Switching Franchises

Before the sun came up, Jim Bickford's signs came down.

More than 30 years after his father, Charles, had purchased the Boston Dodge dealership, and less than a month after Bickford had been notified that his franchise had been terminated, Chrysler representatives made a pre-dawn visit to remove every trace of association with the manufacturer.

But on October 1, there was a new sign over Westminster Motors, bearing the logo of Thrifty Car Sales, a sign representing both radical change and a bit of familiarity.

“It's a whole new business,” says Bickford, whose family has owned the operation since 1977. “I had to put all new signs up, because Chrysler came and took all the signs. They were here at five in the morning on June 12, and they literally stripped the signs.”

The blue Thrifty sign, though, is a sign of the times. Bickford is among the first wave of former franchise dealers cut by General Motors and Chrysler — some 2,100 in all, with more possibly on the way — who have made the move to “franchises without factories,” such as Thrifty, Payless and J.D. Byrider.

The lure of these used-car franchise operations is clear. They offer many of the advantages the dealers came to expect from the manufacturer, such as name recognition, marketing assistance, help with acquiring inventory, warranties and deals on items ranging from tires to oil filters.

Compared to the high-wire act that is an independent dealership, the safety net provided by franchised used-car operations can be quite comforting.

“Is this more familiar? Yes. It's a structure,” says Lee Goldey, an executive of Tulsa, OK-based Thrifty.

“There's a web site that's structured,” he says. “There are partner relationships with AutoTrader, Cars.com, Carfax, things of that sort, to give them discounted deals that they would have had as a franchisee with GM or Chrysler. As an independent, they don't get those types of deals because they don't have the mass and volume behind them.”

It represents a new era in used-car retailing, says Ron Smith, founder of the Pre-Owned Automobile Dealers Alliance.

Most modern franchised used-car stores look as good and are run as well as well as any new-car dealership. “They look like franchised new-car facilities even though they are not.”

Smith points to David Pilcher, executive vice president of National Car Sales, a franchised used-car store in Indianapolis. “Dave is one of the smartest dealers I know.”

Thrifty's volume has increased markedly since the GM and Chrysler cutbacks because the company targeted the disenfranchised dealers almost from the moment they were let go.

Just before the cuts were announced, Goldey, acting on rumblings that something was coming, placed trade-publication ads asking dealers “What is your Plan B?”

Shortly afterwards, “The phone started ringing,” he says.'

About 15 former new-car dealers signed on by mid-November, with 100 more expressing an interest.

Among the first were Bickford and Angelo Mauro, whose grandfather started his dealership in Woodbridge, NJ, as a Chrysler store. “We were with Chrysler 59 years, seven months,” Mauro says.

He wasn't interested in reopening as an independent used-car dealer.

“You really can't get a bank to deal with you unless you've got a franchise,” he says. “As far as selling cars and lending money, if you don't have a franchise, you have to find cash customers. That's very difficult. That's why you need a franchise.”

While Thrifty got a jump in the recruiting process, its competitors are working to catch up.

Payless Car Sales director of operations George Newman says his company is talking to several former franchise dealers, including one next door to its corporate headquarters in St. Petersburg, FL.

Mike Pearce, J.D. Byrider's vice president of franchise development is helping former new-car dealers get the financing necessary to operate one of Byrider's buy-here-pay-here franchises.

“There are a lot of them who have committed to doing something,” Pearce says. “They just don't want to sign until they get financing in place, and that's a huge challenge right now. But there are a bunch ready to pull the trigger.”

For companies seeking expansion, the former franchise dealers are a good catch.

“Since the financial crunch, we've lost some dealerships that couldn't stay in business without lenders,” Payless' Newman says.

Typical used-car dealers don't own the real estate their stores sit on. “The new-car dealers own the real estate and can borrow off that,” says Newman. “And they know what they're doing. It makes sense for us to pursue these people.”

Many dealers who are now running strictly used-car operations have partnered with national chains to boost their service and parts divisions as well.

Bickford, for example, has signed on with NAPA and Goodyear/Gemini Car Care. Meineke Car Care stepped up its recruiting effort by reducing its franchise fee for the dealers ousted by the factories.

Still, even with these non-factory franchises behind them, the newly-independent dealers need help adjusting to life without the factory.

While Thrifty and the others provide plenty of training for their new franchisees, the companies can't cover every aspect of educating dealers. That is where the National Independent Auto Dealers Assn. comes in, says Goldey.

“I can't follow all the regulations and laws because there are too many of them throughout the nation,” he says. “NIADA can help with guidance and compliance. That's the part I don't have and why I want my new franchisee to work with NIADA.”

All of which is encouraging to Mauro, the new Thrifty dealer.

“Somehow, I found a way to make money with Chrysler. I'll make money doing this,” he says.

Not long ago, he says things didn't look good for him. Now? “It looks good.”