Firm invests $70M into dealership group led by Jonathan Sobel

Franchise Equity Partners, a private investment firm connected to longtime automaker executive Mark LaNeve that launched in November 2021, has made its first foray into car dealerships via a multimillion-dollar deal with a growing dealership group in the Northeast.

New York-based Franchise Equity Partners invested $70 million into Georgica Auto Holdings, which is headed by Jonathan Sobel. The deal closed Oct. 21, said Sobel, Georgica Auto's CEO.

"We will use these funds for strategic acquisitions, things that fit our business model," Sobel told Automotive News. "We presently have one deal pending. I can't go into specifics right now because of confidentiality reasons.

"But we are planning to invest some of these proceeds in one transaction that is presently under contract, and we are looking at other deals as well."

Sobel noted that while a majority of the money will spur acquisition growth, some will be used to improve dealership facilities and the overall customer experience at his existing stores.

The deal with Georgica Auto is Franchise Equity Partners' first investment in dealerships, said Don Reese, CEO of the firm's automotive unit and a former leader of used-car retailer DriveTime. LaNeve, a former Ford Motor Co. and General Motors sales and marketing executive, is chairman of that unit.

Franchise Equity Partners said last November that it aimed to spend around $400 million on minority stakes in auto dealerships during a three-year period.

Sobel and Reese declined to disclose Franchise Equity Partners' percentage stake in Georgica Auto but confirmed "it is a minority stake."

"Jon's basically our Northeast guy, and we'd like to continue to grow with him in the Northeast," Reese said. "And we're looking to do that in other parts of the country."

Sobel described Georgica Auto as a newly formed entity created to facilitate the transaction with Franchise Equity Partners. Georgica Auto has dealerships across New York, New Jersey and Pennsylvania. Sobel's portfolio of dealerships represents domestic, import and luxury brands.

Sobel noted that one of his stores, Jaguar-Land Rover Manhattan, already has a minority partner and, as a result, is separate from Georgica Auto and Franchise Equity Partners' investment.

Franchise Equity Partners is backed by New York investment firm HPS Investment Partners. HPS allocated $1 billion to fund Franchise Equity Partners, which targets investment in five areas: auto dealerships, restaurants, heavy-equipment dealerships, beverage distributors and consumer services such as health and beauty.

Franchise Equity Partners was co-founded by Michael Esposito and Scott Romanoff, who are the firm's managing partners. Both Esposito and Romanoff are former partners at Goldman Sachs. That connection was key to this first deal as Sobel, also a former Goldman Sachs partner, knew the pair.

"It seemed like a very logical investment for them," Sobel said. "And they seemed like a terrific strategic partner for me."

Reese said Franchise Equity Partners is working on other investments but declined to speak on deals that are in process.

"Our deal flow has been very active," Reese said.

Northeast growth

Sobel said he has not bought or sold any dealerships so far in 2022. But the deal with Franchise Equity Partners follows an active 2021 for him in the buy-sell market.

Sobel sold Alfa Romeo of Manhattan-Maserati of Manhattan and Chrysler-Dodge-Jeep-Ram-Fiat of Manhattan in New York to Dennis & Co. Auto Group in December.

In July 2021, Sobel bought two Audi dealerships and a Porsche store in suburban Philadelphia. Sobel also bought a Chevrolet-Buick-GMC dealership in the central New York city of Auburn that summer, he noted, which followed the acquisition of three Auburn stores in February 2021.