More than a third of U.S. dealerships are owned by groups of three or more dealerships. This is the fastest growing segment in automotive retailing, true not only because of publicly held companies, but also the growth of regional chains.
Running groups of dealerships is different than running a single dealership. With that come additional problems, challenges and best of all opportunities. Today's multi-franchise dealers and CFOs have greater opportunities for improved profitability than ever before … if they put their heads together.
Executives from multi-dealership organizations are beginning to meet in various forums to discuss their unique issues. I don't think these meetings could or should displace the conventional 20 Group meetings of NADA, NCM Associates, MPG, Performance and others. Multi-franchise dealer meetings and multi-franchise CFO meetings simply add a different dimension.
The goal is for owners and CFOs to participate in a forum with their counterparts from non-competitive groups to address dealership and multi-dealership issues. It's also a chance to network with people who face similar challenges.
Some of the topics they discuss include the following.
Arbitration agreements:
A dealership group recently instituted an employee dispute resolution program. This is a three-part program for all full-time and part-time employees.
It covers:
The revised employment application includes language whereby the applicant agrees to binding arbitration in the event of employment related disputes.
A question and answer pamphlet addressing frequently asked questions for employees and applicants.
An arbitration agreement that outlines the types of disputes subject to arbitration and addresses the authority of the arbitrator.
Self-insured deductibles:
Many dealers (and especially multi-dealership groups) struggle to control escalating insurance costs and to hold department managers accountable for loss prevention. One multi-franchise CFO offers this solution.
In the course of insurance renewal, request two or more quotes based on fluctuating deductibles. For example, if you currently have a $1,000 deductible ask for quotes with deductibles of $2,500, $5,000 and $10,000.
Renew at one of the higher deductibles. Be sure to consider loss occurrences and average insurance claims during analysis.
On a monthly basis, accrue the premium difference. For example:
With a $1,000 deductible, the monthly premium is $5,000.
With a $10,000 deductible, the monthly premium is $1,250.
Accrue and charge to insurance expense the difference $3,750.
For losses less than the new deductible, simply charge the insurance accrual account.
Bring any insurance accrual balance back into income at each year end.
Any managers paid on departmental net profit will be more conscious of insurance losses. We all know, as prevention awareness increases, losses decrease. This particular dealership group determined that this method saved them over $57,000 in 1999 and over $65,000 in 2000. As with any information, this idea is only as good as what you do with it. Now that you have the information to find savings opportunities, go out and save!
Weekly conference calls:
Many multi-franchise dealers have dealerships that are spread throughout a region or even the country.
This distance makes it almost impossible for the dealer and the general managers of each dealership to meet in person as frequently as they would like. So, the dealers and general managers conduct regular conference calls.
These calls make the sharing of important information both time effective and cost effective. Each call is preceded by a written agenda that is faxed or e-mailed prior to call time. Calls are limited to a predetermined amount of time (say 45 or 60 minutes).
Each participant can submit agenda items to the call leader. Each GM gets an opportunity to be the call leader on a rotating basis. This encourages each GM to carefully consider topics of discussion and prioritize them. Resulting improvements have included:
Better communication with the dealer and among the general managers.
Weekly idea session to consider possible upcoming sales promotions.
Weekly tracking and evaluation of new and used vehicle inventories.
Increased accountability for sales, profits and personnel.
An opportunity for instant recognition of good ideas and disseminating the results of implementation.
Quick follow-up on what is working and what's not.
Please feel free to share your experiences and thoughts in these and other areas with me.
Also feel free to contact me and set a time we can visit at the NADA convention in New Orleans. The GBJ booth is number 4368.
Don Ray is the president of the George B. Jones Companies, a national accounting and consulting group for retail automobile dealers. If you would like to know more about tax issues facing dealers, contact him at 800-323-6736 and [email protected].
