Debating an expansion is a discussion buy-here, pay-here dealers have conducted for decades. A larger lot or more locations could mean more room for inventory and possibly enhanced sales and profits. But broadening the store presence also requires more cash or access to capital, additional manpower to handle sales, collections and other chores, as well as securing that inventory that sometimes can be difficult to find at auctions or from wholesalers.
Veteran operators already know and those new to the industry quickly learn that there isn't a specific formula for establishing how many lots work best. BHPH Hall of Famer Ed Bass turned more than 500 vehicles a month all from a single lot — which over time grew to be a block long in Chicago.
On the other hand, EZWay Auto Sales has four lots in the North Carolina foothill cities of Hickory, Morganton, Lincolnton and Lenoir.
“Two stores are definitely tougher to keep up with than one. Having a single point is much easier,” said Chris Pendergrass, president and partner of Buy Here Pay Here USA, which has lots in the Tennessee towns of Cleveland and Dayton, with plans to open a third location in Chattanooga during the fourth quarter of this year.
“You go through some growing pains when you’re not able to be at each location.But obviously the ultimate goal is to be successful and profitable. With more stores you have a better chance of reaching a broader audience,” Pendergrass went on to say.
During its boot camps and national conferences, the National Alliance of Buy- Here, Pay-Here Dealers highlights the selection of a location as one of the 12 critical decisions all operators should consider. Some elements to ponder include:
—Road frontage and how much drive-by traffic passes the location
—Capacity for future growth
—How the location connects with desired customer demographics
About two years ago, the location for the second store operated by Carizma Motors in Lubbock, Texas, was just a pair of dirt lots.
But owner BJ Lewis thought the proximity to a large hardware store on a main street in the north Texas city would work perfectly.
“We knew that would be a perfect spot,” said Lewis, noting that another BHPH store isn’t as far away as are franchised dealerships.
Lewis opened his sparkling new showroom last November. It has the look and feel of a franchised operation with a centralized pod for four salespeople, a ring of offices to complete deals and a large conference room for training and other store events. A detail shop is situated behind the showroom, and the lot has the capacity to hold 100 cars. But Lewis said he can’t keep the inventory level that high because he’s turning units so quickly.
“It took a little over a year to design the building,” Lewis said. “We wanted to represent who we are and what we stand behind, and have a nice place with a nice car and tie it all together. One thing we struggle with is our building is so nice that some people think we’re not buy-here, pay-here. We put in a new LED sign to rectify that.”
Lewis opened Carizma Motors’ first location in September 2009. It’s still moving metal today, and that’s where the operation’s six bay reconditioning center is located.
Between the two locations, Lewis moves about 100 vehicles monthly.
“We haven’t looked back,” said Lewis, who plans to bring on a third store in nearby Snyder, Texas during the next 12 to 18 months.
Meanwhile in Tennessee, Pendergrass is closing in on adding the third store. He explained how the operation learned some valuable lessons since opening its first lot in 2006 and the second one about a year later — just before the recession gripped the country.
“We went through our fair share of challenges back in 2008 and 2009. Since then, we’ve paid down debt, and we’re back in growth mode and doing well,” Pendergrass said.
“I think it was a challenging time for everyone in America. There weren’t too many businesses that were thriving back in those years,” he continued. “When the banks tightened up, it put restraints on everyone. We definitely did here. But the past few years have been good and going well for the industry in general. Hopefully, we all have a lot of upside.”
When asked for recommendations to give to other BHPH dealers who are considering expansion, both Lewis and Pendergrass shared similar suggestions.
“Main thing is I wouldn’t ever open another location until you maximize whatever location you’re already at, whether it’s big or small,” Lewis said. “Try to maximize your sales no matter what. You don’t want to open another location until you’re ready for it. That’s my No. 1 thing — maximize before you grow and try to get any more.”
Pendergrass added, “Make sure that you have your one store running really well and your fit with your corporate office or home base to handle the title work, the payables and the reconditioning of cars.
“Make sure you’re ready for that next step. You can really get going too fast and make it difficult. Be sure you’ve got the staff at your home base to be able to add an additional store,” he went on to say.