Sharpen those pencils!

Is an Oldsmobile franchise worth less for multi-franchise dealers than for the country's 63 exclusive Olds dealers?

Yes, says General Motors Corp. which is phasing out the brand. GM's “transition financial assistance package” (TFAP) sets a sliding scale of $1,500 to $2,900 per vehicle unit for determining amounts payable to Olds dealers.

The largest amount — which was initially $2,400 per vehicle before GM sweetened the deal — goes to those whose new Olds sales account for 76% to 100% of their top year's total new-unit retail sales in 2000, 1999 or 1998.

The compensation scale decreases for multi-franchise dealers whose Olds sales amounted to lower portions of their total volume. Those reporting 50%-75% in Olds sales get $1,900 per unit; 25% to 50%, $1,650; 10% to 25%, $1,525, and zero to 10%, $1,500.

But disagreement comes from veteran dealer accountant Carl Woodward of Bloomington, IL.

A seller of only 21 new Olds units a month, who additionally retailed 45 other new vehicles, might be entitled to a “lost incremental profits value” in Mr. Woodward's calculations of $2,035,212.

That's about equal to the $2,292,000 that GM offered last month to an exclusive Olds dealer who delivered 955 new cars in 1999.

Mr. Woodward, a specialist in evaluating the worth of dealerships and franchises, has factored GM's TFAP scale into his Olds “incremental franchise” value chart, which itemizes “lost sales” profits and expenses for nearly 50 items.

Dual dealers, Mr. Woodward contends, face potential cost burdens and reimbursement needs in 19 different areas, including real estate.

These costs go beyond the “transition,” “retail sales” and “facilities” amounts in the TFAP charts and should be negotiated on a uniform basis whether the Olds franchise is solitary or not, he adds.

His clients include a multi-brand GM dealer who erected a new Oldsmobile building last year at the division's insistence, Mr. Woodward says, “The present value of lost profits is much larger from an incremental franchise than most dealers realize.”

Say a multi-franchise dealer sells 21 new Oldsmobiles a month. Mr. Woodward's model projects lost revenues per annual new units sold over a 10-year period and includes the following: Annual incremental (Olds) net profit, $317,127; monthly grosses-new-units, $31,500; used-unit, $26,021; service, $24,818, and parts, $12,409.

Salesperson and sales manager salaries and commissions are calculated at $16,681 a month; floor plan interest at $4,737; total service expense at $11,777; rent at $2,000 and total administrative expenses at $19,190.

Mr. Woodward also applies a 9% interest factor to determine the “present value” of 10 years of incremental franchise profits.

“Blue sky” figures prominently in his calculations. He argues that dealers should be reimbursed for:

An exclusive Olds dealer, in a metro market and whose building is 11 years old, says it was recently appraised for $3.5 million “if I can find a buyer for it — unless GM finds me another franchise.”

Woodward & Associates, a dealership CPA firm in Bloomington, IL, has developed a value formula for “incremental” or dualled franchises.

This chart shows estimated values for dealers whose Olds franchise is secondary to others GM franchises in terms of volume:

Assume variable and other expenses used to generate this gross profit will consume 60% of the gross profit ($15,000)

Monthly Net Profits (before taxes) $10,000