If you owned a new car dealership, how would YOU do business??

[kaisen]

There's been a lot of conversation here about experiences buying cars at car dealerships. We've talked about ethics, business and sales practices, how to get the best price, how to handle salespeople, etc. It's been interesting to me because I've been involved in the industry one way or another for about 20 years. I've been a part of shaping what this looks like.

SO......

Let's say you were given the rights to a brand-new franchise point in a large metro area to sell new XYZ brand cars and trucks. The XYZ parent company was bankrolling the whole thing but it would end up being yours. You were entrusted with making sure the company was reasonable profitable and that enough cars were sold (i.e., average for region). Otherwise hands off. Clean sheet. Do whatever you want as long as it's legal.

How would you avoid the bad perceptions of other car dealers? Or would you even care?

[Por_sha911]

Before anyone answers, lets start with an understanding of how much it costs to get a franchise, build a building, and floor plan the lot.

[kaisen]

Originally Posted by Por_sha911

Before anyone answers, lets start with an understanding of how much it costs to get a franchise, build a building, and floor plan the lot.

Tens of millions. But let's just assume that XYZ Corporation is paying for it up front, giving you the franchise for free, and carrying the floorplan. They are charging you rent based on a 15 year mortgage at 4% and charging you floorplan interest also at 4%. After successfully running the business for 15 years, it is yours 100% franchise, building, lot, and all.

[Porsche-O-Phile]

Sub it out and take a 2% management fee.

[Christien]

I would do the same thing I wanted to do with our retail lot, but my partner disagreed with. The window sticker would have my cost in the vehicle, reconditioning costs (repairs and cleaning - not applicable with brand new cars), lot pack (dealership overhead, including building, staff, maintenance, rent and advertising), sales staff commission and dealer profit. I would offer to back all these numbers up with paperwork (i.e. invoice for vehicle from manufacturer, or trade-in paperwork) and then the only thing left to negotiate is dealer profit. Dealer profit would be standardized as a percentage. I have a feeling that when people see what exactly goes into the car they're buying in terms of cost, and how little of it is actually negotiable, reasonable markups like 5% they'd be much less likely to try to hammer the dealer profit down to virtually nil. Most people understand that everyone has to make a living.

[kaisen]

Originally Posted by Porsche-O-Phile

Sub it out and take a 2% management fee.

Esentially, that is exactly what XYZ is doing.... they are getting the 1-2% industry average net ROS for the next 15 years. They are expecting YOU to steer the ship and build the business and its processes. You might not need to actually 'work' every day if things are running smoothly.

[kaisen]

Originally Posted by Christien

I would do the same thing I wanted to do with our retail lot, but my partner disagreed with. The window sticker would have my cost in the vehicle, reconditioning costs (repairs and cleaning - not applicable with brand new cars), lot pack (dealership overhead, including building, staff, maintenance, rent and advertising), sales staff commission and dealer profit. I would offer to back all these numbers up with paperwork (i.e. invoice for vehicle from manufacturer, or trade-in paperwork) and then the only thing left to negotiate is dealer profit. Dealer profit would be standardized as a percentage. I have a feeling that when people see what exactly goes into the car they're buying in terms of cost, and how little of it is actually negotiable, reasonable markups like 5% they'd be much less likely to try to hammer the dealer profit down to virtually nil. Most people understand that everyone has to make a living.

Why did he disagree?

So if you were selling a $25,000 car (that's close to the avg new car), you'd start negotations at a 5% disclosed dealer profit ($1250)?

[wdfifteen]

Ha! When I saw the title of this thread my first thought was "Call Eric and ask his advice."
I guess I'm screwed.

[pwd72s]

Hire supermodel looking sales personnel...

[kaisen]

Originally Posted by wdfifteen

Ha! When I saw the title of this thread my first thought was "Call Eric and ask his advice."
I guess I'm screwed.

I'll give my answer/advice later in the thread.... but, Patrick, you likely know most of my answers already

[scottmandue]

Originally Posted by Por_sha911

Before anyone answers, lets start with an understanding of how much it costs to get a franchise, build a building, and floor plan the lot.

As far as building, floor plan, and lot... here is So Cal there are dozens and dozens of empty lots... can drive in any direction and pass two or three.

But yeah it would still cost millions for the franchise and inventory.

But I don't think that was Eric's intent for this thread.

Let's pretend I had the money to do this.

I liked the Saturn no haggle policy, slap a number on all cars that allows a reasonable markup so I can stay in business and skip all the mind games.

[kaisen]

Originally Posted by pwd72s

Hire supermodel looking sales personnel...

I like the way you think!
How would you attract them to the job? How would you pay them?

[kaisen]

Originally Posted by scottmandue

As far as building, floor plan, and lot... here is So Cal there are dozens and dozens of empty lots... can drive in any direction and pass two or three.

But yeah it would still cost millions for the franchise and inventory.

But I don't think that was Kaisens intent for this thread.

Let's pretend I had the money to do this.

I liked the Saturn no haggle policy, slap a number on all cars that allows a reasonable markup so I can stay in business and skip all the mind games.

So would you buy one of those vacant lots or start over in a different type of location? Would you pay to be in a great high-visibility area? Or go cheap for low overhead/rent?

[scottmandue]

Christien had a much better (detailed) response than mine but the same idea (he is obvious a better businessman that I).

RE: If I picked up a lot here in So Cal... I'm not talking vacant lots... I'm talking full on dealership that has been vacated... showroom/offices/garage stalls/giant digital signs/etc already in place.

A lot of them to be had around here.

[Zeke]

I would recruit the best people I could find and set up profit sharing, medical, 401K.

Knowing that sales of new cars only gives the franchisee a nameplate, I would cater to all makes and models within reason for my service dept and bodyshop. I'd have a good manager for both as well as my parts manager that would work closely with my general manager to make sure the overall business model is being pursued successfully.

People may see the sales dept as the front line for PR so I damn sure would treat them with respect. No "take over" sales, only straight up sales. I'd gear my sale people directly to the demographics. If downtown in a city, all wear suits. In FL all wear open shirts. Anywhere in between deserves its own consideration including dressing down a little on weekends.

I would not open on Sunday in a lot of places. If I were in an auto mall and everyone else was open, that would be different. I would do as much for the community as possible including having a good shuttle service and participate in community events like sponsoring a kids ball team and taking cars to local shows.

With higher than average wages and commissions, I'd have a 3 strikes firing policy: a talk, a warning, you are gone, even on the small stuff like dress codes.

The biggest thing I think I could do would be available to the public and to the employees. I was once told a good manger has not that much to do. I would strive to be able to shake the hand of every new and used car buyer. IOW, I want to enjoy working there as much or more than the employees.

I would want to buy a car from me or have my car worked on in my place.

[Joe Bob]

Didn't Saturn dealers do the no haggle thing? Set a price, no ups no downs.....

[Zeke]

Originally Posted by Joe Bob

Didn't Saturn dealers do the no haggle thing? Set a price, no ups no downs.....

They did, but I think it broke down. We'll probably not ever know if Saturn changed much in the business. Mainly because they were "outside" of the box in too many ways.

[LeeH]

Warehouse the cars in a really ratty (ie low rent) part of town. Negotiate everything over the phone. Have a very small office for paperwork/delivery.

[kaisen]

Originally Posted by scottmandue

Christien had a much better (detailed) response than mine but the same idea (he is obvious a better businessman that I).

RE: If I picked up a lot here in So Cal... I'm not talking vacant lots... I'm talking full on dealership that has been vacated... showroom/offices/garage stalls/giant digital signs/etc already in place.

A lot of them to be had around here.

I'm sorry to interchange lingo. "Lots" are also dealerships, not just vacant lots, to me at least. Sorry.

The question is, would you continue the old-school idea of what constitutes a dealership by occupying what used to be a dealership? Or would you think outside the box a bit? Again, the laws only allow so much leeway with zoning and such, but you get the idea.

Ironically, at least in SoCal, the vacant land is worth so much (even now) that the selling price of vacant dealerships is more than a dealership could justify paying. Many will be dozed and something else will go up. Many sit on prime, high-traffic sites worth millions. And dealers aren't making millions.

The Lexus dealer in Newport Beach cost over $40 Million to build. Just the land and building.

[Macroni]

Tough question.

Competitive no haggle pricing /low pressure enviroment
Strong community presence
Strong mechanical team w reasonable prices
Service reminders

I am assuming the area demographics would support the dealership.

There are a number of very good dealerships in our area that meet this criteria.