With no succession plan in place and retirement looming in about five years, dealer Linda Eich DesJardins needed an exit strategy that would preserve her family's business that dates back more than 110 years.
So in late 2012, Eich DesJardins sold 49 percent of her family's business to her employees through an employee stock ownership plan trust. The plan was put in place in December 2012, retroactive to January 2012.
"It's very emotional, especially since you have had generations in the business and it's a big part of the town's commerce," says Eich DesJardins, 55, president of Eich Motor Co. in St. Cloud, Minn. "This is such a graceful way to do it."
Eich Motor Co., which sells Volkswagen and Mazda vehicles, is one of just a handful of ESOP dealerships in the country. The store sells about 2,000 new and used vehicles combined a year.
Advisers and associations that specialize in ESOPs say that about 10,000 U.S. businesses operate under ESOPs. But they estimate that only about nine of those businesses are auto dealerships.
They say many carmakers don't want their franchisees to operate as ESOPs because the concept is complex and factories want assurance they will have influence over the franchisee and the brand image. Automakers often worry that they won't be dealing with a single executive, even though that's usually not the case, experts say. For the same reasons, factories also prefer the ESOP to own no more than 49 percent of the dealership, experts say.
Auto dealership ESOPs are rare, too, because many dealers lack sophisticated knowledge about ESOP structures.