May 2009, Auto Dealer Today - WebXclusive
For the three Dagenais brothers, one of the biggest challenges they faced while negotiating to buy out the local Ford store in Escanaba, Mich., involved keeping their pledge of strict confidentiality. In a Midwestern town like Escanaba, that commitment required considerable skill in the art of deception, something normally not done at the family-run operation.
As the negotiations hit a high point earlier this year, business papers were often exchanged surreptitiously on the street. A direct telephone line was installed that bypassed their switchboard to connect Matt Dagenais with his contacts at Ford Motor Co. and the Northern Motor Company, another local, family-owned outfit that was fated to become the seventh dealership in the family’s burgeoning Riverside Auto Group.
“Sometimes we’d meet at the corporate office late at night,” recalled Matt, who runs the business with brothers Paul and Tim. “We toured the dealership around midnight one night. We had to be very cautious about who saw us. We felt that if people knew the store was selling, the potential was really great that some of the employees at the Ford dealership would leave. It’s a small community. If the wrong vehicles were seen in our parking area, that would have started a rumor. In a small town, that could be very damaging for everyone involved, including employees.”On the Dagenais’ side, the buyout talks were limited to a tight circle of family members and just three top company staffers, all of whom were sworn to secrecy. But the tightly-knit family kept its silence. In the end, there were no leaks, not even a hint of indiscretion. On Tuesday, May 13, 2008, the negotiators were ready to announce to their surprised staffs that a change of ownership was in the works. And at about 3 p.m. on the 15th, just two days later, a takeover team fanned through the Ford dealership.
Over the next 11 hours, they ran through a prepared list of changes that would completely revamp the technology used to operate the dealership. By 2 a.m. on the morning of the 16th, the dealership’s central nervous system – a dealership management system that had been in place for years – was yanked out and a new system from the lesser-known Arkona was installed in its place. By the time the company officially switched hands and opened as a Dagenais business hours later on Friday morning, a new sales manager was in place and ‘shadow’ employees were on hand to begin training each department in the Dagenais way of doing business.
The brothers were tired, but happy to see their game plan executed without a hitch.
“We decided to let the staff know on Tuesday before the takeover on Friday,” says Tim Dagenais, the brother who oversees Riverside’s human resources and sales operations. “We gave them a few days to know that they would have new owners on Friday. We met Thursday morning and had a nice employee meeting. We let them know we were in it for the long haul, and we wanted to work with each one of them to make them successful.”
“What we found was that they had generally good employees who wanted to do the right thing. It went really well. There was no turnover. We evaluated personnel, put in a pay plan, reevaluated used car values, and started selling cars,” said Paul.
“We had terminals for all the technicians,” says Matt, who runs the operations side of the business. “We had new phones in place. The new lender set-ups were in place. We had to set up voice mail. We started teaching service advisers how to use the new system. Only one person, a new sales manager, was brought in. And we think that’s the unique part of it. No one has done a conversion the night before a buy/sell.”
The Family Business
About four years ago, the Dagenais family made a key decision that would make an overnight transition possible. The brothers decided to replace the dealership management system they had in place for all their locations to a system offered by Arkona. Arkona, now a subsidiary of DealerTrack, has an open platform that covers all the functions of the store. It was a decision that even caught some of their colleagues in 20 groups, who had never heard of Arkona at the time, by surprise. But the brothers never regretted the change.
They decided that when the time arrived to plug the Ford store’s operations into the family business, they would instantly hustle in Arkona’s DMS. About two weeks before the takeover, Arkona helped with a preliminary data conversion to prepare for the big night.
By swiftly installing a match for their existing technology, Riverside could immediately count on some significant advantages of scale. Finance operations like payables and receivables could be run out of the same back office. Those costs could now be spread over seven dealerships rather than six. And it was all done without any prolonged agonizing that always seems to plague tech conversions.
“We wanted to run on our DMS,” explained Matt. “So we started the ball rolling with Arkona to make sure things were operational on the day we walked in. Everything possible was set up in advance. We wanted to hit the ground running. So from that point forward, we decided that that’s what we were going to do, and there was no other option.”
Matt offered the previous DMS provider a lump sum settlement. “We couldn’t negotiate ahead of time,” said Matt. “We knew we were going to put in Arkona right away. I find the system to be very user-friendly. It is extremely efficient.”
Their offer was turned down. Now they pay the lease fee every month, even though they don’t use the system. Still, the brothers wouldn’t have it any other way. Even with the added cost of a system they don’t use, Matt feels the family is still saving money.
“We feel that the learning curve for people with Arkona is much shorter,” said Matt. “The control is way better. There’s ease of use, ease of training. One of the biggest selling points is that you have complete drill-down capability. You never go backward to get information. In the past, you had to go backward. Like for a repair order. You could check the history, find a summary, find the repair and then maybe get detail. With Arkona, you drill forward. If I want to see a repair order, see a timeline, there’s never a situation where I have to reenter data to get information.”
It also helps a lot with training new employees. “Our stores operate in a cookie-cutter type environment,” says Matt. “We want it as similar as we can get it. That way, a new employee – wherever he is – hits the ground running. Any one of our employees can do their job at any of our dealerships.”
The Future of Auto Retail
The brothers’ father, Robert Dagenais, started the family car business when he got involved in the local Chrysler franchise more than 40 years ago. His wife Jeanine joined as a partner and their sons grew up in the business. Now the brothers sell Chrysler, Dodge, Jeep, Chevrolet, GMC, Cadillac, Honda, Nissan, Toyota, Polaris all-terrain vehicles and Ford in a market area that spans a 100-mile circle centering on the town of 15,000.
Sadly, Robert Dagenais passed away recently. Even up to the end of his life, though, he kept a hand in the business he had personally managed for years. And he was proud to see his sons keep growing an operation they had known from childhood.
Four of the family’s dealerships lie in the town itself, which sits on the shoreline of Lake Michigan in the middle of Upper Michigan, northeast of Green Bay, Wisc. And with the Auto Mall in Marquette along with dealerships in Iron Mountain and Marinette, the family has the region well covered. But expanding the operation has also placed heightened demands on getting everybody on board able to interact on a daily, instantaneous basis.
In place of the original handful of employees, the Dagenais family now has 185 staffers on the payroll. As the business has grown, so have opportunities for staffers, which have helped keep a buzz of excitement going. But while the family kept all of the new Ford staff intact, as planned, they never intended to run the business the same way.
One of the reasons it made sense to buy a new dealership during one of the biggest downturns in the history if U.S. auto sales is that large, multi-store operations like theirs have a distinct advantage when it comes to maximizing profits. “The single-point mom-and-pop stores are going to be a thing of the past,” said Matt.
“We do things a lot differently,” agreed Tim. “We do less traditional marketing, like print and TV, and more direct marketing. There’s a lot more direct mail. And we use the customer relationship management (CRM) tool, maintaining relationships with the customers.”
Under the new management, any contact from the general public is considered a golden opportunity to put their best foot forward. An automated answering system, for example, was eliminated at the Ford store so more employees could talk directly with customers. Said Paul: “We believe in the personal touch.”
With seven dealerships, the Dagenais have plenty of personal touch to offer. If a new buyout opportunity comes their way, they’ll take a look at it too. “We have to look at the opportunities when they arise, no matter what the timing is,” said Matt, who’s quick to note that the car business is in one of the economic valleys that periodically breaks its way. “If it’s a good fit for our organization,” he summed up, “then we pursue it.”
After the valley comes the next summit in sales. The Dagenais brothers are preparing for the climb.
Vol. 6, Issue 1