Most dealership groups are built by partners. One person has the operational instincts, another has the capital, another brings relationships, and the business grows. That partnership model works until it does not. When the relationship fractures, the dealership cannot hit pause. Cars still have to be sold. Service lanes still have to run. The factory still expects performance. Every day of internal conflict quietly drains value.
We call these cases business divorces because the pattern is familiar. Trust breaks down. Financial transparency disappears. Meetings turn into ambushes. The majority starts treating the minority like an employee instead of an owner. Then the real damage starts: money moves through related entities, opportunities are steered to other stores, and the partner who helped build the business is told to take a discounted buyout or be frozen out.
Valuation deadlocks and why dealerships are harder than most businesses to price. A dealership is not a simple earnings multiple. You are dealing with multiple profit centers: new vehicle, used vehicle, finance and insurance, parts, service, and often separate real estate and management companies. Blue sky is real, but it has to be grounded in facts, not ego. We see partners deadlock over basic issues like whether rent paid to a related real estate company should be normalized, whether “management fees” are legitimate or a profit siphon, how to value used vehicle inventory, and how to treat manufacturer incentive programs that fluctuate year to year. Without a defined valuation process, the loudest voice often wins, and that is how disputes become lawsuits.
The way out of valuation paralysis is process. A strong operating agreement will say who selects the valuation expert, what standard applies, what information must be produced, and what happens if the experts disagree. Some agreements use a single appraiser. Others use two appraisers and a third tie breaker. Either way, the goal is to eliminate gamesmanship. If one partner can starve the other partner of data, the valuation becomes a weapon instead of a measurement.
Fiduciary duties in the showroom. Closely held dealership disputes often involve classic fiduciary breach behavior wearing a dealership uniform. We see majority owners diverting corporate opportunities to other points, shifting customers and inventory, pushing profitable products through affiliated entities, or allocating shared employees and expenses in ways that quietly transfer value out of the jointly owned store. In plain language, this is the “hands in the cookie jar” problem. It is not just unfair. It can be unlawful. The best cases are won by following the money and the paper trail, and that is where dealership disputes often turn into forensic accounting fights.
There are also softer fiduciary breaches that still cause real damage. Denying access to monthly financial statements. Locking a partner out of key meetings with the factory. Changing compensation and perks to punish a dissenting owner. Paying distributions to some owners while telling another owner there is no money. These moves are designed to exhaust the minority partner and force a cheap exit. Illinois courts have tools to address it, including emergency injunctive relief when the conduct is actively destroying the business or diverting assets.
Exit strategies that prevent a courtroom war. The best time to plan for a partnership breakup is when everyone still likes each other. Operating agreements and shareholder agreements should include buy sell mechanisms that are actually usable in the real world of dealership finance. That means thinking about how the buyout will be funded, how long payment terms will run, what happens to personal guarantees, and how manufacturer approval will be handled. Deadlock provisions can require mediation, set strict timelines, and provide a clear decision rule when partners cannot agree on major actions. A well drafted agreement turns a breakup into a process. A poorly drafted agreement turns a breakup into a brawl.
Even the best exit clause has to match dealership reality. Shotgun clauses sound tough until you realize the “winner” needs financing, floor plan approvals, and often manufacturer approval. A forced buyout that cannot be funded is not a solution, it is another lawsuit. The right structure is usually a combination of a clear valuation method, a realistic funding plan, and a timeline that keeps the dealership stable while the ownership issue is resolved.
When partner disputes erupt inside a dealership, they rarely stay internal. Manufacturers notice instability. Key managers leave. Lenders get nervous. That is why dealership business divorces have to be handled with both litigation strength and dealership specific knowledge. The goal is not to create a courtroom spectacle. The goal is to protect the value of the store and get to a fair resolution before the business itself becomes collateral damage.
DiTommaso Lubin, P.C. represents dealers and closely held business owners in high stakes partnership disputes, squeeze outs, and fiduciary duty litigation. If you are dealing with a partner problem that is threatening the future of your store, call 630-333-0333 or contact us online.