Once regarded as a relatively insignificant statistic, service-absorption percentages remain a high priority at Victory Automotive Group.
“We pride ourselves at bringing our vehicle owners back for maintenance, service, parts replacements and the like, because that shores up our absorption numbers,” says Jeffrey Cappo, who runs Victory.
Service absorption refers to how much back-shop departments cover the overall cost of running a dealership. That can vary, but the magic percentage point is 100, meaning fixed operations cover all overhead. Anything above that is dealership nirvana.
Victory has come close, Cappo says. “The higher the absorption, the higher our profits.
“In addition, service repeaters become loyal to the product again and again,” he says. “We leverage every service promotion we can to keep them coming back.”
The group is based in Morristown, TN, where it started with a Nissan store; it now has eight Nissan outlets. Today, Victory operates 17 metro- and small-town stores in Michigan, Indiana, Tennessee, North Carolina and now California, with a recent acquisition of a Honda store in Santa Cruz.
Besides Honda and Nissan, the group represents Toyota, Chrysler, Dodge, Jeep, Chevrolet and Buick.
Victory ranks No.45 on the Ward's Megadealer 100 with total revenues of $541.7 million, new-vehicle sales of 11,294 units and used-vehicle deliveries of 16,946.
At the Victory Honda store in the Detroit suburb of Plymouth, Service Manager Kevin Martin has set aside a dedicated booth for quick lubes and oil changes and hired a “detailing expert” to do “freshening” work not ordinarily performed on cars at dealerships.
Victory dealerships also offer customers service-department price menus. They feature various packages for service and maintenance jobs, as well as complimentary offerings for customers who have a lot of work done.
“There are no catches, hidden fees or gimmicks in the service price lists sent to Victory group owners,” General Manager John Monteleone says.
Victory is unusual in that it represents no luxury brands. Cappo has stayed away from those, preferring to offer “mass-market” marques.
He is convinced the return on investment is higher for Honda, Nissan and Toyota than on their premium-brand siblings of Acura, Infiniti and Lexus.
“We'll service luxury brands, but that's as far as we'll go with them,” Cappo says. “Our dealerships have remained quite comfortable doing our own prepaid maintenance, and we maintained high grosses all through the recession.”
Victory's service, accessory and body-shop operations accounted for $52.5 million in revenues last year.
“I'm an old-fashioned kind of guy, trusting my brands, styling my ideas and believing dealerships should have body shops,” Cappo says. “My joys in life are my family and having happy customers.”