and grow their dealer automotive
businesses?
3. What unique contributions have African American dealers made to the industry, their
respective vehicle brands, and communities?
Research Design
The research had a mixed-methods approach through qualitative case studies of qualified
African American dealers in addition to a quantitative survey of the relevant NAMAD
population of African American dealer candidates. First, the research design leveraged the
multiple-bounded systems case study approach. According to Merriam and Tisdell (2016), the
researcher served as the primary instrument of data collection and analysis and took an inductive
approach to find meaning and understanding via in-depth analysis of information that included
observations, interviews, documents, reports, or other artifacts. The research design aligned with
the purpose of the study because it focused on understanding successful cases of the OEM and
captive programs used by African American entrepreneurs to launch their first dealership, under
difficult circumstances that would have otherwise been prohibitive to acquiring a dealership
franchise.
Examining cases over time was critical due to changing dynamics in the market for
buying and selling dealerships. The increasing consolidation of a fragmented industry, combined
with the exit of many first-generation dealers, has resulted in rising goodwill or franchise blue
34

sky. Changing market conditions have increased the difficulty in obtaining capital, as higher
funding levels are required to purchase dealerships with lower percentages of tangible assets,
such as vehicles or real estate. For this reason, what made a program successful in prior decades
might not have been applicable in the current environment. Interviews of successful African
American dealers who used programs were used to understand their lived experiences. Other key
information for analysis, based on availability, included OEM programs, services, training and
support, data on network representation, OEM mission and strategy statements, or other
organizational culture artifacts.
Sample and Population
According to Merriam and Tisdell (2016), “We have concluded, however, that the single
most defining characteristic of case study research lies in delimiting the object of study: the
case” (p. 38). The participants of the case study were African American dealers identified
through references from OEMs, lenders, and other dealers who, without the support of OEM or
Captive programs, could not source the capital required to acquire and successfully grow their
dealer businesses. In my current role supporting the Hyundai Motor Group brands, a power
differential exists based on the influence I have in influencing the large sum credit decisions as
the department head of Hyundai Capital’s commercial lending department. To mitigate this risk,
the case study selection excluded any Hyundai Motor Group brand dealers and instead focused
on U.S. domestic, non-Korean Asian, or European brand dealers. To increase validity and
credibility, nine African American dealer entrepreneurs across different time periods and brands
were interviewed.
A request was made to candidates with the NAMAD (2015). Per the association's
website, it was founded in 1980 to ensure the presence of a meaningful, representative number of
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minority entrepreneurs and employees in the retail sales, supplier, and service sectors, and the
manufacturing ranks of the automotive industry. The target population would be comprised of
existing African American dealer owners looking to grow their businesses and prospective owner
candidates preparing to acquire their first dealerships or actively shopping for their first
dealerships. The association had an estimated 650 members, but instead of surveying the entire
population, a nonprobability sampling approach was proposed to the NAMAD.
After discussing the research objectives and approach with the NAMAD, the association
was supportive of the initiative; however, due to limitations on the NAMAD side, they were
unable to segment out the contact information for just the African American subgroup of
members. Additionally, they did not want to send an instrument to all members, as due to prior
experience, they felt it would adversely impact potential future research efforts based on negative
feedback from members of other underrepresented groups. The research instrument and approach
were included for reference in future research efforts.
Instrumentation
A quantitative survey was appropriate to collect key information on the target population
of African American dealers because the survey allowed for the ability to administer remotely,
measure accurately, compare results across participants, and obtain higher reliability. The survey
had 17 questions, of which five solicited open-ended responses. Nine questions related to the
second research question, such as understanding what experience, qualifications, and desires
participants had related to dealer ownership. These questions primarily applied nominal
measurements with named attributes or interval measurements with consistent attributes. The
survey also had two questions linked to Research Question 1, which aimed to understand the
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relationships between lenders and manufacturers. As it was difficult to develop fixed measures of
relationships, these two questions used ordinal scales.
Data Collection
The interview protocol used a semistructured approach designed to take each participant
through 15 questions prepared in advance of the meetings. The interview process also provided
participants with opportunities to deviate from the planned questions and explore relevant areas.
Follow-up questions were used to probe deeper into relevant areas while adhering to the overall
instrument structure.
The original intent of the quantitative survey was to administer the instrument online via
Qualtrics. A request was made to deploy invitations via email to the NAMAD’s African
American members. As the research topic was inherently demographic-related, it drew on
concepts from Rosenberg’s (2017) work on the respectful collection of demographic data. Key
points included asking impacted communities for input, identifying the true need for information,
and explaining the purpose and privacy policy. The overall research plan was presented to
NAMAD association leadership with a request to deploy the instrument via targeted email to
African American members. The email request to target participants included an introduction to
the survey design and use; however, due to data limitations in the NAMAD, the instrument could
not be distributed exclusively to African American members, and the decision was made to not
deploy the survey. The other idea contemplated was to administer the survey at the next
NAMAD conference. Past NAMAD conferences have included a vendor hall, where space may
have been procured to solicit survey responses and answer questions. This method would have
afforded potential participants the option to walk up and scan a QR code that would link to a
survey page, and ask questions; however, this option was not pursued due to time and travel
37

limitations. Also, the conference option was not deemed ideal based on the ability to efficiently
and effectively reach and obtain responses from all intended participants.
Validity and Reliability
To ensure the interview's validity and reliability, the following three strategies as outlined
by Merriam and Tisdell (2016) were used:
1. Reacher’s position: Based on the nature of the research, which focused on the critical
examination of issues on race, reflective efforts were made to understand and
document my worldview and positionality, biases, orientation, and relationship to the
study.
2. Member check/respondent validation: Post-interview, interpretations, and findings
were shared with participants to ensure information and interpretations were accurate.
3. Peer review/examination: After interviews were compiled, results were discussed
with manufacturing partners and captive finance peers to help interpret information
and assess emerging findings.
Relative to the case studies, there was an emphasis on ensuring credibility, transferability,
dependability, and confirmability to make the work of value for OEMs and lenders for review
and consideration. The inclusion of a diverse range of cases was incorporated to increase the
external validity and transferability of findings. Efforts were made to incorporate public
documents, where available, to ensure dependability. Also, care was taken in arranging and
managing dealer interviews in partnership with the NAMAD association. Key steps included
consistent interview format, documentation of interviews, data coding and storage, and member
checks.
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Regarding the survey instrument, Salkind (2014) cited the test-retest method as the best
means to ensure results were reliable over time. The original intent was to launch an email
campaign through the NAMAD, together with the in-person survey, and with a collection of
information at the NAMAD conference. This dual approach was designed to ensure results
would correlate. Relative to validity, the approach required future design consideration as the
results rely on the honest self-assessment of participants. The potential for participants to
overinflate or underrepresent their responses represented a risk to data validity. To test the
criterion validity as outlined by Salkind, I would need to find a means to correlate results with
other valid measures. This remains an open item, but one possibility for future research could be
to leverage either data manufacturers may be willing to share, or the data from the overall dealer
association called the NADA; however, as the quantitative survey was not deployed due to
NAMAD data limitations, these items have remained open.
Ethical Considerations
The research aimed to benefit the African American community by improving the
accessibility of capital to qualified dealer candidates. The research incorporated cases and
interviews of successful African American entrepreneurs to highlight their perspectives. The
research has the potential to harm lenders through the examination of policy and practices,
interviews, other artifacts, and information. Results were shared with all participating lenders or
firms. Care was taken to treat the information shared with providence in hope of bringing to light
issues that can be solved to the benefit of all.
For participating African American dealer participants, informed consent was gained in
advance, and participants were reminded that they had the option to stop at any time. Participants
were also provided the ability to request a copy of the output and have the opportunity to ask
39

questions. Confidentiality was used to mask participants through pseudonyms. Pseudonyms were
also used to maintain the confidentiality of lenders or other organizations named in qualitative
interviews. All information was securely archived and appropriately password protected. Finally,
due to the inherent power dynamic as a participating industry lender, other brands outside of the
Hyundai Motor Group brands were used for case analysis.
Future Follow-Up on Quantitative Survey
As noted previously, the NAMAD was contacted about the quantitative survey to
understand the pool of African American members. The association was willing to support and
found value in the research but was unable to segment out the African American association
members from the rest of the population. As NAMAD members are sensitive to inclusions and as
there were no means available to survey a subset group of NAMAD, the decision was made not
to move forward with the quantitative portion of this research as originally designed; however, in
discussing both the qualitative and quantitative research with other lenders and the American
Financial Services Association (AFSA), all parties found value in the quantitative data the
instrument could provide. For this reason, there is a future potential research opportunity or
potential joint AFSA-NAMAD association initiative to expand the original survey to include all
NAMAD underrepresented groups to better understand the NAMAD members’ goals and needs
to enhance current OEM and lender support or developing new innovations.

40

Chapter Four: Results and Findings
This research study presents data about successful and experienced African American
automotive dealership owners who could execute their first dealership acquisition via an OEM,
captive lender, or bank program. The open system Burke-Litwin (1992) model is used, as it takes
the external environment as a critical driver of change in organizations in addition to
transformational, transactional, and personal factors. Qualitative interviews of nine participating
entrepreneurs were conducted to understand their career path to becoming a dealer, perspectives
on challenges and opportunities in obtaining business capital, and future endeavors. As a
researcher, I am not making large claims about the African American perspective or existing
automotive dealer entrepreneurs in general, but rather describing my participants’ lived
experiences. In addition, an artifact analysis of publicly available OEM and lender information
was made to supplement qualitative interview data.
The research questions that guided this study were
1. How do African American entrepreneurs view OEM, captive and lender programs,
and their abilities make capital accessible and attractive to dealer candidates?
2. How do African American entrepreneurs describe their experiences in obtaining
capital and support needed to successfully start and grow their dealer automotive
businesses?
3. What unique contributions have African American dealers made to the industry, their
respective vehicle brands, and communities?
Participating Stakeholders
African American dealer entrepreneurs were sourced through OEM, captive lenders, and
other dealers to ensure participants had the necessary qualifications. The information was also
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validated through public information available on the internet. I directly conducted nine
interviews with participants via conferencing software and transcribed the recordings during the
second quarter of 2022. The interviews averaged 54 minutes in length and ranged from 33 to 90
minutes. I also conducted the qualitative analysis directly using Atlas.ti (Version 9) to code and
organize the interview data, and descriptions of the participants are summarized in Table 1.
Pseudonyms were used to protect the confidentiality of all interview participants and to
help in the interpretation of the information.
Mr. Morris was exposed to dealer automotive ownership early in his career while
working in commercial banking. He initially transitioned his corporate career to entrepreneurship
as a successful restaurant franchisee before using a domestic OEM motor holdings equity
program to acquire the first of three domestic dealer rooftops
After college, Mr. Borishade started a career in dealer automotive sales for an important
brand, before earning promotions of increasing responsibility on way to becoming a dealership
general manager. During his journey, he was able to attend a NAMAD conference, which
provided the inspiration to become a dealership owner. After partnering with a large private
group dealer as a minority partner, leveraged Small Business Administration (SBA) bank loans
to acquire an import franchise as 100% sole owner.
Mr. Jordan’s initial ownership opportunity came via a partnership with an existing
African American dealer, who became a dealership owner via an OEM program. Through
experience, he was exposed to the advantages of an OEM program, including the framework and
structure provided to help first-time operators successfully manage a dealership as an owner. Due
to the perceived disadvantages of available OEM programs, elected to use SBA bank funding to
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acquire his first franchise. Later, he acquired a second franchise using a pilot program from a
traditional bank.
Mr. Marshall’s overall career spans more than 50 years of automotive experience. He
rose from humble beginnings working in a buy-here, pay-here operation to acquire six domestic
franchises. He used a combination of SBA bank loans and OEM debt programs to obtain
ownership.
Mr. Jones transitioned from a career in the U.S. justice system to dealership sales based
on family recommendations and quickly advanced his career while simultaneously taking
courses through NADA and NAMAD. Although approved through OEM equity program,
acquired three stores through a combination of SBA bank loans and partnerships.
Mr. Curtis is a second-generation dealer who grew up working with his father in industry.
He used OEM equity programs to expand beyond his father’s initial store to acquire three total
dealerships.
Mr. Davis is an accountant by trade and worked for a certified public accounting (CPA)
firm that specialized in supporting automotive dealers. Mr. Davis grew to appreciate the
entrepreneurial opportunities of owning a dealership, and he owned three stores over time via
OEM motor holdings equity programs.
Mr. Grant had a career in the automotive industry that has spanned over 50 years, starting
on the OEM side as a representative calling on dealerships and then transitioning to retail
through OEM dealer development training programs and motor holding equity programs. He has
grown his business over time to acquire four dealerships.

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Table 1
Characteristics of Interview Participants
Name Total auto
experience
Experience
as owner
Franchises
owned
Franchise
types
Initial
lender
Career
start
Mr. Morris 19 15 3 Domestic OEM equity Banking
Mr. Borishade 16 5 1 Import SBA bank Dealer sales
Mr. Jordan 22 7 2 Import and
domestic
SBA bank Dealer sales
Mr. Marshall 52 45 6 Domestic OEM debt Subprime auto
Mr. Jones 12 3 3 Domestic SBA bank Government
Mr. Curtis 37 15 3 Domestic OEM equity 2nd generation
dealer
Mr. Davis 27 15 3 Domestic OEM equity Accounting/CPA
Mr. Grant 50 33 4 Domestic OEM equity OEM
Mr. Williams 47 22 3 Domestic
and
import
OEM equity Dealer mechanic

Note. Names are pseudonyms. Total automotive experience and experience as owner metrics are
measured in years. Franchise type refers to the nation of origin or headquarters for the
manufacturer. The initial lender designates the source of capital and form of the program. OEM
equity represents the situation where an OEM provides initial capitalization via equity but retains
control of the dealership until shares with management control are bought back or paid off. OEM
debt represents the situation where OEMs provide initial capitalization via debt, but the
entrepreneur retains control and downside risk. SBA bank represents the situation where an
approved bank provides loans guaranteed by the Small Business Association of U.S. Federal
Government.
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Mr. Williams worked in the automobile industry for over 47 years. His first role was as a
mechanic intending to own a body shop. He was recruited by an OEM for his role as district
service manager, and managing the warranty business for a dealership ultimately led to a career
in retail sales and operations. He bought his first dealership through OEM motor holdings equity
program and had three dealerships.
Qualitative Findings
The findings are organized based on major themes that emerged in each of the three
research questions. To retain the participants’ perspectives, where possible direct quotations are
used. Results of the findings presented in Chapter 4 are analyzed in Chapter 5 through the lens of
Burke-Litwin (1992) model, with recommendations presented for enhancing organizational
practices at each level of the model.
Dealer Perspectives on Making Capital Accessible
Sources of African American Dealer Entrepreneurs
To gain insights into success factors, qualitative data were collected from a diverse set of
African American dealer entrepreneurs, representing various regions of the continental United
States, different domestic and import OEM brands, and diverse paths to ownership. Of the nine
participants, two dealers followed a traditional path that started by selling vehicles in dealerships.
Another two were exposed to automotive dealerships while working at financial companies that
serviced automotive dealers, specifically accounting and commercial banking. OEMs were
directly involved in the launch of an additional two participants’ careers where one dealer was
groomed to be a district service manager, while another worked in sales managing dealer
relations. Finally, of the remaining participants, two started their careers in nondealer segments
of the automotive industry while the final participant started his career in an unrelated sector.
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Regardless of where candidates started their careers, several foundation themes emerged, as it
relates to sourcing dealer candidates.
Means to Family Stability. Three interview candidates were initially motivated to sell
cars in a retail dealership to provide family stability and increase wealth. Mr. Borishade started
off selling cars for a publicly traded dealer group after college and mentioned,
Once I started garnering some success and seeing how they’re able to change my life and
my family’s life, then I started really striving to grow in the business and I started having
more aspirations to get promotions and learn more about the business.
Mr. Jordan had a similar experience while rehabilitating from an injury working for a large
private group that could accommodate his schedule. Similarly, in the case of Mr. Jordan, the
combination of understanding the “kind of money being made in the business” and his aptitude
for business prompted him to pursue further career growth beyond car sales as an associate.
Finally, Mr. Jones, despite having a stable government career, was already pondering how best to
supplement his income to support his children’s college funds. Upon a referral from a relative
that transitioned from a similar role to the car business, Mr. Jones decided to “give it a shot” and
came to find out after several consistent months of high income that “this is what I need to do.
So, it put me in a position to take care of my family.”
Entrepreneurial Spirit. For other interview participants, exposure to automotive
dealerships from supporting service providers kindled the internal desire to become an
entrepreneur. Mr. Morris, a former commercial banker, reflected on his experience and impetus
to leave his stable career for the risk of being and entrepreneur and said,
I had clients that were automobile dealers and working with them and their businesses,
visiting the excitement of selling cars, selling those assets that piqued my interest. But the
46

financial return, the return on investment that I saw my customers were having in that
particular business that really got me interested and wanting to be an entrepreneur. I had
that spirit since early years of college, looking for something to invest in.
Mr. Davis also provided financial services to automotive dealers, but from the accounting
perspective working for a CPA firm that performed audit, tax, consulting, and other services.
After 9 years of working in accounting, he “figured out” he was on the wrong side of the
business and took a job selling cars because he knew the business from the “top down” and
wanted to get involved directly as an entrepreneur from the “bottom up.”
After college, Mr. Grant worked for an OEM for over 14 years, primarily through the
field sales organization calling on dealers to consult on areas including inventory, marketing,
profitability, sales, and service. During that time, he was selected to participate in an “advanced
training program,” which included 6 months of in-dealership work. Reflecting, Mr. Grant said,
“During that period is where I really got the bug or love for the retail automotive industry,”
leading to his path to ownership through an OEM motor holdings program.
Fruits of DEI Actions. Finally, intentional DEI efforts from OEMs directly or indirectly
led to the development of future African American dealers from three of the candidates. In the
case of Mr. Marshall, an OEM program directly led to his ownership of a dealership. He started
his career in a subprime buy-here, pay-here automotive rental business earning $100 per week as
an “up-boy.” In the late 1960s due to race riots, he could acquire the operation from the
European American owner, via an SBA loan for $95,000, secured by all of Mr. Marshall’s
belongings at the time. The SBA loan to acquire the buy-here, pay-here, business had a 10-year
term but he could pay it off in under 6 years. After paying off his SBA loan, an OEM assigned a
new open dealership point in his region under a DEI program mandating ownership from an
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underrepresented group. As a result, a privately owned dealer group sought an African American
majority partner and interviewed Mr. Marshall as one of three candidates to jointly apply to the
OEM for the dealership franchise. As Mr. Marshall had experience in both entrepreneurship and
capital, he was selected by the group to apply with and ultimately obtained 51% ownership in the
dealership point.
Alternatively, Mr. Williams’s case represents an indirect case of the positive impact of
OEM DEI initiatives. Mr. Williams was around cars his entire life, having built his first vehicle
from junkyard pieces as a youth. In high school, while working for an independent car dealer as
a mechanic, he participated in an industrial trade program and aspired to one day own his service
garage; however, one domestic OEM sought to recruit young African American men to work on
the service side as OEM district service managers and interviewed Mr. Williams for the program.
After a successful interview, an OEM representative set up a job for Mr. Williams to work in a
new car franchise dealership handling warranty claims as a test of his interest and sincerity;
however, for several reasons, Mr. Williams went on to several other career steps on the
dealership side of the business on the way to becoming a dealer and never actually worked for
the manufacturer. Mr. Davis was another indirect case and started his career in a CPA firm,
where he was the first African American accountant hired in the company’s 60-year history. Had
the firm not made that hiring decision, he may not have ever been exposed to the automotive
dealer business or could own one.
Positive Influence and Impact of Mentors
Each of the participants described the role mentors played in their personal development as
automotive entrepreneurs and in successful business development. Through the interview
process, participants consistently described having multiple mentors, which speaks to the
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importance of diversity of perspectives, information content, and types of roles mentors play.
High value-added areas in the topic of mentorship raised by interview participants included
lessons learned from personal experience, decision guidance, and emotional support and
encouragement. Specific to the African American community, mentorship is critical to
overcoming the gap in knowledge some families have accumulated from operating dealerships
for decades.
Combination of Mentors Optimal. On the question of mentorship, several participants
mentioned having multiple or a combination of mentors as critical to forming their own
leadership approaches and business success. For example, Mr. Williams stated that his dealer
mentors “all gave me something that I could look back and draw from.” Mr. Borishade went so
far as to say that “without them, I could not see myself where I am today.” The diversity of
mentors discussed by participants included the type of mentor, background expertise, and
philosophies.
The establishment of meaningful relationships with experienced dealership group
mentors, helped participants to understand the potential opportunities available. As an example,
Mr. Williams shared his experience in working with a very well-known large private dealer
group owner:
He [Mr. William’s mentor] expanded from the seven [dealerships] to whatever he had,
which was about 30 some stores at that time. And we would go through the whole
history, and I would ask questions of what we’ve done differently, et cetera, those type of
things and he would answer them honestly. And then I understood that I didn’t know if I
could say if [my mentor] was really in the automobile business or if he was in the real
estate business, because as he began to tell me about how massive his operation was.
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Then I began to understand that the dealership was a platform for his organization to
foster wealth in the insurance business, et cetera, those types of things that was a whole
other company that he was able to grow because of the dealerships.
Having dealership owners from underrepresented groups as mentors, when possible, was
another critical type of relationship that added distinct value to participants. Mr. Jones provided
an example where one mentor modeled the ownership path providing necessary scaffolding that
he could mirror in his career:
Well, he was actually a minority dealer that came in and started out detailing cars and
ended up buying the dealership that he was working for years later. So, it was one of
those things that he saw in me, his exact path to success, and he took it upon himself to
say, “Hey, I want to help you out with this.”
Mr. Jordan had a similar experience of mentoring under two partners who were “from a
minority-owned store by two minority-owned guys who both had already been on a minority
program.” Specifically, this helped Mr. Jordan understand the advantages and disadvantages of
not only being a dealer but also understanding how capital is raised.
In additional to dealer owners, OEM mentors were also raised as relevant to success. Mr.
Curtis, the only second-generation automotive dealer to participate in the qualitative study,
specifically listed his father “at the top of the list”; however, he also shared the following about
an OEM mentor:
He was my father’s [OEM] portfolio manager and encouraged me to continue to go
through the process, the assessments and stuff like that, and the training. And then when I
asked [if] it was time for my turn for an OEM loan he was in the mix then, too. So, it just
came kind of quite naturally.
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Furthermore, participants described the diversity in background experience and
philosophies of their mentors which helped them to accelerate their career growth and success.
For example, Mr. Williams described the range in his mentors and the knowledge imparted by
the “best pencil guy,” who helped him to understand expense controls, measuring productivity,
etc., versus the “Rah rah, Type A personality,” who provides insights into directing and inspiring
people. Similarly, Mr. Grant talked about two primary mentors with vastly different perspectives
where one mentor was described best as a “marketer” or “promoter,” with the second
characterized as the “disciplinarian.” Mr. Davis provided a different view and cited one mentor
that was widely known for customer service and shared, “One of the things that he stenciled into
my mind is that if you are committed to taking care of the customer, your business will be
successful. Just take care of the customer and protect your brand at all costs.”
Career Guidance. Participants reflected on the guidance and direction their mentors
provided to help direct their development. First, several dealers mentioned accounts of how
mentors provided generous access to various resources. Two of the most important resources
cited were time and openness, leading to mutual trust and respect. Relative to access to time, Mr.
Borishade said one of his mentors was
like a father figure in the car business. He literally held my hand through every aspect of
becoming an owner once I decided I could do that. I’ve never had to make a decision
without having him as a resource and his guidance to make sure I didn’t make costly
mistakes.
Regarding the transparency aspect of access, Mr. Jones stated about one mentor,
So, he does a good job of educating you and not holding any information back so I was
ready to step out there a lot of information that’s not given to you when you’re a general
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manager because if I give you too much information, then you’ll leave. That’s the
thought process I guess.
Taken together, there is a selfless investment by mentors of time and information, which by
design empowers the mentee to breakout as a potential competitor.
Participant feedback on mentor guidance also highlighted efforts made to help develop
the network needed to be a successful dealer owner. Mr. Jones’s mentioned association
connections and stated, “[ My mentor] put me in front of the right people. Any questions I had
about being a dealer—He was very, very supportive. He was the one that actually told me about
NAMAD.” As it relates to the OEMs, Mr. Borishade reflected on the guidance received and
shared,
[My mentor] taught me how to conduct myself and how to represent myself and the
understanding of the importance and how the manufacturer use me and help me
understand the KPIs (Key Performance Indicators) of the manufacturer and really just
how to carry myself as a young up and coming businessman.
Finally, Mr. Morris mentioned access to other dealer mentors and said, “Actual car dealers
themselves that I was able to spend time with on weekends, late evenings talking about the
business. And it gave me access to the facility to come in and observe, watch the operation.”
Outside of associations like NAMAD or NADA, OEMs, and other dealers, a few dealers
mentioned that their mentors also helped provide exposure or access to lenders.
A key insight from several participant interviews on mentors was the importance of best
practices or lessons learned. This is because, for several first-time dealership applicants, they
must leverage all of their resources to obtain the necessary capital. Thus, if a dealership fails, the
candidate is likely to have their entire net worth wiped out. On this point, Mr. Williams recalled
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a frank conversation with a mentor who said, “To own a dealership takes all you got and all you
can borrow. … Good times, you can make all the money you want to make in one [dealership] of
these. Bad times, even one dealership is too many.” The mentor was not trying to discourage Mr.
Williams, but rather trying to set the right expectations to help him properly prepare for success.
Another of Mr. Williams’s mentors emphasized other important aspects, specifically
understanding financial statements and costs that might not be top of mind for a prospective first-
time dealer owner and recalled,
When I was first exposed to it [financial statements], the only number that meant
anything to me was the net because that’s what I got paid off of. [My mentor] made sure
that I understood all the different pieces of the financial statement and what they meant.
And I learned how to dissect things backwards, forwards, etc. Watch your expense.
Here’s a cheat sheet for you. Find an operation in the organization. Take their financial
statement, lay it down, lay your expenses down next to it and see where you’re
out of line and start working on those things.
Career Path to Becoming a Dealer
Participants were interviewed about significant steps taken along the path, which
contributed to becoming a dealer and success as a dealer. Some responses were centered around
experience working in dealerships. In addition, dealers mentioned high-value training that
supplemented work experience through associations including NAMAD and NADA, corporate
training programs, and college. Finally, another important consideration related to accumulating
the necessary wealth to either become a minority partner or acquire a dealership through an
OEM or lender program.
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Relevant Dealership Work Experience. Interviews reflected participants generally had
experience working in all major aspects of running an automotive dealership before becoming an
owner. An automotive dealership has four main revenue centers including new car sales, used car
sales, finance and insurance, and parts and service. As an example, Mr. Borishade shared how
over a period of approximately 10 years, he took on roles of increasing responsibility starting as
a sales associate in 2006. He then gained experience as a finance and insurance manager, used
car manager, new car manager, general sales manager, and finally general manager. This
progression positioned him well for his next step as a minority owner in a dealership.
Mr. Borishade did not obtain direct experience in the parts and service side of dealership
operations, until becoming a general manager responsible for all aspects of a dealership. Mr.
Jordan shared a similar background and mentioned being given “a lot as a [general manager],”
without any direct parts and service experience either. The importance of the parts and service
department for a dealership sometimes referred to as fixed operations, is that it provides stable
income that can absorb overhead expenses in the event sales of variable products (new sales,
used sales, finance, and insurance) were to decline. For other interview participants, such as Mr.
Williams, direct parts and service experience, represented a foundational career step, and
reflected, “And so I realized that a dealership is a very dynamic operation.” He shared examples
of processes that an average consumer may not be aware of such as how to properly dispose of
scrap parts, or handle client warrant claims from beginning to end.
Other common insights received from participants related to the value of diversity
working in different dealerships for different owners, and the opportunity to be a minority
partner before becoming a 100% majority owner. As an example, Mr. Morris said, “Actually I
worked in probably six different stores. Two that were privately owned by individuals. That
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allowed me to come into their stores and work with them side by side and then four additional
stores that were owned by [OEM].” Relative to minority partnership experience, Mr. Jordan cited
that before joining two other experienced partners that despite his knowledge of running a
dealership, he was not aware of how to acquire a dealership from the beginning in sourcing the
opportunity, all the way to closing a deal at the end. Finally, outside of the core functions, Mr.
Davis was one participant that had direct dealership experience in a support function as a CFO
for a dealership group that went from private to public ownership.
Relevant Nondealership Work Experience. Several participants offered up critical
nondealership work experience that contributed to their future success as an owner of a
dealership. As an example, Mr. Williams struggled to find an opportunity in dealership sales due
to a lack of sales experience. As a result, he elected to take an opportunity to work in insurance.
He described his career step and how it benefited him in the future:
So, I quit the automotive industry, went to work for the insurance company. Worked for
them for about 3 years, did well sold, learned how to sell, knocking on doors, and selling
life insurance. Really. Things went well there, made a little money, was able to put a little
money back. But I was still wanting to get back to the roots, which was to automotive.
And so, I quit the insurance business, and I had sales experience.
After transitioning back to work in a dealership, Mr. Williams was able to obtain a sales position
and used his insurance experience to earn a promotion working as a finance and insurance
manager at a dealership.
Participants offered up other examples of nondealership work experience that helped
shape their careers as dealership owners. For example, Mr. Morris learned a lot about how to
represent a brand in a market as a fast-food franchisor operating five outlets. Mr. Grant provided
55

a different example, which was less about skills and more about inspiration to be an entrepreneur
and a dealer. From his early experience working for an OEM calling on dealerships in a
relationship management role and said,
But calling on dealers and consulting with dealers, the 14 years that I did that, I saw the
way they lived. I saw the things they had, and I saw the way that the successful dealers
accumulated money and where they were. So, now I said, okay … what are you going to
do with your life? And then all of a sudden, I end up working in a dealership, and I see
this way to make money and to grow. And I said, hey, I would like to be a private
entrepreneur.
Opportunities to Supplement Work Experience Through Education. Education was
another major theme that helped participants develop the skills and knowledge necessary to
become a dealer. Three categories of training were cited by dealers including association
provided, corporate training, and finally higher education. Of the participants interviewed, the
association tie-in as an education supplement to work experience was the most referenced as
critical to success. Mr. Jones’s shared his experience after his dealer principal sent him to
training through NADA:
So, I worked there for a year. And then, of course, he sent me off to NADA school. And
that, of course, put everything that I was doing every day into perspective with the proper
training of it, with the schooling behind it.”
Mr. Jones summarized the type of content that the associations provide and the potential
impact when combined with in-dealership experience. He said,
But as a general manager, you have all four components of the dealership, so you have to
learn how to manage all of that. And then when you go to NADA school it’s pretty much
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courses you’re training on, all those different in depth training. They peel the onion all
the way back and you understand where every dollar goes and why. Once I got the year
of actually working as a general manager, then going to school for it, that next year it
made sense. But then when you go to school, it really makes sense why you were doing
what you were doing and the things that you needed to change and adjust. It just makes
life a lot easier once you get that education behind you with that dealer school.
Classes taken at colleges and universities provided another means for entrepreneurs to
obtain the right knowledge. Mr. Williams provided a relevant example, tied to his development
of selling skills and said,
And finally, I decided that everybody told me I had no experience in sales. So, I started
taking night classes at a junior College to expand my horizon in sales. So, I took
marketing classes. I took sales classes. I took public speaking classes, just whatever I
thought I needed to enhance my ability to communicate and sell product to somebody.
Corporate training programs represented the third category of impactful training to
success as a dealer. Mr. Morris provided one example from his experience as a food entrepreneur
where he received corporate-provided training and mentioned,
They take owner operators, and they send them through a 1-year program to acclimate
them even more with the retail side of the food industry. And they teach you about
marketing, advertising, pricing, ability to hire individuals, recruit talent, manage talent,
analyze talent, analyze financial statements. So quite a bit, even with my banking
background, I had all that. I was a credit analyst for 6 months before I became a
commercial lender. But even with all that experience, the [corporate training] was very
essential and just sharpening along those skills.
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From Mr. Morris’s discussion, although the food industry diverges from automotive in many
areas, the training provided was extremely applicable to owning and operating dealerships. Mr.
Grant provided an example of a similar program provided by an automotive OEM and said,
“Their in-dealership training program, where it was a combination of classroom training and
additional working in the dealership at hands-on. I did that for a year, graduated, and then was
placed in my first opportunity.”
The participants’ comments on career paths should be taken in the context of the overall
low ownership mix of African American entrepreneurs at less than 2%. Although prospective
African American entrepreneurs have the necessary talent and entrepreneurial spirit to be
dealers, due to the lack of visible role models, they may not see a clear path to ownership. For
this reason, supporting training and education programs in partnership with all relevant
stakeholders is important to building a pipeline of future African American entrepreneurs.
Relationships Underpin the Automotive Industry
The qualitative interviews included several questions about participants’ first dealership
acquisitions, including how the entrepreneur was connected to the opportunity, preparedness, and
ability to close on the transaction, opportunities and challenges surrounding the deal, etc.
Participants established the value of relationships before and after closing on the dealership
acquisition as a critical factor to success. Mr. Grant summarized this perspective and stated,
“You need relationships. This is a relationship business, and I think that that plays a part in it.”
Perspectives on five relationship segments were shared including lenders, OEMs, associations,
dealers, and business brokers. Reflecting on comments from interview participants, African
American dealer candidates maybe at a disadvantage to other candidates in trying to establish
and grow relationships across the five segments. Due to the lack of established relationships,
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creating awareness of programs available such as through NAMAD, are critical to helping close
the gap.
Lender Relationships. The participating dealers did not mention national or regional
bank relationships as playing a significant role in acquiring a dealership. The lack of bank
relationships may have been due to a lack of knowledge, stringent bank qualifications that
exclude participation, or a lack of significant commercial business dealings. Mr. Morris, as a
former commercial banker, was unique having launched his career in finance; however, even for
him, banks were not a significant factor in sourcing the capital required for his first deal and he
elected to use an OEM equity program. Reflecting on the early part of this career and experience
as a dealer, Mr. Morris commented,
I think it makes it easier if you have some experience with the bank and you use that
particular bank to help you. If you can establish a relationship with their diversity
banking side, I think some of the banks have different programs that are available to
minority entrepreneurship to kind of help guide them through the process.
Mr. Borishade mentioned leveraging a SBA bank to finance his dealership acquisition.
They offer attractive terms and rates, as the loans are guaranteed through the government;
however, the key to a deal through the SBA is not the actual loan approval, but OEM
relationship. This is due to OEM minimum requirements for the percentage of unencumbered
funds when applying for franchise rights. In his case, Mr. Borishade could obtain OEM approval
due to his prior relationship with an executive.
Captive lenders, which are OEM subsidiaries, were raised as influential partners to help
close deals and for ongoing support; however, experience across dealer interview clients was
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mixed. Mr. Curtis provided positive feedback on the role and importance of using the captive
and said,
It’s the relationship, right? So, you stay loyal to a brand or a bank because of the
relationship you think you’re building. And it’s almost personal, right? It’s almost like a
personal relationship: Your financial arm [the captive lender] has to be your partner, not
just loan you money and hope for the best or restrict you at any time. They need to be
your partner and help if you have troubled times, they need to be there to help you get
back on track.
In addition to serving as a stable partner to support and sustain growth, Mr. Curtis also
mentioned a few areas where his captive lender added value including training, how to manage
capital better, support and presence at functions such as NAMAD or dealer 20 benchmarking
groups, and object assessments.
Mr. Jordan used the OEM Captive when closing on his first dealership transaction despite
offers from other lenders in higher amounts. Reflecting, Mr. Jordan selected the captive, despite
an inferior offer as an investment into a long-term relationship and said,
And we felt they gave us opportunities. We were going to go all in with them. We went
with products, we went all in. And honestly, we had some other people [lenders] out
there. They actually gave more money, and we chose to trust [captive lender].
In this instance, by product, Mr. Jordan was referring to a loan made as an advance of warranty
and prepaid maintenance production. In addition to commercial and insurance production, Mr.
Borishade mentioned the use of consumer loan and lease products, as another support area of
importance based on the total captive relationship.
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OEM Relationships. As new vehicle franchise dealers, the perspective of the
participants interviewed emphasized OEM relationships as the most important to cultivate and
maintain versus all other segments considered. OEM relationships are the most important due to
the power dynamic between the OEMs and the dealers. While a dealer entrepreneur may have
multiple lender options for capital, OEMs are the sole source for their brand vehicles. In
addition, manufacturer franchise agreements have other terms and conditions to which dealers
can be compelled to adhere, such as facility requirements. Participants raised the importance of
understanding the costs or investments required for dealers in time and resources, to establish
strong relationships with the OEMs. In addition, they also reflected on understanding the benefits
close OEM relationships can provide dealers as being equally important. Benefits cited may take
the form of education, guidance, access to potential dealership acquisition opportunities, and
funding. Finally, dealers shared other OEM best practices that strengthen relationships from the
dealer perspective, such as recognition.
Dealer participants shared several items they perceived as high value to the OEM from
their dealer bodies. OEM areas of interest discussed by participants included maintaining a
shared voice between the OEM and dealers with consumers, alignment on initiatives, use of
enterprise solutions versus outside partners, and finally performance measurement. Mr.
Borishade equated the OEM and dealer relationship to a marriage and mentioned the importance
of aligning to the OEM culture and messaging as paramount to “speak the same language so that
when the customer comes into the dealership, there’s not a miscommunication between what’s
being communicated by the manufacturer and what the dealership is delivering.”
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From Mr. Borishade’s perspective, attention to OEM interests is at the root of OEM and
dealer synergies, and felt a loss of total value to both parties if OEMs were to deal directly with
consumers. He further explained,
But that’s why I love the manufacturers. Because they’ve got so many resources, they’re
doing so much research, and they have, I think more of a comprehensive knowledge from
a macro perspective. And we may have it on a micro perspective, day to day, but by
communicating together, then we could create a great experience for the customer and
employees to improve the brand value. So, [my mentor] made me align with the
manufacturer and understand, like being a poster child of the manufacturer, like, I’m Mr.
[OEM Brand]. I’m going to make my town an [OEM brand] town.
In addition to sharing a common voice, dealer support of OEM-driven initiatives or
direction, and fully using OEM enterprise resources were other examples of areas where dealers
needed to maintain healthy relations. Reflecting, Mr. Curtis equated this to being a “team player”
and said,
I use the captive and I’m a team player. So, for example, if I had a [OEM brand] store,
who would sell all of [OEM]’s product, whether there’s insurance, warranties, whatever
you want to appeal to people or to the manufacturer of your dedicated brand.
This quote referred specifically to using the OEM subsidiary captive finance and insurance
entities’ products and services versus other vendors, which may provide better profit
opportunities to the dealers.
Mr. Borishade also reflected on instances when, to support the OEM, attention needed to
be diverted to OEM initiatives, and focus areas versus the dealer’s priorities and stated,
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So, I’m so manufacturer driven now and so interested in helping the manufacturer and
understanding their goals and matching up my Tier 3 [local advertising] with their Tier 1
or Tier 2 (national or regional advertising) or anything that they are pushing.
Manufacturing oil. They’re pushing, hey, we need you to buy some of these accessory
kits. We’re trying to drive this. Anything that the manufacturer wants, I want to deliver.
The dynamics in making a decision are difficult at times for dealers to manage, and
whether intentional or not, may not always be in the best interest of the dealer. For example, Mr.
Grant shared an example of where he felt compelled to arrange his store office space in a
particular way that went against his instinct as an African American dealership owner in a
predominately European American town. Per Mr. Grant,
They wanted me to do it this way. And I’m trying to do it their way to pacify them
because, hey, they’re the ones that put up the money. The second time, I didn’t do it that
way. I did it my way, and I was much more successful.
This simple example highlights the nuances for dealers to manage the OEM relationship and
understand when and how to push back on requests or directions.
Ultimately, as the intensity of competition in the automotive industry is extremely high,
the dealers interviewed spoke to the need to deliver on business objectives to maintain positive
OEM relationships. Mr. Grant reflected on the metric most used by OEM in sales efficiency and
stated,
One of the key things right now that they’re looking at is that you don’t determine your
success in a particular market. You don’t. But the [OEM] will determine that based on
the size of that market and the percentage of cars they feel that you should be selling,
your sales effectiveness. If you’re not 100% sales effective, you can forget it. When I
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bought that store, the present efficiency was only 40, 50% sales effective. I was able to
get that up to between 65% and 70% sales effective, but that wasn’t good enough for the
OEM.
Mr. Borishade shared a similar sentiment and said, “So, I started building the OEM
relations when I start putting up numbers.” In addition to sales metrics, customer service and
profitability from the manufacturer’s perspective were also cited as necessary to deliver for the
maintenance of positive OEM relationships.
Interview participants shared several benefits or advantages to dealers achieved through
maintaining mutually beneficial OEM relationships. Benefits discussed include education, access
to acquisition opportunities, and capital programs. Mr. Morris reflected positively on his OEM
interactions and relationship and shared the following thoughts on support for prospective
owners from underrepresented groups:
And I think if you talk to any OEMs as a minority dealer, I think you should ask them as
to what’s available in terms of support, dollars, training, just any advantage you can get
to kind of help you start up your first 6 months, first couple of 2, 3 years in business. The
manufacturers, they have money, they have access to capital that maybe some of the new
dealers would not. Any they could probably guide them in the right direction to be able to
gain access to money.
Mr. Jones shared a similar sentiment as it relates to obtaining both training and capital
and stated,
So, if we can educate people on how to use their talents or funnel their talents into the
right direction to get them the support they need, not just capital, but education wise.
When you’re interviewing with those manufacturers, you learn so much.
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Participants also mentioned the importance of building history with OEMs both at a
regional and corporate level to access both capital and dealership acquisition opportunities. Mr.
Smith shared his example of how the OEM reached out to him:
And primarily because we performed extremely well over the years, we focus on our
dealer performance score, which is the scoring system for [OEM], to make sure we have
a good store. So, when the time comes up and they’re looking for a candidate, they reach
out to you. So, it didn’t dawn on me at the time, but I realized now that we’ve done a hell
of a job and our path has been amazing.
Mr. Williams shared an example of how his OEM relationship provided not only access
to the opportunity but also capital support and said, “And so, they served up that deal up to me as
an opportunity since I was on their list of approved candidates. And by that time, I’d already
went through all their assessments.” Mr. Curtis shared a related sentiment of building trust with
the OEMs and said,
You have to show them all that you are prepared, prepared to take on the task, no matter
what the playing field is. Any every dealer, especially minority dealers, they start off as
candidates, but everybody has their own path, right? And I really feel that you have to
show everyone that throughout your track record, your resume that you’re prepared, it
comes all the way down to you character, how you present yourself, how you live.
Finally, Mr. Curtis also shared the impact his relationship had on closing his first
transaction and said,
So, from all of those years that I was working with the OEM and building my brand, like
executives that can help me do a deal, and when it came time for me to do a deal, reached
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out to that executive, and I said, “If I want to be a dealer principal and strive to do my
own deal, do I have your backing?” And that executive said, “Absolutely 100%.”
Finally, there were two best practices that positively contributed to mutually beneficially
relations. The first being active OEM participation in events and the second recognition. Relative
to interaction at events, Mr. Borishade mentioned several examples including dealer networking
meetings that provided access to OEM executive or the NAMAD association gatherings where
potential candidates have the opportunity to interview in front of executives. He said in support
of continuing the participation said,
I think if you have a desire to get to know the manufacturer, you have access to the
manufacturer at all these events. So that accessibility of the executive and the people who
are in sales, parts, and service who represent the manufacturer. It’s good that you can be
face to face with these people, if you really have that type of ambition to bold good
relationships, it available to you.
Another well-received practice was when the OEM visits a dealership to recognize the
ownership and staff. In support of this practice, Mr. Borishade had the following insights:
Let’s say we were 150% sales effective, Number 1 in the district in sales effectiveness.
And a regional VP comes to the city and takes my whole staff to dinner. We rent out a
spot in my PMA [primary market area] and [OEM] pays for it, takes our whole staff to
dinner and it’s a big deal. And it makes the employees buy in to loving the manufacturer
also, so its events like that when the executive comes in and says, “You’re not just one of
3,000 dealerships. You’re special.”
Mr. Curtis, referring to the impact of OEM encouragement, shared similar insights:
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It’s those pinch-me moments, right? When you don’t realize because you’re just working
every day and trying to do what you do. Any then when you go somewhere and hear,
“Can you call this guy? He’s a potential candidate, can you go call him and tell him what
he needs to do and kind of mentor him through the process?” And then also, when you go
to a function and they point you out in a crowd or you see your name on the screen and
you’re either first, second, or third in the nation of achievement
Association Relationships. The two major associations mentioned by participating
dealers as being extremely important and influential to prospective dealer owners are the
NAMAD and the NADA. Both offer training and access to OEMs and lenders. In addition,
NAMAD has a specific mission to support underrepresented groups. Mr. Jones, on the specific
access to OEMs through NAMAD, said, “And of course, you have all manufacturers there, and
you interview on Friday with five manufacturers that are looking to place minority dealers. So
I’d interview with them and follow-up with them.” From Mr. Marshall’s perspective, the
NAMAD is important politically, and he felt there were opportunities to leverage the association
with the government. Finally, through the NAMAD, members can gain encouragement from
other African Americans who model the path to becoming dealers. Mr. Borishade reflected,
For the first time, I attended the National Association of Minority Automobile Dealers,
NAMAD, in 2015, July. For the first time in my career, I have seen minority owners,
specifically Black owners. It was like very eye opening for me and it inspired me to think
differently and think that I could be an owner. So, on my way going back to Charlotte,
where I was a general manager, I couldn’t stop thinking in my mind that I’m going to be
an owner. And I set forth the goal from the inspiration that named that I would be an
owner in 12 months.
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Dealer Relationships. The focus of this section is on relationships with other dealer
owners as peers and with dealer owners as employers. Unlike a mentorship relationship, this
describes a situation where a peer may be going through similar challenges in becoming an
owner or tying to access information or resources that an employer provides an employee.
Regarding dealers as peers, Mr. Borishade described a relevant example of a peer that was going
through the acquisition process concurrently and the impact it had on his pursuit:
I was just asking him so many questions about how he was going to do it, how you
structured it, how you went about doing it. And he made it just so simple, and it made it
just so believable. He cleared up any doubt in my mind telling me his plight on his
particular deal. So after that happened, I had 100% confidence that it was either dealer
principal or nothing, but I wasn’t going to settle for less than that.
Mr. Jones commented on the role a dealer can play in supporting employees looking to
acquire a dealership and said,
How do you even start to look for your own deal? It’s not there. I’ll just be honest with
you. If you don’t have a supporting dealer that you work for, then you won’t ever find
out. It’s like a closed door. Then, you’re not going to find this stuff on your own.
Business Broker Relationships. Relationships with business brokers, that contract to sell
existing new vehicle franchise dealerships on behalf of existing owners, represent another area of
opportunity according to interview participants. Some participants, such as Mr. Borishade
connected to their first opportunity through a broker. Mr. Jones provided key insights into the
influential role they play. Mr. Borishade said,
We have communications, and of course, the manufacturer is always the last one to find
out. When a dealer is for sale, people don’t take it to the manufacturer, they take it to the
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broker and the broker gets the terms and stuff agreed upon, and then, of course, the
manufacturer grinds it out after you’ve already made agreements to sell or purchase it
In the case of Mr. Jones, he was fortunate to have found a broker that helped educate and
walk him through the process; however, in many instances, brokers will not take time to educate
a potential candidate particularly if the candidate does not have the substantial resources
necessary to close on a dealership transaction. Instead, most brokers may take the path of least
resistance and service existing large dealer group owners.
Dealer Perspectives on Dealership Marketplace
Participating African American entrepreneurs were asked questions about their
experiences in obtaining start-up capital for their dealership ventures. The dealer discussions
touched on types of transactions, such as obtaining a new open franchise point versus the sale of
an existing dealership, and on the difficultly in financing a transaction. The difficulty in
arranging the financing is a result of rapidly escalating dealer franchise prices or blue sky, which
trade at price: earnings multiples. While different capital options were mentioned, based on the
backgrounds and experiences of the participants, most of the discussion surrounded OEM equity
programs referred to as a “motors holdings” program. Other capital program types mentioned
included debt finance from OEMs, captive lenders or bank facilities, and SBA-guaranteed debt
programs. Finally, the interview participants shared how experiences and preparedness impacted
transactions.
Dealer Perspectives on Available Capital Options
The primary options for dealer entrepreneurs to finance acquisitions are OEM equity
programs referred to as motors holding, and debt financing primarily available through captive
lenders or banks. In addition, there is a recent form of debt available from approved banks in
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partnership through the SBA that some entrepreneurs seek to use. Manufactures typically will
not approve deals where the source of funds is a private equity or venture capital firm, as these
capital sources include ownership stakes and focus on profitability first with future intent to sell
or flip the investment for an acceptable return. Another way for dealers to acquire ownership is
through partnerships, as either a minority partner of a larger group or in partnership with other
dealers. Key factors for dealers to consider in evaluating between options include the level of
control, downside risk to the owner, and support structure provided by the lending partner.
Perspectives on OEM Equity Programs. This section uses the narratives of four dealer
participants that capitalized on their first dealer acquisitions via an OEM equity program. The
programs are commonly referred to as motors holding, as stock shares in the dealership legal
entity are owned by a combination of the entrepreneur and the OEM. Mr. Morris described the
motors holding program and structure as, “[OEM] has a kind of financial bank. Motors Holding
is a separate corporation attached to [OEM]. And what it does, it provides funding for deals.”
The earliest form of the program dates to 1972, as outlined by the GM Diversity Dealer website
(GM Minority Dealer, n.d.). Despite the longevity of the program, some dealer participant
feedback was mixed. For example, Mr. Grant, despite supporting and using the program
personally stated, “The motor holding program has run its course. I think they need to upgrade
the program.” Another dealer, Mr. Borishade, when seeking capital, specifically did not consider
using it and felt
that structure is antiquated. That’s an old structure that needs to just go out. That’s all I’m
saying. If you want to bring us in, you have a real goal to increase diversity and equity,
owning new franchise dealerships, well, then you have to change that structure.
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The motors holding program has several unique and important elements designed to help
new owners successfully launch a dealership business while minimizing downside risk, including
low capital requirement, stock repayment mechanism, and partnership support. This section will
summary the program design and structure, and the positive and negative aspects from the
dealer's perspective.
The most critical feature of the program design is the source of initial capitalization and
repayment. Mr. Grant summarized the elements:
My first venture, just to use round figures, it took a million dollars, so I needed $150,000
to start that venture or to invest with them. I put up 15% of the required capital. They put
up the other 85%. And as you make profits in running that business, those profits are used
to, number one, pay dividends based on the amount of money that they put in to them.
And then half of it goes towards paying dividends, and then the other half goes towards
retiring their preferred stock.
Per Mr. Grant, the stocks are repurchased until the OEM’s ownership mix is reduced to
15%, at which point the entrepreneur can buyout the remainder via bank or another lender. Mr.
Morris added the interest pricing and terms were “pretty good.” There was some frustration
expressed by Mr. Grant from the entrepreneur's perspective, as a majority of profits under the
program are routed to the OEM. He said,
The difference is that the motors holding program is every quarter. Depending on how
much money you made, all of that money was drawn out of the business. In other words,
it was either going towards paying them dividends or retiring their preferred stock. And
what you got out of that, even though you were profitable and let’s say you made a half
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million dollars, you retained more ownership, you bought more ownership for your
portion of that $500,000, and then they took the money.
Despite the frustration, Mr. Grant also referred back to the overall objective and said,
“Once you buy them out, it’s a different ballgame because now you get to keep all the profits in
the business. So, you sacrifice in the beginning, but that sacrifice goes towards ownership.”
The application to the OEM motor holdings program has some uncertainty relative to the
dealership assignment, specifically the geography. Mr. Morris commented on the motor holdings
structure and mentioned, “What [OEM] does is go through a vetting process having a dealer in a
geographical location that he’s comfortable with. You determine if you can live in that
community if you can form a quality of life with your spouse.” Mr. Davis described the
uncertainty in the process and said,
I did all the paperwork, went through, showing my financials and stuff, and I never knew
where it was. So, now when I got in the [OEMs] minority dealer program, I declared for
the Southeast region. [OEM] has five different regions and you can say, Well, I’ll take a
deal in the South Central, the North Central, the West, or the Northeast.
This uncertainty has the potential to create issues for a first-time owner from an
underrepresented group. Mr. Grant had an important perspective as his first dealership was not
successful and reflected on the location:
In my first opportunity, I did not make it; however, that opportunity, in my opinion, was
not a real good opportunity and they did not replace me with a minority. It was an area
where there were very few African Americans, virtually none. I went in, and they
restructured the whole dealership.
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By restructuring, he also mentioned that in addition to the obstacle of being an African
American in that particular community, that OEM directed him to surrender one of the franchises
that was a profit center for the prior owner.
Once an entrepreneur acquires a dealership through a Motor Holdings program, the OEM
as an equity partner provides structure and support to aid the dealer. Mr. Morris referred to the
beneficial OEM scaffolding provided and shared,
When you go in business, you have to have some kind of a guidebook in my opinion to
operate by do’s and don’ts, especially for new business owners. Motors holding provides
that as they’re an extension from a banking standpoint. They’re not directly running your
business day to day, but the oversight that they offer and that they require keeps you
sound from a working capital structure, keeps you sound from an inventory perspective.
Mr. Grant also felt positive overall about the OEM program and would still recommend
using it and provided the following recommends in support based on governance provided by the
OEM:
It’s a good program. It’s very structured. They [the OEM] have rules and regulations and
you learn as they’re working with you every day. You have certain guidelines that you
have to stay within. And I think that, that is a good way for minorities who have not been
in the business to become good, solid dealers because there’s discipline, whereas if it’s a
loan, they’re not working with you. They’re not really teaching you anything. They have
certain guidelines. They don’t want your capital to drop below this or drop below that.
But they’re not in there helping you, working with you, staying in touch with you, and
mentoring you every day like the motors holding program. So, it’s a costly program, but
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it's a good program, and it's a way for minorities to have complete ownership of their
efforts.
In addition to the structure provided by the Motors Holding program, other key positive
benefits include financial forms of support, guidance to avoid overpaying for a dealership,
elimination of unlimited risk, and the ongoing OEM relationship. Relative to financial support,
Mr. Davis summarized his sentiments and said, “But my main point is that [OEM] gave me
everything I needed to be successful, not just with financial support, but inventory. So, when I
opened my doors in October 2007, I didn’t have to apologize for anything.” This type of
commitment is especially relevant in the current environment as vehicles sell above the
manufacturer’s suggested retail prices due to inventory shortages caused by supplier issues and
high consumer demand. Mr. Davis also provided an example from the financial balance sheet
and said, “They [the OEM] were so hell-bent on me being successful that we capitalized that
store with $2.4 million. And the working capital was like 1.8 or 1.5 [versus a current ratio
standard of 1.2].”
Another positive aspect of the motors holding program is that the structure can help
prevent an eager, first-time dealer entrepreneur from overpaying for a dealership. If a transaction
is financed through variable rate debt, overpaying for goodwill, known as blue sky can be
disastrous. Mr. Grant shared the following example from his experience:
For example, there’s a dealership that you can buy, and let’s say that the owner, he wants
too much for that dealership. Well, if he wants too much, then motor holdings will not
participate. If they can’t structure that deal so that they can see you make money in that
deal, they’re not going to do it.
Thus, the OEM serves as a trusted mergers and acquisition advisor under the program.
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The equity structure of the program provides a floor to the downside risk to a new
entrepreneur. Mr. Grant stated,
The motors holding program has an end result, and that end result is you owning 100% of
that store, whereas if you take a loan and let’s say that you go through a recession and
you run out of cash, you can lose everything.
Mr. Williams further sharped this line of thinking and said,
Essentially, what it boiled down to was they partnered with me. That took the risk out of
the deal because we only paid dividends if there was profits. If there wasn’t profits, there
was no bank beating on my door for a monthly payment. That took the financial pressure
out so that you could focus on fixing the deal, selling and servicing cars and trucks.
Participant interviews showed several negative factors or flaws in the program were
specifically raised as it relates to transaction limits, dealership control, and adverse selection.
Currently, a dealer candidate needs to have a minimum sum of $500,000 or 15% of the total
capitalization to be eligible for the Motors Holding program. Mr. Davis emphasized the limit of
the guideline and said,
Right now what we’re trying to do is convince [OEM] to look at the standard for
somebody getting in a minority dealer program for years was $350,000 and passing all
the tests. All that means is that it makes you eligible for motors holding financing. The
dealer principal has to put up 15% of the total capital. So, that limits a guy to a $2.3
million deal.
Mr. Grant supported the idea based on the cost of goodwill or blue sky to acquire a
dealership and said,
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My first venture was basically a million dollars that I borrowed in his [my son’s] first
venture it was seven and a half million. So, it’s a big difference. The cost to do it and to
get into this business has really multiplied tremendously. Whatever the blue sky is, that’s
added to whatever capital you need to run the business. And then that’s the total capital
requirement. It doesn’t just go away.
Outside of leverage constraints, lack of management control was the second primary
issue shared by participants. There were several themes mentioned including the expectations for
performance and metrics, ability to push out a minority partner, and business decision. Mr. Davis
described the power of the voting stock held by the OEM: “As long as they own any of the stock,
they have all the voting stocks. They can fire you anytime if you’re underperforming.” This leads
to the issue of expectation of performance and measurement. Mr. Grant shared a salient example:
When I took over, I started meeting with them and I said to them, there’s no way that
you’re going to sell 4,000 units in this location. They said, well, that’s not true.
Somebody can do it and we think you can do it. And so, we’re going to put you in the
point. They put me in the point and I raised the bar, but I didn’t raise it far enough. And
eventually it got to the point to where they said, well, you’re not sales effective. So, we
want you to sell the store. And I said, “Well, I don’t want to sell the store.”
Mr. Grant could not name his son as his successor and eventually lost control of the point due to
underperformance based on the standards set by the manufacturer.
For a new owner that is fully invested in the success of the store, making sure the
dealership acquisition target is viable is of utmost importance. Mr. Morris emphasized this and
stated,
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Back in the [OEM’s] early days, they made some mistakes with putting dealers in deals
that weren’t deemed very good deals. And the dealer was out of business within a year,
maybe 2 years. Motors have done more due diligence in terms of choosing the right deals
to offer the dealers now. And we don’t have many of those deals that go south, so to
speak. Most of them are very prudent. There’s only one good deal and that’s a good deal.
I tell people all the time, bigger is not better. Smaller is not better, only better is better.
So, you got to find the right deal. That’s the most important piece to all of it.
The final potential downside to the motors holding program mentioned by participants is
the alignment of interests. Mr. Grant thought that there is too much OEM emphasis made to
balance profit versus establishing a strong dealer from an underrepresented group and said,
If they didn’t focus so much on being profitable, they could probably do a lot better. They
were the first, I would say, manufacturer that took a chance on putting minorities in
business and actually backing them, actually participating for them to go into business
and it was a good program. But if they weren’t going to make money and they didn’t
want to do it, and that’s a problem because, in my opinion, it’s sort of a conflict of
interest. You want to help minorities, you want to put minorities in business. However,
that’s contingent upon you making money on those minorities.
Overall, despite the positive and negative aspects of the motors holding structure, the
participating dealer entrepreneurs were still committed to the program, believed in the merits,
and appreciated the OEM commitment. Mr. Curtis’s thoughts encompassed the sentiments:
My first acquisition was a long training process. They actually did a very good job, they
put you through a lot of scrutiny, right? And here’s something else you really got to
commend [OEM] for sticking with the development program, but stuck in there with the
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dealer development for went through a lot of scrutiny from the board, the dealer Council,
even NAMAD, through a lot of stuff. But they hung in there and kept the program
together.
From Mr. Curtis’s perspective, the most important aspect of the program is the combination of
components the program offers including training, board scrutiny, the NADA, and the NAMAD,
work experience, etc. The program provided African American candidates exposure to OEM
decision makers and the chance to provide over time their qualifications and readiness to be a
dealer owner.
Perspectives on Debt Programs. The alternative, based on availability to dealer
entrepreneurs, is in the form of debt from a captive or bank lender. The main appeal to debt
versus an OEM equity program is control. Reflecting on the lack of debt options for African
American dealer entrepreneurs, Mr. Borishade said,
It’s about control. What we want is for the minority candidate to have control over their
own destiny and to be able to execute on their creativity. That’s what makes us strong is
the ability to execute on our creativity. If I’m a partner in the store, but I still have to
answer to someone or if I can’t execute my creativity, I’m still not free to be me and to
maximize my vision within me.
Despite the desire for debt finance, from the participants interviewed, there were not
many options available. Mr. Curtis said,
There are other avenues out there for people if they’re looking for capital, those are
mostly captive or spin-offs from captives. But as far as mainstream banks, stuff like that,
the institutions, I don’t really know of any programs out there with them.
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Another participant, Mr. Jordan, actively sought bank support and could obtain bank debt
financing via a pilot. In discussing the experience, he mentioned the bank.
Luckily, they had something they were working on. Somebody put us together and kind
of told them what was going on and I ended up talking to them and they ended up getting
all of the top brass pulled in on this. They were trying to do something to help minorities,
but they just did not have the curriculum written down yet.
Per Mr. Curtis, the bank monitored the business quarterly to understand not only the performance
but how Mr. Curtis managed the dealership.
Mr. Morris, as a former commercial banker, shared the mind of a banker from his past
experience:
So, if you’re a banker, and you get a candidate who’s been offered a good deal, deemed a
good deal, a good dealership in a good market. So, your biggest concern as a banker now
is does a guy have the financial know how to make this deal work? Does he have the
management expertise, the character of the guy I’m dealing with, and how am I going to
get my money repaid to a bank?
Assuming the deal is deemed “good” by the bank, and the candidate has all the requisite
experience, bank approval from the bank comes down to repayment. Repayment can be made
from cash flow or net worth or equity. This brings up the structural component of industry
lending practices that limit debt accessibility, which is leverage. Leverage is a ratio of debt to net
worth or equity, and banks and captives by practice provide loans for goodwill or blue sky on a
dollar-for-dollar basis. Mr. Borishade said, “That’s a high barrier of entry. The root to me is
leverage.”
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Unfortunately, large-sum dealership transactions are considered bespoke lending, and
terms can vary based on the dealership being acquired and the background and net worth of the
borrower. For this reason, there is a perceived inequity in access to capital. Mr. Jordan said,
I can tell you from working on some privately held groups. What I did notice is that some
of these guys, that when they say you got to be one to one [debt to equity ratio], well,
they don’t hold those same standards. All these guys, some of these guys are leveraged
higher. Some of these guys buy these deals leverage super high. And so it’s not across the
board deals.
From the captive perspective, there was positive feedback on debt programs being
developed by or already in market from OEMs or OEM captive lenders. Mr. Jordan described
one program, including the unique debt forgiveness incentive, and said,
[OEM] debt program is strong and true to heart. I mean, it’s one that lets you borrow the
money. And if they give the loan, if you perform, can you imagine they’re going to
forgive a portion of that loan. So, they’re helping you get in with cash. They’re helping
you get the floor plan, they’re helping you with the supporting cast.
Separate from the bank, the OEM and captives have aligned interests for dealer success, and the
quotation mentions, in addition to the debt financing, ongoing support, and access to resources.
Three of the dealers mentioned a new channel for capital through the SBA that provides
high-leverage loans. Approved banks are willing to make higher-risk loans at attractive rates and
terms, based on performance guarantees from the U.S. government. Mr. Borishade provided an
overview of the program,
The SBA will do 85% to 90% [of the capital required] if the manufacturers will approve
the structure. We’re in business. Let’s say the deal is a $10 million deal, all in working
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capital, real estate, everything. If the SBA is willing to put up $9 million and the
candidate has a million, the deal is easy to approve. If the deal is $5 million and the
candidate has $500,000, the SBA lender is willing to up $4.5 million and that’s a done
deal.
The comments from Mr. Borishade highlight a secondary issue from manufacturers who
approve entrepreneurs for the franchise. Typically, OEMs will request approximately 40-50% of
funds used to close on a transaction be unencumbered. Thus, even if a dealer can obtain 85% to
90% of the capital required to close a transaction, the associated manufacturer must also approve
the leveraged deal structure. Mr. Borishade described the frustration and said, “We could do that
deal. The manufacturer can’t come in and say, ‘I want to approve a structure that needs to be one
to one.’ That’s the problem.”
The participating dealers’ perspective on service from the SBA banks was very positive.
First, Mr. Jones described the positive speed of service and said,
Well, I found a deal and applied for a SBA loan. … And everybody’s always like, it’s
really hard to get through SBA, and it’s a lengthy process. And I kind of got approved in
like 18 days. The SBA also really fast because everything they needed, I just got it to
them, and they worked it out and we got that approved.
In discussions with Mr. Jones, one thing that may have helped expedite his loan was the
research that he made into the program in advance and his understanding of how to apply. Mr.
Jones said,
The thing about it is I studied the SBA loans and what they will finance, what they won’t
finance, all the resources that they will provide for you, and the support. Of course, you
just have to make sure you get the right deal that lines up with your opportunity.
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His insights included what is included in the 10% capital requirements separate from
closing costs, or how to use the 7a program that provides working capital up to $5 million. Mr.
Jordan also mentioned the bank also provided positive consultative value in helping him build
his business plan.
Despite the positives, there are risks to the dealer entrepreneurs by taking on high levels
of debt. Mr. Williams provided key insights:
I don’t care if it’s a 0%, that’s just adding so much risk to the minority. Now, the second
or third time that a minority buys a store, they could probably take on that financial risk
of borrowing the money from a bank and paying those loans back. I didn’t do it the
second time around. I went with motors because the deal was a risky deal. And I thought
that me and the manufacturers should partner together on a deal with risk. It’s just that
sometimes if you borrow the money from a traditional bank loan, the bank expects
interest payments regardless of business climate. When you’re partnered with someone, if
there is no profit, there’s no profit. If there is a profit, then the profits are shared between
dealer and between the institution that help fund the operation.
Perspectives on Alternative Options. Outside of OEM equity and different debt options
from lenders, the other channel for entrepreneurs to acquire a dealership is through partnership.
Mr. Jordan described the situation as a “catch on both ends” and said, “You have the guy who’s
got all the talent in the world and he can operate [the dealership]. He can run [the dealership], but
he doesn’t have the financial backing and net worth in order to have access to it.” Under this
scenario high net worth individuals or firms can incentivize qualified dealership general
managers to run the stores they acquire.
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Mr. Williams obtained ownership in his first dealership as a minority partner together
with a large established dealer group. At that time, he had enough resources for a 5% equity
stake and borrowed another 5% to reach 10%. His narrative highlighted the downside control
issues related to this approach:
The problem that surfaced was [the majority owner] decided that he would sell his
company. … That sale didn’t go down, but it was enough for me to understand that next-
level thinking. He said, “I’m the majority partner. I have all the rights. You don’t have
the rights. If we decide to sell, you have to sell, you can stay on. If you don’t stay on,
you’ll have to sign a noncompete.”
Mr. William’s example provided two important insights. First, he intended to hold the
point long-term and was not consulted about the deal until it was under contract to be sold. If he
was fully aware of the possibility, he may or may not have gotten into the deal in the first place.
Second, unlike the wealthy majority partners, he could not sign the noncompete as he did not
have sufficient resources to fall back on. Unlike the wealthy majority partner, he could not afford
to stay out of the workplace for an extended period which put him in a precarious position. Mr.
Grant also shared concerns about the realities of being a minority partner from his experience
and said,
Yeah, you could get another dealer to back you; however, usually if another car dealer
was willing to back you, normally they’re only going to let you buy so much of the stock
in the dealership. Basically, you’re a partner, but you’re basically working for them
because they’re going to make money off you.
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Mr. Borishade also pointed to concerns with this approach and provided an example
based on an assumed sales price of $1.5 million for blue sky in addition to real estate and
inventory finance needs to illustrate a realistic scenario and equity issue:
He [European American entrepreneur] comes to [OEM]. He wants to buy that same deal I
want to buy, but never sold a car in his life. But he’s got the money unless you get an
operator. So he scoops up some guy that was a GM at a dealership for 3 years. So, he
makes this guy 10% partner, and this guy goes in and does his deal. And now I’m the
proven guy that owns the dealership for 4 years as a partner with the top guy. But I got
$500k and this tech guy has $10 million to go grab his general manager and put him in a
store just so he can meet the requirements and say, “Hey, we can approve now because
we got an operator.” But I should have been able to do that deal because if the
manufacturers want to protect the entrepreneurial spirit and I’ve got the competence, the
experience, the “know how,” the energy. Not only that, I’m motivated by breaking a
generation curves of poverty, being perpetuated and inherited, handed down year by year
by year by year because of a lack of access to capital, not work ethic and not competence,
just straight up access to capital.
An alternative to working with a larger group or high-net-worth majority partner is for
several individuals to form a partnership of relative equals. Mr. Jordan used this approach to
obtain an ownership interest in his first dealership and shared,
I mean, to get in that deal, it took three guys. One guy who owned his own store, another
was a previous dealer. He had myself, who was young, but at this time was a GM and I
was making plenty of money at this time and felt I had done well with my money, and I
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had to sell everything. I had to sell everything. I had to sell my home, liquidate my 401k.
So, we went in a third, a third, and a third.
This partnership ended well for Mr. Jordan, and after growing a profitable business could
sell it as part of the initial capitalization for his own solely owned business; however, it
represents a significant risk to the new entrepreneur, who has injected all personal capital into the
deal, such as reliance on other partners, available resources to weather an economic downturn,
etc. For example, to close this deal Mr. Jordan noted, “We went to the point of trying to use
insurance advances.” This specifically references taking an advance of future automotive
warranty production as a source of funds, as all others had been exhausted.
From interviews, no single debt or equity program option can meet the needs of African
American dealer candidates. For this reason, there is an opportunity for OEMs and captives to
develop new innovative financial instruments. Finally, African American participants have
frustration with how some established dealers can access capital at preferential terms or under
conditions where policy exceptions are made that allow for higher leverage structures.
Dealer Perspectives on Transactions
Perspectives on New Point Assignments. Dealership transactions take two forms: (a)
OEM assignment of new points and (b) buy-sell deals between existing dealers and
entrepreneurs. New points are typically highly desirable, based on market location and
demographics, because there is no blue sky or intangible goodwill value that the prospective
entrepreneur needs to pay. As dealer candidates may be assigned new point locations, Mr. Morris
shared that his greatest concern was understanding how he would operate in the new
environment. Examples cited by Mr. Morris include selling vehicles in winter months from
December through February or handling local or state taxes or other practices.
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My findings also revealed what one entrepreneur described as a “cheat code” for
obtaining new points. Mr. Borishade provided the following scenario for the cheat code case on a
new dealership point:
There’s no blue sky, but it’s a great situation. So, Mr. Dealer Group Guy is presenting [to
the OEM] also knowing that this particular manufacturer is really pushing diversity, and
they really need to give this point to a diversity candidate. So Mr. Dealer Group Guy,
with his 52 stores says, hey, let me go find some Black guy to be the operator, and puts
this Black guy on the deal so that he’s gonna be 51% and the other guy gonna be 49%.
But then there’s an operating agreement that really gives the control to the 49% dealer
guy. So, ultimately, the 49% dealer group guy is really in full control. So now the
minority is really just the front because the control is not there. Ultimately, we’re talking
about power, the ability to execute on your creativity, and we’re talking about control. So
now I lose that opportunity because I can’t compete with Mr. 52 dealership group guy
and his Black candidate or Hispanic Latino candidate.
Mr. Davis also mentioned the cheat-code scenario and brought up a key advantage OEMs
realized from the assignment of new points to entrepreneurs from underrepresented groups. The
fundamental insight was if African American entrepreneurs are assigned a key point that they
will commit to building the OEM brand and market presence over a long-term horizon. The
African American entrepreneur is different from a large group dealer with a portfolio of brands
and franchises, that may seek to optimize returns and will trade a dealership to maximize profit if
deemed optimal for profitability. Mr. Davis explained,
Let’s just talk about open points with [OEM], and they have very few of them. They
already have too many dealers. But in today’s world with OEM, you get an open point. I
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think if you sell it in the first 3 and a half years, they can buy your store at book value. If
you sell it in the next 3 and a half years, they have a right of first refusal. So, [OEM] has
put the deterrents to the dealer like, hey, we selected you. We didn’t select you to flip it
and make money on it in a couple of years. And ironically, it was our minority dealers
that advocated that change.
Mr. Morris also had concerns about the assignment of new points to African American
candidates and believed that a new approach was warranted. To Mr. Morris, one root challenge
for African American first-time candidates is how to battle 3rd and 4th generation groups with
established access to significant capital. He offered the following thoughts on the subject:
I think if a manufacturer were sincere in that here’s a geographical location, we
potentially could have two or three stores. I think that would get existing dealers more
interested, to form a corporation. I don’t think that ever goes off the table when you’re
putting up money, investing capital. I think any of them want to know, how do I get my
money back? How do I get paid? What’s offered to us? We get one store. What about the
next store? I mean, as a minority dealer, you fight the larger dealers, you fight the
majority of dealers. And when I say fight in a sense of working capital, money available,
I mean, some of the guys are third and fourth generation dealers, and you’re getting some
of these minority dealers that are just coming in first time dealers. They have no chance
against some of the larger corporations, public companies now almost taking over.
Mr. Morris suggested the best means to address the large dealer group cheat-code scenario is to
court existing African American dealers that have a performance history to form a corporation.
Offering a cluster of dealerships in a geographic territory would provide an impactful incentive
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for existing African American dealers to pool their expertise and resources together, including
access to capital, to execute a regional network consolidation strategy.
Perspectives on Buy-Sell Transactions. The second deal type is a buy-sell or a
transaction that occurs between an existing dealer owner that agrees to sell his store to another
entrepreneur. Buy-sell transactions are not originated by OEMs, but all new dealership owners
must be approved by the manufacturers to make sure proposed owner candidates meet their
franchise policy or other requirements. Mr. Morris felt fortunate his first buy-sell transaction
represented the best cast, optimal transaction. Key insights from his experience included the
position of the OEM brand in the local market, the condition of the facility, and the retention of
existing dealership staff. In his case, his OEM brand was a large manufacturer of trucks, and the
dealership was located in a heavy truck market. Second, the dealership was only 3 years old with
a new building and did not require any additional facility investments. Third, Mr. Morris could
retain most staff, which afforded him a head start.
For some participants, having access to the fair transaction was based on the willingness
of the seller to work with the African American entrepreneur buyer. In Mr. Borishade’s case, he
was fortunate to find a seller that was willing to work with him versus a larger, more
sophisticated group dealer and said,
You’ve got a family that owned it for 40 years, and here’s an outsider that’s new to the
community, and we could double the business. I was kind of surprising that they sold it to
me. I mean, I was shocked about that. I was really humble and very thankful. But other
than that, I had everything that I felt like I could have been weak at or that could have
created some type of surprise that I wasn’t prepared for.
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Under a buy-sell transaction, there are typically three assets that require financing
including the inventory of vehicles, land including facilities, and finally, unsecured funds for
either working capital or the intangible franchise value referred to as blue sky. In assessing a
transaction, understanding the deal for oneself was another key consideration for African
American entrepreneurs based on the risk involved. Mr. Marshall provided several reasons why
it was not advisable to overly rely on others including lawyers, consultants, or accountants that,
“One day they’ll tell you whatever you want to hear that, you know, the clock is ticking with
them, whether you make it or not. They don’t. They don’t care. You know you got to do your
own due diligence.” Another example cited was an OEM advised entrepreneurs to buy points
that were not viable, and ultimately lead to nonperformance and need to inject more capital into
the business.
Mr. Marshall outlined key capabilities African American entrepreneurs need to have to
successfully acquire a dealer and profitably perform as a going concern:
You’ve got to be competitive. Like, very early on, you’re able to figure out something’s
going to make money or not. … Those are things that like a banker or a captive or the
manufacturers that’s going to appeal and make them successful once you get that
foundation in place. I mean, because you run seven businesses in a dealership at one time,
you got a body shop department, got to make money, you got a rental car department, got
an F&I department that has to make money.
The blue-sky value encompasses the income potential for all dealership profit
opportunities across new and used car sales, finance and insurance sales, dealer rental, parts, and
service. For any entrepreneur to overpay for blue sky through leverage would be crippling, but
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for an African American entrepreneur that used his or her net worth, it could lead to a
catastrophic wealth transfer to the seller.
Whether a proposed transaction is a buy-sell or an OEM assigned new point, all
participants interviewed supported the continued development of new business models or
approaches to improve the percent of dealerships owned by African American entrepreneurs. Mr.
Williams shared the following thought as part of this discussion on this point:
And I think it’s important when I see an organization willing to spend the time to figure
out what models are out there, which models are determined to work, and that there’s
more than one model that works. But at the same time, if you’re looking for operators
who want to stay connected with the community, I think it’s important to grow, then
you’re actually looking to probably not give stores to the multi big operators because it’s
about balance sheet with them. The smaller dealer operator is invested. He’s not dealing
with other people’s money. Their assets are on the line. Their reputation is on the line.
They live in the communities they serve. They are real people. People can touch them.
They know that, and as a result, they’re not going to do something because they can sit
behind a boardroom deal and no one can ever access them.
Dealer Perspectives on Current Trends. There are two dominant trends adversely
impacting African American entrepreneurs’ abilities to own dealerships. The first and most
important to address is rising blue sky values paid on the sale of existing dealerships. Mr. Davis,
on the topic of blue sky as one example, said,
I think the program [OEM equity program]—Well, not the minority program specifically,
especially African American ownership of car dealerships. I think we’re in a severe
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crossroads. I think the stores are so expensive. I just don’t see how somebody starts from
nothing in today’s world like I did 15 or 16 years ago.
The second relates to the current rising rate and inflationary environment. Supply
shortages and higher interest expenses drive up costs and create additional barriers to new car
franchise dealer ownership, particularly relative to the finance of real estate and construction
costs. Across both items, all dealers emphasized the importance of access to capital for an
African American dealer. A comment made by Mr. Curtis on this point summarizes the
sentiment of the participants, “Financial capital is definitely everything. If you don’t have access
to capital, you can’t get going.”
Several participants pointed generally to considerations and concerns about the rising
blue-sky values, which is a function of the low supply of franchise dealerships to acquire and
high demand. Mr. Jordan, as one of the newer owner participants, shared how dramatically the
market has changed since his acquisition and stated,
I feel like I came in to on the tail end of the last of the deals, because the same store that
everybody thought I overpaid for, would probably have people try to offer me double and
triple the amount I paid for the store just a year ago because the values skyrocketed. So,
with that being said, it was tough just to get these small deals. You could imagine now
trying to get somebody to come up even with the smallest percentages down. The average
guy, even if the guy found a small deal now, he’s going to have a million cash
For long-time dealers, such as Mr. Davis, there is a frustration that based on the current
environment, while he could sell his stores and generate 10s of millions in cash, it would be
difficult to buy back into the market. He shared the following frustration:
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I mean, if I tried to buy my store and even if I put 50% down, that’d be all my cash, then
I’d still go out and have to finance $30, $40 million. That doesn’t make sense. It doesn’t
make sense. So really, that’s why I say that manufacturers are going to have to step in
and do something because it’s a wealthy man’s game. It’s not for entrepreneurs anymore.
As part of the discussion, Mr. Davis’s key insight is that for a profitable dealer group,
accessing the capital necessary to cover the blue sky in a transaction is not a limiting factor;
however, for a smaller entrepreneur, it is an obstacle is based on the client:lender $1:$1 industry
practice for unsecured lending on blue sky. Mr. Curtis also acknowledged this obstacle:
As a lender, I think I, too would be cautious about over lending on that much blue sky,
the values may change. And of course, we’re going into a new era with electrification
autonomous. But as a lender, if it was me, I’d have to put that caution in my back. I’d
have to make sure I see it. It’s out there. We’ve all seen so many rapid changes, and no
one wants to get hurt. But in order to continue to support the dealer body or minority,
they’re going to have to step up.
Commercial real estate transactions for dealerships are often done with 20-year
amortizations based on 5-year terms used to reset interest rates. Rising rates and inflation of
materials and labor, compound the already high barriers on real estate and construction for a
potential first-time entrepreneur. Although the costs may increase, lenders typically will lend in
and Mr. Curtis shared,
Well, the hindrance is, I think, a lot of it is real estate. So, real estate, you get an appraisal
on the real estate collateral, it supports itself. As long as you have the down payment, the
20%, or whatever, you’re fine.
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The issue is for larger, desirable areas where the real estate costs can easily run $5 million for
land and upwards requiring dealers to have $1 million or more for the down payment under a
conventional mortgage.
Outside of blue sky and real estate values, the current economic environment volatility is
another potential factor for consideration. Typically, the automotive industry can be seen as a
leading early indicator. If consumer sentiment decreases, large purchases like automobiles can
decline. Reflecting on his first dealership transaction, Mr. Curtis shared,
When they say you’re all in, I was absolutely broke. I put all my money into the deal. I
think most of us probably walk into our first deal because you’ve got to believe in
yourself. You’ve got to believe you can do it. There are variances out there that change,
you know, the economy’s volatile. There’s things I could change, right. But it was, you
know, I knew if it was left to me, I knew I had to get it done.
Dealer Perspectives As African American Entrepreneurs
Interview participants shared insights into their approach and philosophies on
successfully running a dealer, lived experience as an African American entrepreneur, and
thoughts on ongoing lender partnerships. In general entrepreneurs’ narratives revealed that taking
a longer-term approach to building a business including relationships and community presence
was critical to success; however, the primary challenge facing African American entrepreneurs is
having access to enough capital to be able to reach sustained success in the face of competition,
and specifically from large, established dealer groups.
Perspectives on Approaches to Successful Operations. In general entrepreneur
narratives revealed philosophical approaches to successful operations, of which a few common
themes emerged and a few points of departure. Regarding common approaches ensuring
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profitability first was cited by several participants due to the realities of balancing the goals of
the OEMs, lenders, and entrepreneurs that may or may not be aligned. This may seem to be a
common business principle or simplistic, but Mr. Grant summarized,
Well, I’ll say this like I’ve mentioned quite a few times, the automobile business is a very
lucrative business. If you understand it and you pay attention and you know how to make
money, it’s very simple. You can’t buy something at one price and then sell it for less
than that price and make money and survive. If you buy a product, your cost has to be
less than what you sell it for or you’re not going to survive. You have to make money.
And I mean, the manufacturers look at this. The dealers look at it. That’s the way you do
business.
The challenge is when stakeholders have different goals. Mr. Williams shared one
struggle in pushing to meet OEM sales efficiency goals or targets for sales in a particular
territory determined based on vehicle registration data. Customer Satisfaction Index (CSI) is
another OEM goal dealers can struggle to balance achieving versus being profitable and is
measured by a survey sent to customers post-sale. Mr. Williams shared the following on
balancing profitability versus OEM goals:
I might be accused of not being sales effective over making money. I may not be the most
desired person because my mental state says if you stay profitable, you can fix the other
problems eventually. If you do what it takes to become sales-effective and CSI-effective
to the point that you’re losing money for yourself and your partners, you won’t be around
to fix your financial problems. You’ll be out of business. So, my first goal of teaching
guys, and if I’m wrong, if that philosophy is flawed, I’m a flawed dealer, is stay
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profitable and continue to work on the deficiencies of your store. If you got money,
you’ve got another day to work at it.
Another finding from several participants was the approach to being in the stores as the
operator. Mr. Marshall provided this description of his philosophy as a group owner: “Be in the
store. Know the numbers. My main philosophy in the car business: You’ve got to be there (i.e.,
dealership). You got to be there, and you’ve got to understand your numbers.” One participant
mentioned wanting to have all stores in a radius that could be driven in a single day. Where this
is relevant to OEMs, is that, unlike investors that may look to rapidly flip an asset for a fast
return, the participants were overwhelmingly invested in building their community business for
the long term. Mr. Davis, on this point, also referenced the African American dealers that
participated in OEM programs had no issues accepting terms that included prepayments of
profits in a 10-year horizon.
Where dealer perspective varied was concerning the type of transaction and business
model. For example, Mr. Curtis primarily sought stores owned by publicly traded dealer groups:
I look for an opportunity that is either owned by public groups because they generally
don’t push the market. They usually get in because, remember, they’re looking for
revenue. All they do is apply more management fees to it to pay the bigger corporation.
Right. So, they don’t really care if these things make money or not. They just want to
make sure that it’s got enough revenue. … Generally, I find that change is hard to adapt
for a lot of people, and they’re highly successful. So, why would they want to change or
evolve with the times? They don’t they don’t want to change anything. It’s working fine.
But what happens is they underperform in the manufacturer’s eyes or anybody’s eyes but
their own.
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By comparison, Mr. Jordan focused less on the ownership type and more on the
individual culture of the store. He provided the following description:
If it’s broken—I’m talking about culturally-wise, which most stores are broken. Most
stores are broken by culture processes. That’s what I’ve been figure out over my time,
and I spent the journey of my career, taking broken stores and turning them around.
That’s why guys would pay me so much money to work for them, it’s because I had a
knack for doing that. But what I found out when I know about this door is broken
internally. The culture of the store is totally wrong. You can see there’s no pride in the
building. There was no pride on the inside or the outside. You can just tell that the morale
of the store is beat down. So one thing that I did when I went in is trying to change the
people who were on board and try to salvage what I could salvage from the other people.
Similar to Mr. Jordan, Mr. Curtis mentioned the cultural component of turning a
dealership business around:
And then when I get an opportunity for those stores, generally, I find they’re easy to turn
around just by motivating the staff and find processes that generate income. They don’t
make a lot of money, and the staff usually falls right in place because now they’re all
making a lot more money than they make before. And it really is kind of like just walking
and flicker switch. You just get everybody going.
From participant discussions, it was evident that the approaches to success were long-term by
nature, requiring addition time and capital to obtain success.
Perspectives on Lived Experiences As African American Dealers. Interview participants
shared unique lived experiences as African Americans that included challenges and motivations.
Mr. Curtis summarized the sentiment:
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I think it’s an opportunity to show the majority that you belong there. And that comes
with some challenges, and I grew up in a nondiverse community too. So, I did understand
that you’re already looked on a little differently by most. So, it’s best to stand out
positively and definitely, not negatively.
Mr. Grant shared a similar sentiment but provided an example from his experience:
Always have racial barriers. I have to admit, in my first opportunity being in [the
Midwest], I thought it was a pretty good venture. I thought I could make it. But the
market that I was in, they weren’t used to African Americans being business owners. I
had an African American football player, had a chain of barbecue restaurants at that time,
and he went into business in the same area, and he ran into the same problems that I did.
It wasn't that they disliked him or they disliked me. It was kind of a stigma. Well, I got to
wait and see what kind of person you are, but meanwhile, I’m not doing any business
with you. So I’m dying on the buying while you’re sitting there waiting to decide whether
or not I’m a reputable person to do business with. It’s tough other businesses, they don’t
want to do anything to help you because it’s a very competitive business. They’re going
to do whatever they can to get whatever business you have because they don’t think you
should be there anyway. So, it can be difficult. Even though you may be in a good
market, even though you may have good franchises, it doesn’t mean that you are going to
be successful in that particular place.
Based on this example, obtaining long-term success in this market would have required
additional time and capital from his lender partner to develop community relations and market
reputation.
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Mr. Grant commented on the challenge to develop a market as an African American
dealer and the opportunity to build a market brand and presence:
It does not necessarily mean that an African American has to be located in the African
American community. But like, for example, I’m in an area where I would say the
African American population may be 20%, but what I’m getting at is that the people, my
customer base, the people that come in and buy from me, it may be up to 40% to 50%
African American, I’d say it’s actually over 50%. Well, a lot of those people come and
buy from me because I’m an African American. And I think the manufacturers need to
see that all African Americans don’t want to buy a car from a Caucasian, just like all
Caucasians don’t necessarily have to buy from a Caucasian. They’ll buy from an African
American. If he’s doing business right, if he’s competitive and he can offer them or he
can give them what they’re looking for in the purchase of an automobile, they’ll buy from
him. If they see he’s a good, sound businessman and you're doing things for that
community that they live in, they’re going to give you business.
Mr. Grant stated certain aspects could not be accelerated or rushed, and the need for the right
capital level to support business development until positive cash flow is achieved.
Findings showed other areas may also have required additional time for African
American entrepreneurs to launch a dealer business as well. As a commercial banker, Mr. Morris
was surprised by the lack of interest in his dealership banking relationship:
No one showed any interest other than one small community bank that to this day I still
bank with. And we keep huge deposits in the community. And I don’t put that on
anything other than just maybe out of sight, out of mind, new guy coming to town, new
dealer.
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While Mr. Morris’s case may have been more surprising than damaging from a business
perspective, Mr. Jordan cited one example that was both surprising and had a material adverse
impact. The following is a situation where shortly after having closed his deal, he experienced an
exodus of employees:
It’s kind of like they almost held them together just enough to get through the buy-sell,
and then they walk out. But the beauty of that is they left after a week, seven of them left.
Four of those technicians came back within 3 or 4 days, saying that they felt like they
handled it wrong and asked that they had an opportunity. They said they would give me
an opportunity to try to show them what I could do. So those techs came back, and I got
in there. I was hands on, boots on the ground. Every day I got involved. I think the
biggest thing that I did do to help it out was me being in that store and then seeing the
culture, me being able to speak and talk to these guys, and also getting involved in the
community because the reputation in the community was broken.
Another important aspect of the participants' experiences as African American dealers
related to the role of internal and external motivations in their businesses. Regarding internal
motivation, Mr. Jones summarized the extra pressure he felt to succeed:
I was so ready, you know, like, you get that fire built up, and it’s like it’s kind of hard to
see if there was anything that was not good about it. I was hyper-focused on all the
opportunities and the potential and betting on myself. I’m betting on myself. I spent every
dime that I had down to no money in my bank account to get out there. So, at that point,
it was sink or swim. And I understood that the dealer that I work for, he’s always telling
me, you’re going to get one shot. Whenever that shot happen, you’re going to get that one
shot, and when you get it, you have to make sure you capitalize on it.
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Conversely, Mr. Davis provided an example of external pressure in the form of an OEM
introducing competition from a large group dealer into his market. In this case, the area
management from the OEM provided feedback that Mr. Davis’s sales efficiency, despite being
higher than 100%, was below expectation. Mr. Davis was insulted because they suggested the
group dealer would push him out of business. Mr. Davis reflected after outperforming the group
dealer:
But I went back to my partner and I said, “Look here. If we allow them to beat us, and we
had seen this at [OEM], every time a minority comes up against a mega dealer, we’re
going to lose.” And we still have a lot of that. And that’s what we talk about, the fight to
fight that we can do as dealers. It’s really how can we band together ourselves and put
our money together to do deals and not just wait on [OEMs] to give us something, but
we’ve got to step out there, and that’s something that a couple of dealers and I are trying
to do.
Ongoing Capital Support From Lending Partner. The need for additional capital after
launching as part of an ongoing mutually beneficial dealer-lender relationship was another theme
mentioned by several participants. Mr. Curtis shared his experience as an African American
dealer that put the majority of his resources into the first store he acquired:
Yeah, at the time you worry that money is always an issue, right. So, you worry if you
have enough capital to continue to grow the business. And my background, having
operated a small store really paid off for me. Very cash sensitive there because we didn’t
have a lot to offer. And let’s say you have payroll and you had a big weekend and its
following Wednesday. You’ve got to pay off all your cars that you sold and you get a
floor check same day, right. You spit up all your money and you got all these payoffs to
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pay off on these trades, right. So, you just spit out all your money and you’re hoping it all
comes in.
Mr. Grant referenced a similar experience:
Let’s call them a backer or someone that’s going to finance you that is willing to stick
with you through the good and the bad. In other words, you go through recessions. We’ve
gone four or five recessions. I’ve been through bankruptcies where the manufacturer goes
bankrupt. I’ve been through a lot of different things.
Unique Contributions and Future Endeavors
In response to interview questions on future endeavors, unique contributions, and legacy,
focus on community support was the central tenet underlying all the discussions. Mr. Jordan
summarized the impact of community integration on business results, when in reflection he said,
“I mean you could advertise on TV, radio, and everything else you do all day, but the best word
is the word of mouth, and you’re only going to get that by taking care of your people.” Examples
of the key contributions made by dealers will be summarized in the following narrative. In
addition to serving the community, paying forward support received to other entrepreneurs from
African American and other underrepresented groups was the other major theme that emerged
from participant interviews. Mr. Davis, in sharing his family’s history, best represented the spirit
of thankfulness and giving and recalled,
And [my father] was one of those sanitation workers in Memphis. When Dr. King came
there, he never made over $12 an hour. He carried garbage in Memphis for 42 years. My
mother did domestic work for the most part. So, for me and my wife, I don’t know why
God has blessed me so much financially, but I know it’s to do more than accumulate
trinkets. How can I give back not just helping minority dealers get in business, but how
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can I make a difference in my community? How can I take the wealth that God has
graced me with and use it for good?
Community Engagement and Service
Mr. Jordan provided an outline of his market approach to putting the community first,
versus narrowly focusing on achieving business results only. It began with reaching out to the
local Chamber of Commerce, which created a networking domino effect that connected him to
the sheriff’s office, the local high school and ultimately leading a committee of diverse group
seven people. Together, they organized a blood drive event in support of at-risk children for a
poverty-stricken part of the county leveraging the dealership, which has 10 acres of land. The
positive response and impact led to an expansion of the committee to include eight more
members including a national department chain, the local power company, and other business
and community leaders. The group organizes quarterly events, and Mr. Jordan described a recent
Easter egg hunt in the community for low-income household children that provided and
distributed over 3,000 eggs, 30 bikes, certificates for food, and more. Mr. Jordan said,
It was just a great feeling, honest. It’s one of the best moments in my life, but by the time
I realized that while I was there at the event, we sold an additional 10 cars within a week
and a half time period of that. We really put the emphasis on the things that matter, and
the community really supports me, and not only this community but the surrounding
communities.
Mr. Jordan also emphasized he could not drive the community contribution without having the
ownership control of his dealership as a platform:
I just felt like I could do it better, bigger, because my ideas were not capped. And so, in
my store now, I don’t have capped ideas because I can be creative and do those things I
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feel like need to happen because the community you’re in, those are people supporting
you. Those are people going to be in the service department, or sales department buying
cars, and you’ve got to take care of them.
Mr. Marshall was another dealer participant that shared some of his community focus
efforts. He mentioned there are approximately 30 initiatives he invests time and resources in,
including a paternal care program associated with his church, a drug program that he is closely
associated with based on his status as a military veteran and a Toys for Tots partnership with his
community hospital. Mr. Jones also focused his community support efforts on disadvantaged
children, and was very proud of a “livestock” show sponsorship that helps kids generate college
funds through efforts to raise animals over the course of a year.
Supporting Future Generations
Creating Clear Path to Success. Second to community, supporting the next generation
of African American dealers, was the other major contribution area raised by the interview
participants. Regarding why future-generation support is important to participants, two different
motivations were evident. The first is the simple joy of teaching or helping a potential future
dealer achieve ownership as a form a paying forward support received in the past. For example,
Mr. Grant, when asked about future endeavors, said, “I like teaching and helping people. … I
love the business, which is the reason I haven’t retired. I’m 73 years old, so from here,
continuing to help people, I see our youth coming around.” In discussing, future endeavors and
legacy, Mr. Jordan cited community support as the root motivation for owning a dealership
platform and said, “My whole goal when I started my auto group was to be able to buy stores,
build businesses but also create opportunities for others like myself.”
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Regarding how best to support future entrepreneurs, the participating dealers specifically
touched on several areas including partnering with the relevant associations, establishing OEM
and lender relationships, capitalizing off the relevant career opportunities, and building
confidence in the ability to become a successful dealer owner in a reasonable time period. For
example, on this point, Mr. Jordan brought up his mentorship intentions, “which is to try to help
and open doors to others, give people the same opportunities whether it be a mentorship or either
open the doors by giving them partnership opportunities.”
In response to the question of future intentions, Mr. Borishade discussed his personal
goals in working with the NAMAD as another example:
One of my ultimate goals is to be on the board of NAMAD, educate minorities on the
information needed to be a dealer. So, if you come in as a salesperson and your
aspiration, your career path, is to want to be an owner, I want to already have the
fundamentals laid out.
One salient example that he raised is the Enterprise Rental Car employee career path,
where steps to higher management and leadership levels are well laid out and organized for
recruits. His reflections on the Enterprise program highlighted key best practices to groom future
African American dealers including laying out a clear career path and providing full access to the
information needed to help fuel what Mr. Borishade described as the “ultimate journey of
success.” Some opportunities of interest that Mr. Borishade raised from the NAMAD board
perspective include working with OEMs, captive lenders, and banks to create minority programs
and education programs for minority candidates. He also brought high attention to the need to
address high-leverage solutions in capital structures necessary to acquire dealerships.
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For Mr. Grant, supporting the next generation personally was critical because he felt it
was important as an African American dealer to share his successes and where he made
mistakes. Reflecting on the importance of mistakes to learning he said, “You’re going to make
mistakes in life, but you’ve got to know what to do when you make that mistake. That’s one of
the keys. Don’t just show them the good. Show them the good and the bad.”
Succession Planning. A subset of future generation support for several participants was
regarding succession planning. Succession plans refer to the transition of business operations and
resources from dealer owners to children for ongoing operation and expansion. Mr. Curtis, as a
second-generation dealership owner is one successful case where he could build off his father’s
dealership to grow and acquire three stores on his own. Mr. Morris, when asked about future
endeavors spoke about his two sons that are currently active in his business, and said, “My goals
are to help them facilitate their goals.” One of his two sons is actively running all three stores.
Mr. Marshall provided a similar sentiment: “I just want to see my boys over [my dealerships]
and understand the importance of this, because it’s a good business.” Mr. Jones, when asked
about his future endeavors, said that his goal is to acquire a total of eight stores together with his
children.
Finally, Mr. Williams linked personal success with the next generation and said, “I
don’t believe I’m successful until the next generation is successful.” He called out the strategic
opportunity for his children and African American future dealer owners in general and said,
There’s always going to be stores that are bought. There’s going to be stores that will go
out of business. There’s always going to be new points because population centers move.
No rush on that, ok? The rush is to make sure that what I know about the business is
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shared, so that minorities don’t have to be one-time wonders, okay? Someone has to stop
and train to make sure the next generation can make it in the business.
Artifact Analysis
An artifact analysis of OEM and lender programs was conducted to understand what
programs, services, and other support were available to African American and other
entrepreneurs from underrepresented groups. Six mass markets [versus luxury] OEMs were
analyzed as identified in the NADA (2021) annual report, representing 70% of the new vehicle
market share with combined annual sales of over 10 million vehicles. Due to my position at
Hyundai Capital, the Hyundai and Kia brands were excluded from the analysis. The artifact
analysis also included three banks, which were identified through their participation in the
NAMAD (2021) annual conference. The analysis includes two national banks and one regional
bank specializing in SBA loans. To protect proprietary information from the OEMs and lenders,
only publicly available information was accessed as part of this research from websites. The
exception was the SBA lender, Live Oak Bank, which shared the presentation materials from the
NAMAD 2021 annual conference.
Public Statements From OEMs on Supporting Dealer Diversity.
Table 2 summarizes public statements from OEMs on increasing DEI and where possible
specific references to increasing dealer network diversity. Information was taken from the OEM
websites. In some instances, such as Toyota and Ford (n.d.), there were close ties to their
minority dealer associations and, as a result, brought in statements from their associations.
Among the top OEMs by market share, Honda was an outlier. Although they have public
webpages to promote diversity in the enterprise, dealers were not mentioned specifically on their
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sites. Another item of note included Toyota’s reference to a specific target of new minority
dealers that they want to add per year of 5 to 7 dealerships.

Table 2
Top OEMs by Market Share and Dealer Development DEI Statements
2021 Diversity, equity, and inclusion OEM dealer network
statements
Sales M/S %
Toyota $2,332,262 15.6% Toyota Motors North America: “Engaged, diverse, and
inclusive environments for all. We believe furthering the
success of our customers, dealers, team members,
suppliers, and communities is key to our success. By
embracing and living our commitment to advance and
foster engaged, diverse and inclusive environments, we
are setting the pace in innovation. And, we’re leading the
way toward a future of both physical and upward
socioeconomic mobility for all.” (Toyota, n.d., para. 1)
Toyota Lexus Minority Owners Dealer Association
(TLMODA, n.d, para. 2.): “TLMODA is committed to
the success of our members, providing strategic support
and business development resources that optimize
opportunities for growth and economic sustainability.
Our members build strong relationships with fellow
minority-owned dealers and Toyota/Lexus senior
managers, resulting in a unique and productive network
of like-minded professionals.”
GM 2,203,064 14.8% “A diverse dealer network matters greatly to GM and to the
customers we serve. Minority Dealer Development is
designed to support our diversity goals. MDD is
dedicated to growing a performance-driven, customer-
focused, and profitable dealer network by attracting
highly qualified minority dealer candidates, this is one
demonstration of GM’s commitment to a diverse dealer
network.” (GM, n.d., para. 1)
Ford 1,821,788 12.2% “Diversity and Inclusiveness is part of Ford’s DNA, and
growing a strong minority presence in our dealerships
remains a key focus. At year-end 2018, Ford had 168
minority-owned dealerships, which represents 5% of our
3,201 U.S. Ford and Lincoln dealerships. We continue to
work with our Ford Minority Dealers Association to
sustain and strengthen our current minority dealer
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2021 Diversity, equity, and inclusion OEM dealer network
statements
Sales M/S %
portfolio with dedicated resources to increase
profitability. Together, we are directing efforts toward
growing the minority ranks of dealership management
and employment to better reflect the community and to
facilitate a greater number of future minority dealer
principals.” (Ford, 2022, para. 4)
Stellantis 1,760,139 11.8% “Stellantis has a long-standing enterprise-wide
commitment to diversity equity and inclusion that dates
back to the 1963 addition of our first minority dealer in
the post-World War II era. Realizing the value of
training as early as 1968, minority dealer candidates
were identified for Chrysler dealer training. In addition
to a focus on increasing and sustaining our minority
dealers, we have a culture of inclusion for all of our
dealers and ensure representation of minorities for
profitability conferences, customer experience coaching,
business development pilots, and networking
opportunities to share best practices. Currently, our
minority dealers are some of our most profitable dealers
and we are committed to ensuring their financing
viability and succession for the future.” “(FCA, n.d.,
para. 1)
Honda 1,466,630 9.8% “Sameness doesn’t work in a product line and it doesn’t
work in a workforce. That’s why from the beginning,
Honda has strived to bring people from different
cultures, backgrounds, races, genders, and sexual
orientations together. It’s a commitment that hasn’t just
created better diversity. It’s created a better Honda”
(Honda, n.d., para. 1)
Nissan 977,639 6.5% “Promoting diversity is just good business. Because our
workplace, our marketplace, our community – they’re all
connected. Our Corporate Diversity Initiative aims to
improve business results by ensuring that our core
businesses (sales, marketing and distribution,
manufacturing, research and development, design,
procurement, and administrative support functions) meet
the distinct needs of an increasingly diverse customer
base and labor market. Nissan is committed to creating a
culture where everyone belongs and employees,
customers, and partners feel respected, valued, and
heard". (Nissan, n.d., para. 2)
“Nissan values inclusion in all areas of our business,
including procuring innovative goods and services and
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2021 Diversity, equity, and inclusion OEM dealer network
statements
Sales M/S %
retailing our cars, as we work to prioritize the diversity
of our customer base.”(Nissan, n.d., para. 6)
Total 10,561,522 70.7%

Current Standing of Dealer Networks by OEM and African American Ownership
The information on dealer networks and African American ownership was available from
the NAMAD website, based on self-reported information from the OEMs. A 5-year period was
reviewed between 2017 through 2021, and data reflects several important insights. First, the
overall dealer networks were relatively flat over the period reviewed and in aggregate the
number of franchises decreased by 1%. This implies that the OEMs on an annual basis do not
assign many new franchise dealership locations and potentially limiting African American
entrepreneur opportunities to acquire new points. Of the OEMs, the networks of GM, Ford, and
Stellantis decreased while Nissan and Honda reflected small increases.
For the OEMs reviewed, the total African American dealerships owned by 2021 in
aggregate was only 223 and represented only 1.7% of total franchise dealerships. Relative to
African American ownership trends five of the six OEMs reflected small but increasing trends in
the range of 0.2% to 0.6%. Ford’s reflected no growth, but it should be noted had the second-
highest overall African American ownership mix at 2%, behind Nissan at 2.4%.
Current State of Market for Existing Dealerships
To provide perspective on the market for new car franchise dealerships, a brief overview
is provided. The key information is presented and analyzed based on the Kerrigan Advisors
(2022) Blue Sky Report, which is considered in the automotive industry to be one of the most
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reliable and valid sources of information on the market for existing franchise automotive
dealerships. The following are highlights from the Kerrigan Advisors report. 2021 was a record
year for transactions with 383 deals closed. The pace increased in Q1 2022, and over the
last 12 months, a record 389 transactions closed representing 829 franchises. It should be
noted that the 3 years from 2017 through 2019 only averaged 217 transactions before the
pace started to increase in 2020. Kerrigan Advisors made the comment from their
experience that if the pace continues nearly every dealership in the United States would
trade hands in the next 20 years. They speculate the high transaction volume is because of
industry consolidation reducing the number of single-owned dealer franchises and a
higher concentration of larger group dealers. Average dealership pretax profit has
increased from a 5-year low of $1.36 million per rooftop in 2018 to a high of $4.07
million for 2021. The higher dealership earnings compared to the pre-pandemic period
have resulted in higher goodwill or blue sky paid on transactions by 47% over historical
levels. The average blue sky value or franchise goodwill value as of 2021 based on a
price: earnings multiple of 2.7 times was $11 million.
OEM Support for Dealership Entrepreneurs from Underrepresented Groups
Information from OEM and OEM minority dealer websites was compiled and
summarized to show what efforts are being made to promote and recruit entrepreneurs from
underrepresented groups. Data are summarized in Table 3, but results reflect that the most
progressive OEMs have built comprehensive programs that in additional to capital programs to
acquire dealerships also encompass supporting OEM-specific dealer associations, providing
valued added tools and consultative services, partnering with associations for dealer training and
finally providing opportunities to build relationships to key stakeholders.
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Table 3
Minority Dealer Support Summary by OEM
Minority Dealership Relationship
dealer Service/ Training acquisition building/
association tools support program networking
Toyota X X X X X
GM X X X X X
Ford X X X X X
Stellantis X X X X X
Honda
Nissan X X X
Examples OEM access
Newsletter
Charity
support
Benchmarking
Reporting
Analysis
Executive
GM
Operational
Debt
Equity
Events
Strategic
partner
20/20 groups

Note. X above designates that the OEMs have available support in the area per information made
public via their corporate websites.

OEM websites show best practices for each category excluding acquisition capital in
most instances. The OEM dealer associations play an important role in supporting dealers, and as
an example, the Toyota Lexus Minority Dealer Association lists the following member benefits:
(a) networking opportunities, (b) mentoring support, (c) the collective representation to OEM
senior leadership, (d) legislative action and support at various levels of government, and (e)
community involvement support. Relative to service and tools, OEMs and their associated
captives can provide unique data, tools, and support for dealer entrepreneurs. As one example,
Ford, through its minority dealer website, lists several specialized services including aged
inventory marketing, performance consultative training, dealer performance reporting, and
market area benchmarking including ethnicity, annual income, and operational information.
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Regarding training, the website showed OEMs promote and leverage existing training in
partnership with key dealer associations. For example, Ford promotes general dealership
management and variable and fixed operations training in partnership with NADA, similar to
other OEMs.
Finally, OEMs employ several actions to help entrepreneurs from underrepresented
groups establish and grow critical relationships. Perhaps the most important is helping dealers to
join dealer 20 groups. GM (n.d.) defined dealer 20 groups as having up to 30 noncompeting
dealer members that meet at least twice per year. Benefits to dealers include higher income,
focused time to analyze operations, and learning about additional profit and growth opportunities
from other dealers. Other OEM relationship support includes holding regular events and making
an introduction to supporting vendors or other industry partners such as systems providers,
lenders, and other service providers such as accounting firms or marketing companies.
Honda was an outliner among the six OEM reviewed. Honda did not have public DEI
statements specific to dealer diversity. In addition, as shown in Table 4 on OEM support, Honda
did not provide any external public information on any of the five support areas listed in the
following. As a result, one way to judge the impact of the actions is to compare the African
American mix of the five non-Honda OEMs against Honda. Over the periods reviewed between
2017 through 2021, the average of the five OEMs increased by 0.3% from 1.5% in 2017 to 1.8%
in 2021, while Honda remained flat at 0.7%. If we consider the net difference in 2021 of 1.1%
and based on the 13,134 total franchises for the group, this represents only 135 dealerships or 11
for Honda independently. Thus, to close the ownership gap new approaches and solutions are
warranted by the industry to grow the African American dealer ownership mix.

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Table 4
Estimated Capital Needs for an Average Dealership Acquisitions
Collateral Description Total dealership acquisition and
lender assumptions
Required
entrepreneur
capital
New inventory Vehicles Floorplan credit line: $8,101,355
Lender collateral advance: 100%
$0
Used inventory Vehicles Floorplan credit line: $2,025,339
Lender collateral advance: 100%
$0
Real estate Land and facility Real estate price: $8,101,355
Lender term loan advance: 80%
$1,620,271
Working capital Funds for payroll,
advertising, etc.
Dealership requirement: $1,620,271
Lender term loan advance: 50%
810,315
Blue sky Intangible franchise
value
Franchise sales price: $11,400,000
Lender term loan advance: 50%
$5,700,000
Total capital $8,130,856

Note. The new vehicle credit line is estimated based on the NADA (2022) data for 2021 average
new vehicle sales price of $42,379, annual dealer units sales of 930 units based on a 3-year
average between 2019-2021, and a 75-day supply of vehicles. The used credit line needed is
estimated at 25% of the new line based on personal experience and expert judgment. Real estate
needs are estimated based on personal experience and expert judgment at a 1:1 ratio between the
new flooring line:real estate. For working capital and blue sky term debt, it is assumed that the
lender will advance $1:$1 against a borrower’s unencumbered investment. Average blue sky
values are taken from the Kerrigan (2022) report of $11.4 million based on price:earning
multiples of 2.8x and average pretax dealership profits of $4.07 million.

Analysis of OEM and Captive Programs
To analyze programs available online to African American entrepreneurs, an average
case of a dealership acquisition was developed based on information from the NADA (2022)
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Data Full Year Report for 2021 and the Kerrigan Advisors (2022) Blue Sky Report for 2021.
Table 5 outlines the total costs required to buy a franchise that sells an average of 930 cars per
year generating an annual pretax profit of approximately $4.07 million across all profit channels
(new sales, used sales, parts and service, and finance and insurance). Information reflects what
an entrepreneur is required to have in unencumbered funds to finance the transaction via
conventional lender products and practices.

Table 5
Summary of Qualifications by Program Option
Qualification GM
equity
Stellantis debt
(Ally, Chrysler Capital)
Live Oak Bank
SBA 7a, 504
Minimum
investment
$500k or 15% of total
franchise capital
required
Minimum of 15% of
unencumbered liquid
total investment
(exclude real estate)
Minimum 10% down
payment required for
total project including
real estate, blue sky,
working capital
Experience Minimum 2+ years
dealer executive
Experience as GM
Demonstrate
proficiency in all key
areas including new,
used, finance, parts,
service and
accounting
Extensive retail
automotive
experience
Provide track record
including sales,
market share and
successful operations
SBA lender
underwriting
guidelines

Education Bachelor’s preferred No requirement No requirement
Performance
history
Retail sales
performance: 3 years
Customer satisfaction
reporting: 3 years
Sales efficiency: 3 years
Sales customer
experience index: 2
years
Service customer
service experience: 2
years
SBA lender
underwriting
guidelines

Financial Financial proforma
Operating plan
Financial proforma
Operating model
TNW and income test
Personal resources

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Table 5 reflects that an entrepreneur would need to bring in approximately $8.1 million in
unencumbered funds to close on a dealership acquisition via traditional finance programs. While
the grid represents an average dealership, some opportunities for a less expensive transaction
(i.e., lower blue sky) could exist for a nonprofitable or less profitable dealership target; however,
the lack of dealership profits could be a source of risk to the buyer. Second, as the lender
advance percentages suggest, the stronger the collateral, the more lenders can advance in terms
of funding. Entrepreneurs can borrower 100% of cars, but less for single-purpose commercial
real estate dealerships (market practices are 80%). Typically banks and captives finance only
50% of unsecured funds needed for working capital or blue sky. Entrepreneurs may have some
options on real estate that require less capital upfront such as working with a real estate
investment company under a sale and lease back arrangement, but very limited options exist for
unsecured loans. For this reason, new open points are highly attractive, as there are no blue-sky
costs associated; however, from the total dealership network size, for the top six OEMs, the
networks decreased in size by 1% from 13,302 for 2017 to 13,164 for 2021. This indicates new
point opportunities are scarce and cannot be depended upon to increase the African American
ownership mix.
Lenders DEI Support for Minority Ownership Growth without Detailed Program Online
Some OEMs, captives, and banks support DEI initiatives for underrepresented groups,
despite the lack of program details online. This could be due to the bespoke nature of lending on
large-sum deals, the desire to keep priority information from competitors, or other reasons. For
example, Nissan had the highest mix of African American ownership despite not having listing
program details or an application online; however, there was a high-level outline of a strong
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program targeting entrepreneurs from underrepresented groups available on the Nissan (n.d.)
corporate website:
Nissan’s Dealer Diversity program is the first of its kind for the company and the genesis
of our recent increase in minority dealers. The program creates a purposeful partnership
where:
 Nissan places the minority dealer candidate in healthy stores in great markets.
 The dealer candidate is the owner Day 1, rather than a lengthy buy out process.
 Financial, marketing, and operational progress and planning are offered. (para. 6)
Toyota Motor Company’s website is similar in that the site provides summarizes the
program at a high level without providing additional details. Their website outlines the Toyota
Dealer Investment Group (TDIG), in partnership with organizations, such as the NAMAD or
U.S. Hispanic Chamber of Commerce, and offering capital, management, and operational
support to qualified minority candidates.
From the NAMAD website, material from the 2021 conference includes representation
from three national banks: (a) Chase, (b) Ally, and (c) Bank of America. The Bank of America
(n.d.) website contains real estate support for dealers from underrepresented groups, including a
marketing collateral piece on growing the minority dealer base. While program details are not
available, it contains thoughts on
 unique challenges facing minority dealers: culture biases, fewer financing options,
smaller partner networks, and insufficient capital access
 Recommendations to minority dealers include building a strong foundation,
developing a broad skill set, starting saving now, learning how capital works, seeking
out a partner, soliciting legal advice, and joining NAMAD and other key associations.
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 advice to other dealers: expand the talent pool, succession planning, retain minority
ownership, create a capital pool
 advice to OEMs: recruit minority employees, support minority dealers, encourage
mentorship of candidates
 advice to aspiring dealers: save money, identify capital sources, seek out mentors,
participate in industry groups, learn business fundamentals
Similarly, on the Chase (n.d.) corporate website there is real estate set aside to encourage
and support minority businesses. The cite prompts interested individuals to contact the bank for
additional information but does include some general information on one-on-one coaching,
community resources, educational resources, and banking and credit solutions.
Details from Ally’s (n.d.) site were not available, but several support areas were
mentioned, including the desire to support network ownership that reflects the consumer client
base, efforts to increase support to DEI-focused advocate groups, and launch of the Dealer
Assessment Program in partnership with the NAMAD. One other item of note is that on the
Stellantis program detail, three lender partners are listed including Ally (n.d.), Chrysler Capital
(Stellantis captive), and the Live Oak Bank.
Analysis of Lender DEI Dealership Support Programs With Detail Available
The artifact analysis compares information online from three programs, each of which
takes a different approach and offers different strengths and weaknesses. The three programs
compared include (a) Stellantis: Dealer Market Investment Program, a debt-based program, (b)
GM Dealer Development Program, an equity investment program, and (c) Live Oak Bank: SBA
loan program. The programs are reviewed based on the candidate's qualifications and the
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program structure. Findings are also compared to the conventional dealership lending programs
outlined in the previous section.
Comparison of Program Eligibility Qualifications
From an examination of the three programs, there are clear similarities between the GM
and Stellantis programs, despite the different forms of capital investment. As shown in Table 6,
both heavily consider the experience of the candidate running a dealership and overall
knowledge of the key parts of dealer operations. The other primary factor considered is the
performance history of the candidate running a dealership operation including sales, market
share, and customer satisfaction for sales and service. Where the programs diverge is in the
minimum amount of unencumbered funds needed by the candidate to close a transaction.
Regarding the Live Oak Bank SBA program, qualifications are based on the SBA legal
program requirements and individual participating banks that have their own underwriting
criteria. Per the presentation made by Live Oak Bank at the NAMAD conference, the primary
qualifications can be summarized based on two tests. The first is a tangible net worth test that is
based on the calculation of no greater than $15 million over the last 2 years tax returns. There is
also a taxable net income test where net income cannot exceed an average of $5 million over the
same periods. The second is a personal resource test that analyzes available personal liquidity to
make sure the applicants have less than the financing amount being requested. Relative to the
participating banks that perform the underwriting, guidelines can vary by lender, but common
criteria may include cash flow, personal credit of guarantors, the character of applicants
(criminal record, litigation, etc.), resume, management experience, and collateral that takes into
account the market and brand of the dealership.

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Table 6
Summary of Program Structure and Impact on Entrepreneur Capital Needs
Structure GM
equity
Stellantis debt
(Ally, Chrysler Capital)
Live Oak Bank
SBA 7a, 504
Blue sky Minimum $500k or 15%
Term TBD
Down payment: 15%
Term: 5 year
Down payment: 10%
Term: 10 years
Working
capital
Minimum $500k or 15%
Term TBD
Down payment: 15%
Term: 5 year
Down payment: 10%
Term: 10 years
Real estate Minimum $500k or 15%
Term TBD
Down payment: 5%
Term: 5 year
Amortization: 20 year
Down payment: 10%
Term: 5 or 10 year
Amortization: 25 year
Other terms
or
conditions
Under equity program
candidate receives a
portion of profit based
on ownership percent
Dealer uses profit to buy
back shares until GM
is paid off or dealer
can refinance through
another lender
Stellantis contributes
15% on real estate
Dealer must provide site
control for 30 years
Dealer cannot sell
dealership assets or
burden the dealership
with additional debt,
including mortgage,
until both loans are
paid off
Some OEMs may not
allow SBA financing
due to strict 50%
leverage ratio
OEM site control not
allowed
Floor plan lender must
be agreeable to
structure, notably
collateral and liens

Capital need Blue sky: $1,710,000
Working capital:
$243,040
Total capital: $1,953,041
Real estate: $405,067
Working capital:
$243,040
Blue sky: $1,710,000
Total capital: $2,358,107
Real estate: $810,135
Working capital:
$162,027
Blue sky*: $1,140,000
Total capital: $2,112,162

Note. Loan guarantees on SBA 7a loans for blue sky and working capital are available up to $5
million. Lenders may or may not be willing to increase loan amounts beyond what the SBA will
guarantee.

Comparison of Program Structure
The three programs compared the average transaction case based on a real estate sales
price of $8,101,355, blue sky price of $11,400,000, and a working capital need of $1,620,271.
Under the equity program as described below in table 6 from the GM motors holding webpage,
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GM motors holding and the dealer candidate each invest in the dealer company by purchasing
shares of capital stock in $100 increments. GM motors holding would hold preferred stock with
voting control whereas the operator would hold common stock. The amount of investment by the
entrepreneur would be at least 15% of the initial franchise capital. In the sample case, excluding
the real estate which could be leased, the dealer would have to have 15% of the blue sky and
working capital which adds up to $1,953,041. Under the GM motors holding structure, the dealer
operator is an employee of the dealer company and receives a salary. In addition to the salary, if
the dealer company is profitable, the dealer operator receives deferred compensation in the form
of growth in the value of the common stock in addition to an allocation of earnings used to
redeem preferred stock. In addition, the operator is qualified based on the performance of the
dealer company to receive a 20% bonus that can be used to redeem preferred stock.
Stellantis, by comparison, offers debt-based capital programs in partnership with Ally
(n.d.) bank and Chrysler Capital which is summarized below in Table 6. This program is similar
in that a minimum of 15% of the dealership capital is required as a down payment. Loans for
working capital and blue sky carry a 5-year term. One significant advantage of the Stellantis
program is in real estate, where the OEM contributes 10% toward the purchase. As the preferred
lender partners provide 85% LTV mortgages, the dealer candidate would only have to bring 5%
of the capital as a down payment; however, in exchange for the 10%, Stellantis asks for 30 years
of “site control.” Under site control, a dealer grants the OEM the right to decide the use of the
land and facility for the specified period. Despite the attractive features of the Stellantis program,
a dealer candidate would still need to have an estimated $2,358,107 to close on the average case.
The SBA 7a program supports working capital and blue sky finance, while the SBA 504
program is designed for real estate acquisitions. While both are still debt programs, the offers
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provide different features and benefits than the Stellantis model and are summarized below in
table 6. First, both the 7a and 504 programs offer lower down payment percentages at 10%.
Additionally, they offer longer terms than conventional bank programs or the Stellantis model,
which provide dealers with cash flow benefits. Under the 7a program for blue sky and working
capital, the government guarantees 75% of the debt, which increases the risk appetite for lenders
on unsecured lending. However, the 7a only provides guarantees of up to $5 million, which
could limit what a bank or captive lender might be willing to loan. Also, OEMs have policies for
the dealership equity structure, typically in the range of 50% equity, and do not want high-
leverage dealer operators due to elevated risk in the event of a market downturn. On the real
estate side, another risk to OEMs is that the SBA will not allow site control. This could impact
an OEMs willingness to accept a deal financed through the SBA. Finally, floor plan lenders or
inventory finance lenders typically require all dealership assets as collateral. Under the SBA
program, they would have to be willing to accept a diminished collateral position. Despite the
attractive features of the SBA programs and if OEMs accept SBA-financed entrepreneurs, the
dealer candidates still need to have $2,112,162 in capital to close on the average case.
Chapter 5 includes a summary of findings which are segmented by the transformation,
transactional, and personal and individual levels of the Burke-Litwin (1992) model. Based on
findings from the qualitative interviews and the artifact analysis, the best alignment between
OEMs, lenders and African American entrepreneurs occurs at the personal and individual layer
where significant investments of time and resources have been made to support training, tools,
and management support, networking, mentorship and more; however, at the transactional level,
escalating blue sky prices have put deals out of reach of prospective African American
entrepreneurs, despite the availability of SBA loans, debt and equity options for OEMs and
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lenders. For these reasons, it is critical for industry leaders from OEMs and lenders together with
the relevant associations to find new perspectives leading to new solutions and opportunities.
Chapter 5 also includes recommendations based on the findings of the research.

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Chapter Five: Discussion and Recommendations
The findings from the qualitative study and the artifact analysis are summarized in the
following chapter and are based on the transformational, transactional, and personal and
individual factors of the Burke-Litwin (1992) model. At a transformational level, leaders for
OEMs, captives, and lenders can help drive a diversity bonus leading to incremental business
results while improving socioeconomic benefits by focusing on increasing African American
dealer network ownership. Findings from the qualitative interviews shared perspectives on
current OEM and lender programs, and why current offerings are having a marginal impact due
to the rising costs of dealerships or blue sky. Finally, artifact analysis demonstrates that
significant OEM, captive, and lender services and programs are available direct or through
association partnerships. Qualitative interview perspectives indicate the training programs, tools
and networking opportunities available to individuals are well-designed and aligned with
entrepreneur needs.
Findings Related to Transformational Factors
Leaders from OEMs, captives, and lenders should focus on increasing diversity, equity,
and inclusion into their dealership networks due to the incremental bonus benefits diversity
provides. Nathan and Lee (2013) highlighted the advantages of DEI in business, including a
higher propensity to introduce new products, increased market reach, and economic benefits.
Cummings and Bridgman (2016) provided another example and linked diversity of perspective
as means of countering the effects of dominant logic spurring creativity and innovation, and the
ability to draw ideas from broader perspectives. From the qualitative interviews, it was evident
that the African American participants shared a long-term approach to business building founded
in community relationships. Relative to business philosophies, many participants discussed
finding dealership opportunities where they could change the culture to turn around dealership
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performance. Participants emphasized the importance of ownership control to focus time and
resources in areas a large dealer group might not pay attention to. Several dealers mentioned
personal motivation to change their families’ lives through the creation of development wealth,
and the desire to give back to the community through service and donations. Ultimately, the
belief of participants was clear that their success was attributable to the communities they serve
reciprocating, versus marketing or pricing or other business tactics to generate sales.
Qualitative interviews also mentioned a morale component to improving dealership
network diversity. Mavoothu (2009) called out several socioeconomic benefits of promoting
minority business ownership, including decreasing unemployment, increasing economic growth,
and providing individuals with increased opportunities for social mobility and wealth. From the
interviews, African American dealers provide tremendous community impact and several
participants also mentioned creating a virtuous circle through their desire to develop the next
generation of dealership entrepreneurs that will continue to support communities, and establish
their own family succession plans.
One area where OEMs, captives, and lenders can support is continued help to develop
critical relationships, which is consistent with the literature and historical precedent. Green and
Houchins (2017) identified access to capital and relationships as two of the six primary causes of
African American business failures. The lack of relationships was a root business failure issue
due to potential business isolation. Qualitative interviews focused on five critical relationships to
African American dealer success: (a) OEMs, (b) lenders, (c) other dealers, (d) business brokers,
and (e) association. Of the five, OEM relationships were deemed to be the most important and
impactful for success.
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Findings Related to Transactional Factors
Qualitative interviews and the artifact analysis demonstrated that based on the current
market environment and traditional structures, practices, and systems, it is difficult for African
American dealers to close on dealership acquisitions. As it relates to types of transactions, new
points are very attractive to African American entrepreneurs, but opportunities are very limited.
Table 7 shows top OEMs showed that the total networks over a 5-year period decreased by 1%
reflecting the limited supply of new franchise points assigned. Also, participants referenced the
difficulty in obtaining a new point from an OEM when competing against large, established
dealer groups due to the presence of a cheat code, referring to a situation where a group assigns a
minority partner from an underrepresented group but maintains management control through an
operating agreement.
The primary opportunity to increase the African American ownership mix is through buy-
sells transactions of existing franchises, but the rising costs of dealerships or blue sky present a
major obstacle. Estimates based on 2021 averages as outlined in the artifact analysis for a
dealership blue sky alone, excluding real estate or working capital needs, were $11 million.
Compounding the rising blue sky costs are the current rising interest rate and inflationary
environment that impact the costs of real estate and facilities for entrepreneurs. The literature
review supported the structural problem for African American entrepreneurs to acquire
dealerships without generational wealth. Relevant examples include Herring and Henderson’s
(2016) work, which showed median wealth for African Americans was $156 thousand less than
European Americans’ wealth, and Weller and Hanks’s (2016) work, which indicated that since
the Great Recession, the wealth gap between African Americans and European Americans has
widened. Rueben and Queen (2015) demonstrated the impact as African American entrepreneurs
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migrate to labor-intensive versus capital-intensive industries, which are more competitive and
have higher failure rates.

Table 7
Dealer Count by OEM and African American Ownership Mix by Year
2017 2018 2019 2020 2021
OEM DLR # AA % DLR # AA % DLR # AA % DLR # AA % DLR # AA %
Toyota 1,245 1.2% 1,246 1.2% 1,247 1.4% 1,245 1.5% 1,245 1.8%
GM 4,191 1.3% 4,159 1.2% 4,100 1.2% 4,064 1.4% 4,041 1.6%
Ford 3,214 2.0% 3,201 2.0% 3,173 1.8% 3,144 1.7% 3,128 2.0%
Stellantis* 2,600 1.1% 2,602 1.2% 2,639 1.1% 2,609 1.3% 2,607 1.5%
Honda 1,101 0.8% 1,105 0.8% 1,081 0.8% 1,062 0.8% 1,067 1.0%
Nissan 1,042 2.1% 1,082 2.0% 1,075 1.9% 1,072 2.0% 1,076 2.4%
Total 13,302 1.5% 13,305 1.4% 13,315 1.4% 13,196 1.5% 13,164 1.7%

Note. Information in the table above was taken from the NAMAD (2017-2022). This table is
based on self-reported dealer counts that OEMs share with the NAMAD association. Stellantis*
includes data from when the organization was previously known as FCA (Fiat Chrysler
Automobiles). Dealer # is the total number of new vehicle franchise dealers for each OEM
included. AA% represents the percentage of dealers majority owned by African American
entrepreneurs.

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Participant interviews provided African American perspectives of the three primary OEM
and lender program types available including the positive and negative aspects. Historically, the
OEM equity programs have provided a path to ownership for African Americans. The positive
aspects of the program include the low equity needed to join the program, robust program
structure, and limited downside risk (i.e., if unsuccessful the entrepreneur stands to lose his
equity investment but avoids bankruptcy). Despite the benefits, several participants thought the
program is no longer relevant, based on the high blue sky costs, which limit the type of
dealerships for which a candidate can qualify. In addition, the long time required to buy out the
OEM shares to retain full ownership and the lack of full creative control was deemed to be
negative program aspects.
The alternative lender debt programs, including the SBA, offer full control but have less
structured program support and full downside risk if a dealership is not successful. The SBA
program was the most recent innovation post-COVID, as it increased the loan amounts available
through higher leverage and thus less equity required by an African American entrepreneur due
to the government guarantee; however, current OEM policies vary, and not all manufacturers
allow for a debt:equity structure above $1:$1. Also, the SBA program has other structure
components, due to government requirements that are not attractive to OEMs potentially limiting
accessibility to African American entrepreneurs. Overall, there is limited debt financing
available and even when it is available, analysis indicates that African American entrepreneurs
must still have an estimated $2 million in funds available to close on an acquisition transaction.
Another interesting finding of the participant interviews was the role of business brokers
in buy-sell transactions. OEMs and lenders are downstream from the origination of deals, and
brokers focused on established, well-capitalized group dealers, versus unproven entrepreneurs.
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This is consistent with the literature. Ikeda (2018) found higher search costs are synonymous
with a lack of established lender relationships or insufficient networks. Some participants were
fortunate to have organically found brokers willing to invest time and effort, in support of
finding a future transaction. In addition, some interview participants were also fortunate to find
existing dealers willing to sell to an African American candidate, potentially at the opportunity
cost of higher return. Opportunities exist to build programs or structures that align with brokers
and sellers.
Findings Related to Individual and Personal Factors
From the qualitative interviews, mentorship was instrumental to the success of
participants. Key roles of mentors included providing best practices or lessons learned from
experience, decision-making support, and finally encouragement. Consistent with the diversity
bonus, having multiple mentors of various backgrounds and strengths also played a key role.
Examples cited ranged from mentors that focused on analytics, financial statements, accounting,
process optimization, and controls versus mentors that were marketing, sales, and client service
focused. Mentors noted only helped increase entrepreneurs network contacts with key
stakeholders, such as OEMs and lenders, but also groomed them for future market
representation.
One surprising aspect of the research was the high engagement of entrepreneurs from
underrepresented groups from OEMs, captives, and other lenders provided directly or through
NAMAD. The efforts were consistent with best practices from the literature. For example, Myers
(2017) on African American economists pointed to a combination of resources or financial aid,
mentors, or role models highlighting contributions of African American economists and a
community of African American economists as critical to fostering success. The artifact analyst
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reflected consistent support in these areas including the formation of OEM minority dealer
associations to supplement NAMAD or dealer benchmarking groups as additional forms of
communities. Patel (2018) highlighted the strong correlation between early role models and
achievement. The OEMs, captives, and lenders also supported this area by participating in events
fostering the formation of mentor relationships and training.
Recommendations for Practice
Recommendations are segmented based on the transformational, transactional, and
individual and personal factors of the Burke-Litwin (1992) model. Emphasis is placed on
recommendations to improve transformational factors due to the potential for the highest impact.
Regarding the implementation and evaluation of transformational recommendations, the Kellogg
theory approach model is used. Per the Kellogg Foundation (2004), the theory approach model is
appropriate for use in this scenario as it provides deep reasons for the underlying ideas behind a
program, explains alignment between strategies and solutions, and provides the “big picture”
needed to understand why and how a program will work, in addition to what the program is.
Transformational Factor Recommendations
Burke-Litwin's (1992) transformational factors focus on three key areas: (a) leadership,
(b) vision, mission, and strategy, and (c) organizational culture. To drive change, the primary
recommendation is to foster interaction between the leadership of the two major associations in
the American Financial Services Association (AFAA), which includes major banks and captives,
and the NAMAD. As a first step, the recommendation is to develop a two-way survey between
the associations. The two-way survey would include an instrument from AFSA to be deployed to
NAMAD members of all ethnicities to understand the experience, history, and growth plans of
the members. The reason the survey could be expanded from African American to all
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underrepresented groups is based on feedback received on the quantitative survey request from
this research. The NAMAD supported the idea but could not deploy it to just one group. In
addition, a survey from NAMAD will be deployed to AFSA members to understand current and
planned programs and initiatives supporting African Americans and other underrepresented
groups. The second step would then be to conduct joint leadership meetings between AFSA and
NAMAD to review results at a high level to look for new opportunities to increase service
coverage or support. The AFSA leadership referenced specifically is the commercial lending
subcommittee that underwrites and services capital requests for dealers and prospective
entrepreneurs.
The Kellogg framework is recommended as a causal model that transitions from the
current situation to planned work leading to intended results. As outlined in Figure 2, the
framework starts with the assumptions that underline the current situation and include
 NAMAD members have a range of experience levels and goals that are not well
understood by AFSA members.
 AFSA members’ various initiatives may not be fully known by NAMAD members.
 AFSA members may not be aware of all the opportunity areas to support NAMAD
members.
 Business brokers influence buy-sell transactions but are not well integrated into
OEMs or lenders. In addition, instead of investing time in entrepreneurs from
underrepresented groups, business brokers take the path of least resistance in sourcing
dealership buyers and focus on well-established, well-capitalized dealer groups.
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 Finally, AFSA members can improve their relationship to the regulatory agency
CFPB (Consumer Finance Protection Bureau) by advancing issues of DEI through
NAMAD.

Figure 2
Implementation Strategy Using Kellogg Theory Approach Model

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Under the Kellogg framework, the input section includes five major stakeholder groups
including AFSA leadership, NAMAD leadership, OEMs, business brokers, and existing
NAMAD dealers or prospective dealers. Next, three key actions need to be taken by AFSA
leadership and NAMAD, including the two-way survey above, a follow-up leadership meeting to
review survey results and discuss opportunities, and finally a joint approach to engage business
brokers willing to support DEI initiatives.
The output of the actions should yield new segments for increased AFSA/OEM support
and where to focus AFSA-OEM-NAMAD broker attention. The outcomes should include
additional ownership paths, the pooling of resources by NAMAD members for use in
consolidating market territories, new or alternative AFSA-OEM programs, and finally an
alignment of brokers to AFSA-OEMs-NAMAD. Ultimately, the desired impact is to increase the
ownership mix of African Americans and other underrepresented groups, drive higher
participation in NAMAD, and improve the efficiency of the talent pipeline.
Transactional Factor Recommendations
Based on the results of the two-way survey AFSA-NAMAD survey and joint industry
discussions, OEMs and lenders should look to identify underserved segments and build out
programs and services to support those segments. To date, all the public capital program
information is focused on new entrepreneurs with limited resources. Due to high blue sky prices,
the programs have obtained limited success. If OEMs and lenders can segment the population of
dealers based on experience (low, medium, high) and capital needs (start-up versus growth), it
may lead to the identification of new opportunities. For example, could the large, existing
African American dealers pool resources to create corporations that can use bank-syndicated
facilities to consolidate regional territories for OEMs? Alternatively, there are opportunities for
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new entrepreneurs to transition from being a general manager to an owner through either
program designed to acquire a used car franchise or to become a minority new car franchise
dealer, as an interim step.
One important barrier to collaboration between lenders is antitrust laws that prohibit
competitors from directly discussing pricing, market practices, rates, entry or withdrawal from
markets, the volume of loan originations, the form or content of contracts, the standardization of
marketing any product, or any other competitive aspect of an individual company’s business.
Despite the presence and importance of antitrust regulation, precedence exists for lenders to pool
resources through syndication. Under a syndicated loan structure, a lead bank directly negotiates
terms with a client and only after finalizing a structure invites other lenders to fund a portion of
the deal to diversify the concentration risk. As it relates to new entrepreneurs, an innovative
lender could develop a “reverse” syndication concept, perhaps in partnership with the
associations, to bring to the marketplace. While the standard syndication structure spreads a
single concentration risk among several lenders, the reverse syndication concept entails multiple
lenders funding a diverse pool of new entrepreneurs from underrepresented groups attempting to
make dealership acquisitions across various brands. This has the potential to overcome one major
challenge for OEMs and lenders in credit risk. While the probability of dealership default is low,
the severity of loss in default for a leveraged deal is high. What the reverse syndication offers
lenders or OEMs is the ability to diversify risk across a pool of candidates.
Another pooling concept suggested during an individual conversation with a leader from
AFSA was the potential to use the association or a lead bank to develop a “defense” fund. Based
on current economic turbulence and the potential for a recession in the future, the idea of the
defense fund would be to create a pool of funds across lenders to be deployed to dealer
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entrepreneurs struggling with short-term cash needs. This concept requires further development
but emphasizes the need to prevent the loss of dealerships owned by underrepresented groups as
the supply of dealerships is limited.
The emphasis of the recommendation section has been on traditional debt and equity
options provided by banks, captive lenders, and OEMs. The emphasis on traditional debt and
equity options is due to the presence of OEM franchise requirements for owners, which typically
require the primary dealership principal owner operators to capitalize a dealership via 50%
unencumbered funds; however, financial instruments or innovations used to support start-ups in
other industries should be considered. For example, Wang and Lin (2022) developed a
framework for Taiwanese Fintech start-up firms designed to find the optimal external capital
source and highlight several options including
 Equity crowdfunding (EC): EC allows new entrepreneurs to target a broader group of
investors across geographies and relationship networks to access an extended network
of potential investors using social media and the internet.
 Angel funds (AF): AF are private individuals that invest directly in private companies
with which they have no prior connections or familial relationships.
 Venture capital (VC): VC firms provide capital in private firms and take positions of
control on company boards. VC firms protect their investments via management
actions that guide decisions such as market entry or exit, company structure,
operating procedures, etc.
Among the options cited, EC may be the most relevant to pursue. In studying EC with 167 equity
offerings in Crowdcube and 99 equity offerings on London’s Alternative Investment Market,
Cumming et al. (2021) found younger top management teams were more likely to launch and
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have higher chances to complete offerings via EC. They also found entrepreneurs from
underrepresented groups could attract a higher number of investors via equity crowdfunding. As
prospective African American dealership candidates must be approved independently by the
OEM for the franchise (including capital structure) and lenders, the recommendation is for
OEMs and captives to pursue the development of innovative financial instruments such as EC
jointly.
Personal and Individual Factor Recommendations
Artifact analysis reflects a wide range of support available to prospective African
American entrepreneurs from OEMs, captives, and lenders, consistent with insights received
through the qualitative interviews. While new innovations can always provide benefits, there is
no need to develop additional training, support tools, networking structures, etc. at an individual
level. At an individual level, the opportunity is for OEMs, captives, and lenders to work with
existing dealers to incentive new African American employees to join and participate in
NAMAD from Day 1 of employment or at the earliest opportunity. In addition, as some dealers
launched their careers in other industries, it may also be worthwhile to encourage OEM, captive,
or lender African American employees that have indicated a desire to become an entrepreneur to
participate in a NAMAD conference to gain exposure. NAMAD brings together the elements of
personal factors, behavior, and the environment as outlined by Gauthier and Latham (2022)
about Bandura’s social cognitive theory. Through NAMAD, a future African American dealer
candidate can supplement their cognitive factors through the opportunity to see other African
American role models in a supportive environment. The other recommendation is for OEMs,
captives, and lenders to monitor and encourage career development by monitoring the work
experience and training completed by prospective African American dealer candidates. The
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additional engagement and encouragement will increase motivation for candidates to prepare
well in advance for a future ownership opportunity by making the right decisions from an early
career stage.
Limitation and Delimitations
The delimitations of the qualitative study were based on qualitative interviews of
successful U.S. African American automotive dealers with at least 5 years of ownership
experience. The candidates were sourced through the AFSA and NAMAD associations and
industry contacts. The qualitative survey results were limited based on the availability and access
to qualified African American dealerships. While the participants included a range of ownership
experiences, various scales of business, and different domestic and important OEM brands,
African American women were not represented in the pool.
The delimitation of the quantitative study was based on survey questions to the African
American members of NAMAD. The quantitative study intended to understand the pool of
entrepreneurs either seeking to be successful dealers or existing dealers looking to expand.
However, the NAMAD association was unable to deploy a targeted survey and did not want to
take any action that could potentially alienate a member from a different underrepresented group.
Finally, the artifact analysis was limited to publicly available information only.
Suggestions for Future Research
There are ample opportunities to expand the research efforts. First, in the automotive
industry, qualitative research should be expanded to understand the perspective of Hispanics,
Asians, women, and other underrepresented groups. The intended quantitative survey could not
move forward as designed through the NAMAD without isolating members from other
underrepresented groups; however, expanding the scope to understand the total population of
137

NAMAD members could lead to the creation of new or expansion of existing products and
services by OEMs, captives and lenders. Second, the research should be expanded to explore
African American entrepreneurial efforts in capital-intensive industries and industries with
franchisee opportunities. Due to the limited supply of dealerships, another research opportunity
would be to examine the relationship between OEM assignment of franchises and resources or
access to capital. As automotive is a mature industry, the study could be extended to look at
other mature, capital-intensive industries that use a franchise model.
Conclusions
Opportunities to improve African American ownership exist as evident from the
qualitative interviews of successful dealership owners, and current efforts by OEMs, captives,
and lenders to support DEI in general and dealer networks specifically. The current efforts have
not yielded significant changes over the past 5 years, primarily due to the rising cost of dealers
due to the limited supply of new franchises and high demand from entrepreneurs and large,
established dealer groups. However, if the two major associations in AFSA and NAMAD can
collaborate by exploring different segments, issues and opportunities, the potential to create fresh
program ideas and services in the context of the changing market dynamics can be realized.

138

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151

Appendix A: Interview Questions
Three research questions guided this study:
1. How do African American entrepreneurs view OEM, captive and lender programs,
and their abilities to make capital accessible and attractive to dealer candidates?
2. How do African American entrepreneurs describe their experiences in obtaining
capital and support needed to successfully start and grow their dealer automotive
businesses?
3. What unique contributions have African American dealers made to the industry, their
respective vehicle brands, and communities?

152

Table A1
Interview Protocol
Interview question Potential probe Research
question
1. Please tell me about your career path
that led you to being a dealer?
1
2. What interested you to enter the
automotive industry?
To what extent was the auto industry
your original passion?
1
3. Could you describe any individuals
that you modeled or established a
mentorship with?
How did you come to know your
mentors?
1
4. What was your first opportunity to
acquire a dealership?
What influence or control did you have
in selection?
1
5. How did you get connected with the
opportunity?
How accessible was the opportunity? 1
6. What about the opportunity was
appealing?
1
7. What about the opportunity
concerned you?
In what ways did you feel the
transaction was fair?
1
8. What were some of the available
financing options or sources of
funds that you considered using to
acquire your first dealership?
To what extent did you feel you had
enough resources to excel or
succeed?
2
9. What were some of the (other)
facilitators or barriers to entry?
How were you able to overcome the
obstacles?
2
10. What programs were you able to
leverage to start your first business?
How were you made aware of the
programs?
2
11. What kind of social and/or financial
support did you have available to get
started?
What support structure did you have? 2
12. What is your opinion of available
financing programs available to
African American entrepreneurs?
What opportunities do you see to
improve dealership acquisition
financing support for African
American entrepreneurs?
2
13. What surprised you that you didn’t
expect?
Could you have been better prepared? 2
14. What do you think your legacy will
be?
How have you been able to make
unique contributions?
3
15. Where do you want to go next with
business or endeavors?
Do you foresee any limitations to
reaching your next goal?
3

153

Appendix B: Survey Questions
Three research questions guided this study:
1. How do African American entrepreneurs view OEM, captive and lender programs,
and their abilities to make capital accessible and attractive to dealer candidates?
2. How do African American entrepreneurs describe their experiences in obtaining
capital and support needed to successfully start and grow their dealer automotive
businesses?
3. What unique contributions have African American dealers made to the industry, their
respective vehicle brands, and communities?

Table B1
Survey Questions
Question Response option (if closed-ended) Research
question
1. Please specify your ethnicity? Mark
all that apply
American Indian or Alaska Native
Asian
Black or African American
Native Hawaiian or other Pacific
Islander
White
Other (Please specify)
Prefer not to answer
2
2. With which gender do you identify? Male
Female
Non-binary
Prefer to describe:
Prefer not to answer
2
3. Are you currently an automotive
dealer? (note: “dealer” defined as
having full or partial ownership in
an automotive dealership)
Yes—majority owner
Yes—Minority owner
No
2
4. If the answer to question 3 is “yes,”
how many dealerships do you have
interest in?
1
2
3
2
154

Question Response option (if closed-ended) Research
question
4
More than 4
5. If the answer to Question 5 is “no,”
are you interested in becoming one?
Yes
No
2
6. How many years of automotive
dealer experience do you have?
0–2 years
3–5 years
6–10 years
11–15 years
More than 15 years
2
7. Please describe the years of
experience you have in the
following dealer roles
Note: interval scale for each item in
years: 0–2, 3–5, 6–9, 10+
Owner
General manager
Sales manager
F&I manager
Business development center or
internet manager
Controller or CFO
Parts and service manager
Human resources
2
8. Please describe your education
background by selecting all that
apply
High school or equivalent
Bachelor degree
Master’s degree
Doctorate or JD degree
National Automobile Dealer
Association Academy certification
Manufacturer program certification
Technical school
Other—please specify
2
9. Do you have formal mentor(s) by
another dealer, either formally or
informally, that has provided career
automotive dealer guidance and
support?
Yes
No
2
10. How would you characterize your
relationship to manufacturer or
captive lenders based on the
following criteria:
Discuss acquisition
plans/business growth
Review proformas/projections
Determine debt/financing needs
Assess cash flow
Note: question uses a scale from 1 to 6,
where:
1 = no relationship (would need
to identify and set initial
meeting with appropriate
bank/lender individual) to
6 = strong (informal, ability to
call and talk at any time)
1
155

Question Response option (if closed-ended) Research
question
Develop business plan and credit
package
11. How would you characterize your
relationship to banks based on the
following criteria:
Discuss acquisition
plans/business growth
Review proformas/projections
Determine debt/financing needs
Assess cash flow
Develop business plan and credit
package
Note: question uses a scale from 1 to 6,
where:
1 = no relationship (would need
to identify and set initial
meeting with appropriate
bank/lender individual) to
6 = strong (informal, ability to
call and talk at any time)
1
12. How would you characterize your
relationship to automotive
manufacturers based on the
following criteria:
Discuss open or available dealer
points
Cocreate business plan on open
points
Leverage available incentives
Note: question uses a scale from 1 to 6,
where:
1 = no relationship (would need
to identify and set initial
meeting with appropriate
bank/lender individual) to
6 = strong (informal, ability to
call and talk at any time)
1
13. What is your opinion of available
government financing programs
currently available?
Open 1
14. What is your opinion of available
manufacturer or captive lender
financing programs currently
available?
Open 1
15. What is your opinion of available
bank or other lender (ex: private
equity) programs currently
available?
Open 1
16. Regarding dealership acquisition
financing support, what are best
practices that could be enhanced or
expanded?
Open 1
17. What opportunities do you see to
improve dealership acquisition
financing support?
Open 1

Abstract (if available)

Abstract This study evaluated the perspectives of successful African American entrepreneurs who work in the automotive industry and who leveraged a manufacturer, captive lender, or bank program to launch and grow their businesses. Qualitative research was conducted via interviews with nine participating African American dealers with over 160 years of combined dealer ownership experience in 28 various domestic U.S. and import franchises. Qualitative interviews also explored participants’ experiences in obtaining capital and their unique contributions to the industry and their communities. Results were analyzed in the context of the Burke-Litwin (1992) model of organizational change. Meaningful support from original equipment manufacturers (OEMs) and lenders was available to African American entrepreneurs at personal and individual levels through various forms, including training, tools, management support, and networking opportunities. Due to the limited supply of new dealer franchises, rising costs of dealership goodwill, and limited access to capital, there are transactional barriers to dealer ownership for African Americans. The primary recommendations are focused on the transformational factors for leaders of lenders in partnership with relevant associations.

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University of Southern California Dissertations and Theses

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Asset Metadata

Creator Leone, Andrew Mario (author)

Core Title Access to capital for African American automotive dealership acquisition

School Rossier School of Education

Degree Doctor of Education

Degree Program Organizational Change and Leadership (On Line)

Degree Conferral Date 2022-12

Publication Date 11/15/2022

Defense Date 09/01/2022

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag access to capital,African American entrepreneurs,automotive dealerships,OAI-PMH Harvest

Format theses (aat)

Language English

Contributor Electronically uploaded by the author (provenance)

Advisor Picus, Lawrence (committee chair), Combs, Wayne (committee member), Lynch, Douglas Eugene (committee member)

Creator Email amleone@usc.edu,andrew.mario.leone@gmail.com

Permanent Link (DOI) https://doi.org/10.25549/usctheses-oUC112417911

Unique identifier UC112417911

Identifier etd-LeoneAndre-11317.pdf (filename)

Legacy Identifier etd-LeoneAndre-11317

Document Type Dissertation

Format theses (aat)

Rights Leone, Andrew Mario

Internet Media Type application/pdf

Type texts

Source 20221115-usctheses-batch-991 (batch), University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the author, as the original true and official version of the work, but does not grant the reader permission to use the work if the desired use is covered by copyright. It is the author, as rights holder, who must provide use permission if such use is covered by copyright. The original signature page accompanying the original submission of the work to the USC Libraries is retained by the USC Libraries and a copy of it may be obtained by authorized requesters contacting the repository e-mail address given.

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus MC 2810, 3434 South Grand Avenue, 2nd Floor, Los Angeles, California 90089-2810, USA

Repository Email cisadmin@lib.usc.edu