When Is the Right Time to Expand Service Capacity? -Lia Auto Group

Back for another volley rally today. It's me again filling in for Jake. Seems like I should be the picture on, on these volley rallies because I've done like the last three. I've got a friend on today, Sean o' Keefe from, from Leah Cars. How you doing Sean?

Hey, how you doing today, Scott?

Good, good. We've got a great topic today. Something I've been, we've been talking about is, is when to add capacity, when to expand. But Sean, first of all tell us about Leah, the group you guys are based out of, Albany, New York, a great group in the Northeast.

Yeah. So we have a 21 store group based out of New York, but we do, we're located in Massachusetts, Connecticut, in New York. We, we predominantly are Asian brands. Honda, Nissan, Toyota, Hyundai. We do have a couple of domestic CDGR stores and you know that's the, that's the flavor for the Liotto group And yeah, so Ben 1977 was the, the group started and we're, we've been, we're, you know, traditionally we're moving forward. We're buyers and not sellers.

This is a very buttoned up group. They're, they're very forward thinking. And why I'm on today is because when Sean and I were last talking he there, he told me in their Toyota store and they've got plans in their other stores. They're gonna add 16 bays in the Toyota store. So a big decision to, to add capacity, right Sean?

Yeah. I mean historically when we do these build outs, whether it's a Leota group or any other of the groups, they spend a good portion of the spend will go in towards the, and the front facade and stuff. But this one we're going to really concentrate on fixed operations, adding bays, adding you know, bathrooms, service manager, parts manager's office. We're going to go into some robotics as far as delivering the parts to the bays. Try to go with efficiency with some platform, you know, software that's going to really, really. We're going to try to ramp it up. Not try to, we are going to ramp this up with efficiency and how we can utilize these bays because as you know, a lot of times before the bays are built or you, you're at capacity again. So we're going to try to build this thing future and we're going to try to put some of the latest technologies in there and obviously Volley is going to be the feeder at the, at the very base of this.

We've been hearing a lot on when, when we've been doing our Site visits, myself, Jake, etc. We've heard multiple dealers looking to expand last year and not you guys, but it was much more common to say, geez, we're three weeks out or we're short attack. And, and this tide is turning and it's very obvious that you, there's a lot of service business out there to get. The longest running question ever, but how did you guys make the decision to make this many million dollar investment?

I mean to be honest with the, the ownership relied on the metrics. We, it was a math equation that we used, you know, my input in, you know, constantly prodding, you know, like we need more, we need more. But when you're, when your service technicians start to get above 125% efficient and you're starting to put out appointments 10 of the 12 months out of the year, that's problematic because now you're just losing market share or willing to, you know, concede market share. And that's not something that we're willing to do. So the math made a difference.

So how will you measure success?

I mean I, I believe we'll measure success on, you know, efficiency, proficiency, customer experience and Toyota uses a tle which I kind of love this model. Rather than asking people to fill out some surveys and give you a 10 or you know, or give me a, you know, 10, five stars or whatever they're looking at, does the customer return in six months? Does that customer return for another visit? You want to know if you're, how they feel about you that it come back. So retention is our, is our main objective and fix for League Auto. Can we retain the customers that we sell our cars to? Can we retain the customers in our primary marketing area? And we'll measure it by how are we doing with that retention and I think volley reaching out to these customers in our primary marketing area and then us being able to retain them with our facility and with our service. That's, you know, that's how I'll measure it.

How are you going to get on top of enough techs?

I mean that we have a feeder system here in this store where we probably have one of the, well, you know, I can't say for all 21 of our stores but in this particular store they have probably 10 masters that they have taken out of a local college and we sponsor, we sponsor students in the college. So a little bit of investment up front and they shadow and we do the, you know, we do that T10 where we, you know, get involved in it. And that's been Pretty successful for us in this store, in that particular store. But in other situations I feel like, you know, getting ahead of the younger generation and trying to get them in there and work with them in that express role and show them opportunities that that's the only way right now. Scott. I mean, I don't trying to, you know, hang, you know, hang, dang, dangle. The biggest carrot in the neighborhood is just not working anymore.

Yeah, I, I think really like all businesses just being busy will attract better talent because they'll make more. And, and certainly you're going to, you're going to fill up every 8am slot that you have pretty much immediately.

Yes.

How long do you think it'll take to, to sock up the rest of the capacity? Because it's very obvious you will.

So I feel like we have enough demand there now and now we just have to be able to be efficient in how we do business and obviously have the right staffing in place and you know, modify our hours of operation because even though we have more bays, I still think we have to be more conven because you know that that customer that works till 5 o' clock can't come in for a 4:30 appointment. They're not going to take time off of work to come in. They will find other options. So I think we do have to get a little bit more convenient as part of it. And you know, that's part of the math of it.

How, what, what types of things are you going to do to manage disruption during construction?

So when we talk about disruption, what do you, what are you referring to exactly?

I mean, there's going to be construction around the waiting area you mentioned. And, and yeah, you know, the customers are going to see it.

I mean, I feel like the customers are, we're halfway through, the steel's up, the roof's on. You know, we've, we've got this big barrier between the writers and the service lane right now, which is not ideal. But we had to put cameras in so that we can see when the customers come in the drive. So that's, that's, that, you know, I mean it's a workaround. It's not ideal. We'd love to see customers coming in, but it's just not going to work out that way.

What role will the BDC fill or play to fill the these bays?

I feel the BDC is going to play the role of managing the workflow. You know, the next available appointment. When we used our bdc, the one thing that everyone noticed right away is they offer the next available appointment and when the advisors are making the appointments or in house, I think it's the next available convenient appointment for them.

Yeah.

As opposed to like volley is professional. They're up, you know, they're in one unified office. They have a set of rules that they, that they understand they've been groomed that this is how we do business. And, and that's, I think that understanding is they know their job and that's to make the appointment.

You did make a comment in our prep here that this is just off topic a bit, but why did you decide to centralize your bdc?

I felt like we were not good as one offs in every store. So having two or three BDC agents in the store without a manager, having the service manager manage them, it just was not good, Scott. I mean I would go there. It's hard. We're asking the service manager to wear a lot of hats and to ask him to wear that BDC manager hat might be the, probably the one that he's, he's going to least likely to put on every day. And, and I feel like if you leave them in a room somewhere hidden off to the rear, you're going to get that type of productivity out of that. And it's, that's just from my experience, I just didn't have good luck with, with having individual. In some cases in smaller stores they have one BDC and she'd also be the rental agent and should also, if someone didn't do this, she could be, she could be anything or he could be anything. So I feel like in, in our unified bdc, they're one thing, we don't ask them to go drive a customer. We don't ask them to move a car. They, they got a headset on and that's what they do for the time that they're here. So it's just, it's, it's more professional and it's, it's understood what the job role is. The job description every day.

I, I, I think those are, are, are smart points. It's, it's hard in a single store with small coverage to have near perfect coverage on inbound, you know, call them back, miss calls, but also, you know, be a little bit proactive and you can hire a good manager. So I, you know, I see a lot of our customers doing that. Most of the dealer groups, even if they've got two stores they're centralizing so they can have one manager who is, who is making sure they're filling the top of the funnel You've got plans to add more capacity in some of the other stores, right?

Yeah, I mean, my objective is, as part of this build here in the Toyota, we have, we're going to make sure that we have enough allocation of seating for our BDC or unified BDC to cover the group. You know, as we roll out, eventually we'll either relocate half the group over into the mass Connecticut market or we may just manage it all from here. I mean, now that I'm getting used to how it works, it just doesn't matter where the store is. You know, like at first I was concerned not being over there, not being close to that mass market could be a problem. But I mean, we, we got some stores that are pretty far away, 200 miles away. And I don't know what the difference is between 20 or 200. I just don't think it matters. And if we can wrap it all up in one location, we may just do that.

Scott, what do you think the future is for dealers in general as far as the back end? Because it seems like to me that profits will be a lot more con. Consistent in the back end. You, you don't have control or inventory worries. Everyone can service at the Toyota store. Do you see a lot of dealers or do you talk with a lot of dealers that are adding bays and capacity?

I feel like they, when they characterize the dealership, they characterize fixed operations as being fixed operations. It's pretty, you can count on it. It's, it's fixed, it pays the bills. Fixed absorption means you can run that dealership with a good fixed operations, you know, business. And then whatever sales f and I and use makes is, is going to be your bonus. So variable and, and I'm not a sales guy, so when I think of variable, I think of that term meaning it varies from, you know, highs and lows, peaks and valleys. And I don't think fixed has that. You know, we're, we're based on days in the month, but a predictable measure. So I think most of the dealers that I speak to or most of the groups that I speak to fix this is where, where you're going to get your dependability, your reliability, your bills paid, your overhead is going to get taken care of. And I feel like, you know, the highs and lows of sales and they are going to have their highs and when they do, it's great. But when they don't in their inventory problems like currently Honda's, you know, they're doing good this month, but last month we were short Cars, we didn't have enough cars to sell. You know, Hyundai's got too many, Nissan's got not enough, you know, so CDGR don't have the right ones. So it, having, you know, having inventory issues is always a problem with sales. So I think service is just fixed. It's a, it's a, it's a guaranteed asset in the, in a car dealership. And I just feel that's, you know, that's, it's tried and true.

It's hard to make the investment in this age of uncertainty. But it speaks a lot to you guys that you're doing it. I, I'm certain that Toyota store is going to fill up the capacity before you know it. And you're going to probably wonder why you didn't add 32 bays.

Correct. And that's what I hear in the Toyota grouping. A lot of the stores they've opened up and they're at 47 bays and they're maxed out before, I mean, six months after construction complete, they're already starting to question them. You know, did they do enough? And you know what, when, what's enough?

Who knows anything else about, about the expansion you guys are planning that really stands out to you or, or that surprise you about putting it together or the, the whole process?

All right, so I feel like the service drive itself and how we're going to run our business, the efficiencies in the, in our business, you know, how we can start from scratch with the new buildings, you know, with the new infrastructure and really kind of take what we had in and bring it up. You know, like Instead of being 65, 70 videos to the customer, we're going to get up to 95 now. The process and service drive is going to be consistent. Every car, every time, every customer. And our drive is much bigger now as we've taken some of our desks out of there so it's wider and can handle more cars and at once in bad weather and that kind of stuff. So I feel like that is, that's the key component. Having more bass just means you can do more of something. Doesn't mean, you know, you're going to do it differently. So our goal is to, you know, up our game as far as how that customer experience is going to be.

I just think it's great. It's so, it's, it's very forward thinking. I'm going to send this video to about 50 people after it gets posted on the website because I, I hear a lot of people are like, oh, we you know, we can't fit these people and we can't get enough text. But that just sends you the other direction. So it speaks really well to you guys.

Sean? Yeah, I appreciate it.

Yeah. Well, thank you very much, Sean, for, for doing this. Sean o' Keefe from Leah Carr's guys. And, and if you're planning on, he's tough to get a hold of. He wears a gigantic amount of hats for the organization. But if you can track him down and find out how it goes, he's a fun guy to talk to. So thanks again, Sean, and have a happy New Year. We're doing this on New Year.

Happy New Year. And I appreciate your, you know, your assistance with Bali and, you know, helping us move forward with what we're doing.

It's great to work with you. Thank you.

All right, thanks.