Today, many dealers are considering what they will do because of the loss of a franchise, either through voluntary termination or rejection of the dealer sales and service agreement in bankruptcy. If you are considering continuing your business with another franchise or as an independent dealer, there are some things you should think about.

1. Contact the Motor Vehicle Dealer Board. 
Discuss the process for changing your license. Know well in advance any requirements imposed.

2. Notify your lenders as soon as possible. 
You may have provisions in your loan agreements that require you to be a dealer of the franchise you no longer have. Before you undertake any steps, contact those lenders and make arrangements for the change. 

3. Notify your landlord? 
You may have a provision in your real estate lease requiring you to maintain the franchise that you no longer have.   If so, contact your landlord and notify of that change.

4. LIFO Impact. 
If you had a LIFO reserve for the line of vehicles you no longer sell, there may be LIFO recapture. It is possible that you can avoid the full brunt of that if you are still going to be a dealer. Contact your accountant to discuss this. 

5. Check your insurance. 
Make sure you have sufficient insurance coverage to protect against product liability suits arising from sale of vehicles of the franchise you no longer hold, especially if the manufacturer is bankrupt.   A dealer who sold a vehicle that was allegedly defective, leading to serious injury or death, can be as liable in a product liability law suit as the manufacturer. Dealer sales and service agreements provide for manufacturer indemnification. If the manufacturer has gone through bankruptcy, however, those claims are either unsecured (meaning pennies on the dollar, at best) or barred.   A dealer of a bankrupt manufacturer sued for product liability claims will be on its own unless it has sufficient insurance.

6. Remove all trademarks. 
Once you lose your dealer sales and service agreement, you lose your license to use the trademarks of the franchisor. All brand name signs must come down from the inside and outside of the dealership. Internal displays and brochures should be discarded. Advertising should be changed as soon as you are able including listings on the internet, in yellow pages, and elsewhere.

7. Change your fictitious name, and perhaps your corporate name.  
Now that you have lost the license to use the franchisor’s trademarks, you must file with the state to withdraw any d/b/a name filing using a trademark no longer licensed to you. If your corporate name also contains the product name, you should change your corporate name. 

8. Revise your forms.  
With the change in your license, you will have to change the name under which you do business on your forms. You will have to have your forms reprinted without the trade name or trademarks belonging to the franchisor and without the trade name using those trademarks. 

9. Work with your employees. 
Your employees, especially those with you for the long term, are used to selling and servicing the products of the franchisor you no longer sell. Be prepared to provide training for your ongoing business.

10. Continue business under your corporation or LLC or under a new entity? 
There are potential claims against your business from the time you were a franchisee of the manufacturer. If that manufacturer declared bankruptcy, then you will likely have no indemnification protection in the event of product liability suits for vehicles that you sold. Unless your insurance is rock solid and in an amount necessary to cover potential claims, consider whether you should transfer the assets of your ongoing business to a new corporation or LLC, using the bulk sale protections of state law.

11. Make arrangements to handle your obligations. 
If you will do business as a new entity, you are likely to get objections to a transfer of your assets to a new entity from banks and finance sources to which you are obligated for chargebacks, from vendors with which you have long term contracts, or from others to whom you are indebted. Understand those obligations and make provisions to satisfy those creditors in any change of entity. 

12. Take steps to liquidate. 
If you have changed over to a new entity, discuss with your attorney the process of liquidating the old corporation or LLC.