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December 23, 2020 10:44 AM

Calgary's Foundation Auto eyes U.S. expansion

Perry Lefko
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    Foundation Auto

    Kevin Kutschinski: "Our philosophy is we like to buy stores that are bent not broken."

    Calgary’s Foundation Automotive, which bills itself as one of Canada’s newest and fastest growing companies, is expanding its dealership presence in the United States and is about to enter the luxury market.

    Foundation has already accumulated 21 stores in slightly more than two years, and Kevin Kutschinski, Foundation’s president and CEO, said the company has several deals “in the hopper” in the U.S. – including a three-store U.S. group it plans to close by February and a 10-store group by the end of April. He said the company is also looking at some deals with manufacturers to open stores.

    “We think conservatively we could have about 40 stores by the end of 2021 or early 2022,” Kutschinski said. “We didn’t have a specific number of [store purchases] in mind [when the company started out].

    “Our philosophy is we like to buy stores that are bent not broken, so we can go in and make some fundamental change when it comes to process, policies, personnel, pay plans and we put them in the best possible position where we can increase our F&I numbers.”

    Kutschinski, who formed the company in Calgary in 2017, bought stores in Alberta and British Columbia in the fall of 2018 and recently added a second B.C. store. The group is widening its footprint in the U.S. that began with seven purchases in 2019. While the company primarily sells domestic brands, it also sells Honda, Subaru, Kia and Mitsubishi. As part of its expansion in the new year, it will retail luxury brands such as Porsche, Audi, BMW and Hyundai, said Kutschinski.

    “We’ve got a philosophy that we won’t pay over X multiple and we’re able to buy these stores at a fair multiple,” he said. “We like the upside and we’re going to continue in a partnership with the vendor as well. To be frank, there’s opportunities down the road for open points, and we’re pretty bullish on those brands.”

    Kutschinski said he cannot disclose how much the company has paid for all of its stores because of non-disclosure agreements.

    He said he has looked at more than 1,000 stores that were up for sale.

    “I’m very disciplined when it comes to buying stores, the ones we’ve chosen we thought had that upside percentage we required,” he said.

    Foundation’s Canadian stores are in Squamish and North Vancouver in B.C. and Drayton Valley in Alberta. The majority of its U.S. stores are in Texas and Colorado, where the company is planning to expand, and plans to go into California.

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