New Direction for Disenfranchised Dealers

Too many dealers have had to learn how to pick up and move on with their lives after getting a “Dear John” letter from their manufacturer(s) to which they had been loyal for decades. At first glance, it would seem the disenfranchised dealer has three options: close the doors, acquire another vehicle franchise or go it alone as an independent. Thankfully, there is another option. Some dealers have pursued new franchise relationships, not with car manufacturers but with aftermarket service providers.

When Auto Dealer Monthly last spoke to Bo Corwin, a former Chrysler dealer in Hickory, Pa., he was in the process of adapting to life as an independent (“Life After Chrysler—The New Operations of Former Chrysler Dealers,” November 2009). However, he was faced with a significant problem; after being well known as a Jeep dealer for so many years, how did he go about expanding his service customer base beyond Jeep owners and drive new traffic to his store?

Compounding the problem was the location of his dealership. “I’m out in the country. I’m 12, 15 miles from everywhere,” he said. “We have a lot of traffic go by us every day but we only appeal to a very, very small percentage. We were a destination for Jeep.” He needed something that would allow him to attract a much wider range of customers.

Steve Baldo, president of Steve Baldo Auto Group in western New York, had a situation slightly different than Corwin’s. Baldo lost the Chevrolet franchise at his Clarence, N.Y. store, but still has Ford and GM dealerships in Niagara Falls and North Collins, N.Y. Additionally, Baldo has a well-established and successful collision center operating at the Clarence location that he did not want to alter or rebrand.

While he wanted a solution that would help open the terminated dealership’s service doors to a broader customer base, he was concerned about keeping his brand front and center. “We’ve been in business for 20 years, therefore whoever we went with … had to be willing to let us put our sign out front as we always have,” he said.

In both cases, the dealers chose the name recognition that comes with a national brand. For Corwin, the solution was to turn his service department into a Meineke Car Care Center. The Meineke name, he said, gives his store the “look at us” component to attract new customers because people recognize the company as representing an affordable option for maintaining and servicing any make and model of vehicle. He added that while there are a number of other nationally-known aftermarket service providers in the area, “There’s not a lot of Meineke here in [the Pittsburgh area].” Corwin also had more long-term considerations in mind: when it’s time to retire, having a franchise will hopefully make his business easier to sell.

Baldo actually began researching his options before his Clarence store was terminated. “We wanted to understand the differences between our traditional auto dealership business and the aftermarket business,” he said. The primary difference he found was that “the aftermarket’s never had a captive audience, but they do a very good job at attracting new customers on a regular basis.” He added, “When you combine that with our ability to retain customers, it could be a pretty fruitful venture.”

While both dealers now have a Meineke Car Care Center, Baldo opted to also include Meineke’s co-branded business, Econo Lube N’ Tune (see sidebar, Driven Brands’ Jump Start Program). “I think Econo Lube lends a sense of convenience … It creates a lot more car traffic,” he said. “We’ve built our business on customer retention and therefore if we can have a customer that considers us for an oil change once in a while, we think we can do a pretty good job on retaining them either for their other maintenance needs … or perhaps they might trade in someday and buy one of our used cars.” And because he still has two franchise stores, he doesn’t have to lose a potential sale if the customer prefers to buy new.

He added, “It would probably take us three to four years of marketing for our immediate area to get the message that you can now bring all your makes and models to us … I think by bringing Meineke, a national brand, on board we don’t have to invent that wheel with our customers. They know Meineke services all makes and models [and] they know it’s under our umbrella.”

The changeover sparked a renewed focus on customer service for Baldo, and although it was not required, he decided to remodel his showroom as part of his efforts to ensure service customer retention. “We realized that since we’re talking with customers that may not have serviced with us before, we’re talking with a different clientele,” he said, “so what we wanted to do was change around the experience when a customer came into the store.” He moved the service customer write-up area into the showroom and converted half the showroom into a customer lounge, adding amenities like a new flat-screen TV, leather chairs, a fireplace and refreshments. The new lounge has been a huge hit. “Customers have just been overwhelmed by it,” he said, adding that he plans to use the concept in his other stores.

The new operation has put service front and center, especially with the business’s new name: Steve Baldo Car Care and Resale Center. He is making no changes to his collision center for the time being, although he has not ruled out a Maaco franchise. “It was more important for us to concentrate our efforts in Econo Lube and Meineke first,” he explained. “We’ve always had a strong collision business.”

Stamey Hardin, a former GM dealer in Thomasville, N.C., sought to rebrand and reboot his store, Thomasville Chevrolet Buick Pontiac, after receiving his wind-down letter. He briefly considered life as an independent, but felt that because of the facility he had (the building was originally constructed to house five franchises and has 12 service bays) an aftermarket franchise would be a better fit.

That is an extremely appealing aspect of the aftermarket franchise—with minor or even no changes, a dealer can put a service facility that’s likely to be underutilized after the discontinuation of warranty work to good use. By the same token, such an arrangement can mean the difference between keeping and cutting valuable employees.

Those were issues that were in the front of Hardin’s mind after he received his wind-down letter. He briefly looked into purchasing another new car franchise, and while there were several for sale in other communities, he said, “We didn’t want to leave our hometown; Thomasville’s been good to us.” The town, known for its famous Thomasville Furniture Industries, was hit hard during the recession, and the last thing Hardin wanted to do was take more jobs away from the community and leave another building in town empty. He also felt that partnering with another company and using the assets he already had would be easier than starting all over somewhere else.

He looked into a number of service-related franchises, but he knew of a former Pontiac dealer who had partnered with NAPA and “felt like this would probably be the most feasible for us from a monetary standpoint and from a customer relations standpoint.” He also believed that out of all the companies he considered, NAPA’s business model (not a franchise) was the best fit for his store. Hence, Carolina AutoCare was born from the ashes of Thomasville Chevrolet Buick Pontiac.

Informing his employees of the change was the first order of business for Hardin. “You’re trading the known for the unknown, and all of your employees have to be on board,” he said. “One of the biggest concerns I had was the loss of our qualified employees that we’ve had for an awful long time.” However, he said, NAPA has some very strong training programs, and so far, all of his employees have been very positive about the change. “It’s a cultural change. It takes a while but … the folks at NAPA have really helped us out. They’ve been on-site [and] they’re available for us when we call them.”

Part of that cultural change involved learning new software systems, a challenge which all three dealers noted. Aftermarket franchises typically have their own point-of-sale system. Of course, training is available, and in many cases required. In Hardin’s case, he and his staff had to make a complete systems switch, moving from a Reynolds & Reynolds DMS to NAPA’s system. Corwin, on the other hand, did not switch systems; he opted to use Meineke’s system on the service side while keeping Autosoft on his vehicle sales side. He said this was particularly tough where his office manager was concerned. “We had to get her on the same page as [Meineke], and that’s not easy to do with an office manager because they’re so structured,” he said. “That was probably the hardest thing to overcome.”

Another huge obstacle Corwin had to overcome was letting his customers know about the big change. Of course, for any store making this kind of switch, one of the most important issues is notifying past customers and the general public that the service department is now equipped to work on all makes and models. In Corwin’s case, he had his work cut out for him. Notices of the termination were sent out to his customers by Chrysler, leading many to mistakenly believe the store had closed its doors entirely.

“We did a lot of direct mail to our previous customers because a lot of those people thought we got put out of business,” he recalled. “We spent days on the phone.” He also did e-mail blasts and newspaper advertising, but no television or radio. Those audiences are diverse, he said, and he could not afford to advertise on the number of different channels and stations he’d have to cover. He did get an assist from the local media since they were covering the local impact of the Chrysler terminations. He has been able to retain the majority of his service customer base, although he believed it will take some time to recover from the loss of warranty work.

When getting the word out to his customers, Hardin had to shift his thinking away from the mindset of a new car dealer and address the possibility that some people might still want to take their car to a franchise dealership even for non-warranty work. “You have to let them know they’re still dealing with the same people, that you have the same technicians and the same level of service,” he said, “but in our case probably we’re going to be able to do a little bit more with less because we’re unencumbered by [new car manufacturer] franchise fees. We’re able to lower our labor rates and … now we’re able to work on other domestic cars as well as imports.”

Hardin has not abandoned car sales at his location, however. He plans to partner with a franchise dealer in a nearby town who will take over the front end of the operation and offer used vehicle sales under the name Carolina Auto Mart.

Baldo said having a nationally-branded service center will help increase traffic for the sales side of his Clarence store, explaining that the average vehicle seen in an aftermarket shop is often a year-and-a-half to two years older than what would typically be seen in a franchise dealership’s service center. “That creates some coincidental traffic that might be interested in some of our premium used cars,” he said.

Corwin has already seen several new customers on the sales side of his store as a result of his service traffic, since many people needing a lot of work on their car would simply rather trade out of it. “That’s an advantage that we have, and the other disenfranchised dealers that stay in the independent used car business have. They’re going to be able to do that.”

Still, adapting to the loss of a new car franchise is tough. “It’s hard to take a leg off a stool and balance it,” said Corwin. “It’s not easy.” However, pursuing a relationship with an aftermarket franchise can cushion the blow and help dealers move on.

“It is a bittersweet process, but as [a friend] told me,” commented Hardin, “there is life after a franchise dealership.”

Vol. 7, Issue 4