Dealers seeking faster growth are adopting a strategy that includes offering existing or prospective employees an equity stake as they expand their businesses.
“It’s becoming bigger and bigger for us,” said Mike Stollery, founder and chairman of AutoIQ Dealership Group, which has 17 stores in central and southern Ontario representing 12 brands. “That’s what I’m proudest of my whole career, helping others to become dealers ... and along the way it’s turned out to be a really good business model because we have people that care in the [stores].”
Virtually every dealership at AutoIQ “has, or is in the works of having, a managing partner,” said Stollery. “It’s our model.”
Farid Ahmad, founder and CEO of Dealer Solutions Mergers and Acquisitions (DSMA), said the managing-partner strategy has the added benefit of attracting and retaining talent at the senior executive level.
“There is a real lack of talented and knowledgeable GM (general manager) operators,” said Ahmad, “To secure the right operators, dealers are now more than ever offering to sell shares or even at times gift shares to attract and retain the best operators when an opportunity to buy another dealership comes their way.”
Stollery, who first became a dealer in 1988 with a Ford store in St. Thomas, 200 kilometres southwest of Toronto, said his approach is a variation of what was once a common practice among automakers offering dealer-development programs for individuals seeking to buy a store.
“Those programs went away about 25 years ago,” Stollery. “So, if people wanted to become a dealer, they had to get support and you just can’t go to the bank now and get money for your first dealership. That’s where we thought it would become cool to help people become owners.”
His group will provide training to employees with the willingness and aptitude to become managing partners, said Stollery.
“The [automakers] really embraced our concept during all stages of our growth. Like the communities and team members, they really liked the idea of having an owner in the building every day.”
He first implemented the idea about 20 years ago, typically offering an equity stake ranging from five to 20 per cent. Managing partners could come from within an existing dealership, from a store being purchased or outside of the company, said Stollery.
“Offering equity to trusted potential partners was attractive to some of the strongest dealer candidates available,” he said. “Our dealer partners quickly became proficient, which allowed us to focus our attention on more projects. The managing partners also enjoy a greater level of autonomy.”
David McQuilkin, president of Gallinger Ford Lincoln in Milton, recruited a former colleague as managing partner when he purchased the store in November 2019.
John Bettio, also manager of fixed ops at Gallinger, worked with McQuilkin years earlier when the dealer principal co-owned a Ford dealership in Mississauga.
A 30-year industry veteran, Bettio said he had long aspired to be a managing partner.
“You treat the dealership like it’s yours anyway, so to have that opportunity is pretty awesome,” he said.
McQuilkin said an equity partner helps bolster the bottom line.
“They are a little more motivated, a little more engaged, than an employee or a general manager that’s there for hire,” he said.
The strategy is espoused by Calgary-based Foundation Automotive Corp., which has purchased 21 dealerships since 2018, and has plans to double the number of rooftops by 2022, said CEO Kevin Kutschinski.
Foundation provides general managers interested in becoming managing partners a stake in the stores, although he did not reveal the percentage of ownership.
“They are true partners,” he said. “We let them buy into the land and building as well.”