Dealer groups continue to grow. What does this mean for you?
The trend towards large dealer groups is spreading from coast to coast. Beyond the synergies and the economies of scales, what’s behind this? And is there such a thing as too big?
Dealer demographics is one simple factor fueling the growth of large groups as older dealers seek to sell their successful businesses. The aging of the Canadian population and the vehicle preferences of prosperous baby boomers are other elements. Factor in Kia and Hyundai as vibrant, vital brands, add major improvements in DMS software and communications technologies and you have the ingredients that have nurtured this phenomenon.
Building a dealer group takes a combination of strategy, opportu- nity and talent. Canadian auto dealer talked with owners of large dealer groups about how and why they do it.
Need good people for growth
The O’Regan Group is a third generation company that dates to 1915 when S.E. O’Regan established a Ford dealership in Parrsboro, N.S.
Grandson Sean O’Regan is now President and CEO. “To some extent, growth is planned,” said O’Regan.“But our ears are always open for any opportunity. A big consideration is having the people to run the new oper- ation. You don’t want to weaken one dealership by taking someone out of it to run the new facility. We’re always watching as our people develop and when they can take on more, it’s time to move them.”
The O’Regans recognized the rising demand for luxury vehicles and acquired a Mercedes-Benz dealership. They could see the Korean automakers coming on strong so they acquired a Hyundai and a Kia point. They saw opportunities on the used car side and now have two independent used car centres as part of their 14 dealership group.
Diversify your portfolio
Groupe Park Avenue developed from a similar philosophy. Its history goes back 50 years with Norman Hébert Sr.’s hugely successful GM fran- chise in north Montreal. But things changed in 1981 when son Norman Hébert Jr. realized his own friends weren’t buying GM products. He saw the need to expand into import brands and knew there was enough talent on staff to manage new dealerships.
“The Japanese and European factories were ecstatic to have my father become a dealer for them,” says Hébert. “And we were lucky, because just then they were opening up new sales points.” It was the younger Hébert’s task to find the right market, and he chose Brossard on Mon- treal’s then underdeveloped South Shore. Within 18 months they opened three new dealerships, Nissan, Honda and Toyota, in their own new auto mall.
Growth continued. “We saw where the demographics were going and we wanted to be in the luxury business, so in 1988 we added BMW and VW/Audi. Our concept for the auto mall was five dealerships, but we have eighteen franchises there now with nearly 500 employees.”
Family dynamics play key role Family demographics have their place in this story as well. When I asked Will Wheaton what the strategy was for building The Wheaton Group he laughed and said, “Start with a large family.” Wheaton has seven siblings, most of whom are in the business. With 34 grandchildren, an entire third generation is waiting in the wings.
Wheaton mentioned that their acquisitions have often been a result of succession planning. Retiring dealers would get in touch, and Wheaton said they’ve built their 20 dealership group by only buying profitable dealerships.
The big get bigger
The largest dealer group in the west is Edmonton-based Go Auto led by Mike Priestner and his son Jared. It too has a family component. At one point Mike and his brother Pat had 10 dealer- ships between them. They went their separate ways and in time Pat Priestner established Auto Canada. Mike developed his share of the original group into 14 stores and with the recent addi- tion of the Ericksen group, he’s at 23 and counting.
Demographics play a role here as well, as Mike Priestner also saw the need to diversify beyond his Ford and Chrysler businesses into import brands, to “round out the portfolio,” as Jared put it.
The Phaeton Group is another story. With seven dealerships in London and the GTA, it is entirely owned by Emain Kadrie who lives mainly in Dubai. While Kadrie is the chief strategist, Mark Thimmig is the hands-on President. Thimmig has all the cre- dentials for the job, with his background in GM dealer development plus three years building Auto Nation.
Kadrie and Thimmig have ambitions to double the size of the group within five years. Currently, Thim- mig is concentrating on “building a foundation of integrity and trust with customers and with employ- ees which we can translate to multiple locations. “ They expect to stay in southern Ontario and want to acquire quality dealerships. “Ontario’s a big place,”said Thimmig. “We can be very effective here.”
More than one approach to success
Naturally, business models vary from group to group. The Wheaton Group, spread widely over three
provinces, is loosely organized. There are multiple part- nerships in all the stores with a family member in each.
Groupe Park Avenue is 100 percent owned by Norman Hébert, as the Phaeton Group is by Emain Kadrie. Both have General Managers in every dealer- ship, people who are expected to have an ownership
mentality. Hébert’s general managers are “empowered to act like owners. They are completely autonomous.” His business model is clear: multifranchise in one loca- tion to provide one stop shopping.
We are family
The O’Regans take pride in their family values, and they’ve been honoured with several awards includ- ing in 2008 Family Enterprise of the Year. We asked how, with 600 employees, they still retain those family values. Sean O’Regan explained that he and his brother Patrick try to be very visible. “We’re on the job every day. And we meet off- site with our managers three times a year. We open the books so they all can see what’s going on.”
Family is the common thread within the Wheaton Group as well. “We’re a very close family,” said Will Wheaton. “We talk every day and we travel together a lot.”
Mark Thimmig 
puts a high value on consistency. His execu- tive committee meets regularly to craft policy, and they look for the consistent application of those policies across their deal- erships. “But every dealership must retain its distinctive per- sonality,” said Thimmig. “The common processes deal with how you hire, not who you hire.”
These groups will certainly continue to expand, but at a steady pace. Like the Phaeton Group, Go-Auto wants to acquire two dealerships a year over the next five years. For now, acquisitions are not a top priority for the O’Regan Group. “Our motivation is to be the best, not the biggest,” said Sean O’Regan. “For now we’re growing what we have.” Norman Hébert is adding the Rolls Royce franchise in central Montreal and has plans for a dedicated used car centre. He’s the only one who cautioned: “There are limits to growth. One is our capacity to manage a large enterprise, a second is our human capital and third is financial capital.”
The same trend exists south of the border too. In an article in April, the Los Angeles Times quoted industry analysts who say the acquisition business is heating up. “Some big auto dealerships are even spending millions of dollars snapping up independent dealers and smaller chains — a sign of renewed confidence in the industry,” according to the article.
