#54 - Dan Reel - Opening A Second Location

Hello and welcome to this episode of the Independent Dealer podcast. Today we have a previous guest coming back to join us and talk about his second location. Luke. Who do we got?

We got my buddy and our buddy Dan Real. We all know him, he's up in Ohio. He helped co found the Independent Facebook dealer page. So he's opening up a second store and we want to hear all about it.

Yep, here we go. Welcome to the Independent Dealer podcast, the podcast for auto dealers to learn and grow together. Here are your hosts, Luke Godwin and Jeff Watson. Dan, thank you for joining us again. So excited to talk to you a little bit about some big happenings that are going on in your life right now. You are in the process of opening a second location, correct Daniel?

Correct. And thanks for having me guys.

Thanks for being with us, Dan.

Yes, for those of you that don't know, well, you probably do know Dan Real. He was on episode, I think it was 15, just a great owner operator and I really want you to kind of help us go through the decision process and some of the logistics behind this second location because I think so many of us dealership, you know, we kind of, we always eyeball that and I know we've had Eric Freeman on before talking about adding a second location and things like that, but Dan is in the process right now. So Dan, tell us a little bit about, you know, what's your current location doing and this second location and then we'll dive into some of the specifics.

Sure. So our current location, we're in a really small town. I mean we probably have 1500 people or so. I don't know the exact number, but it's a really low number of people in the town and we're, you know, five, five to ten miles away from the next town with 1500 people. It's just extremely desolate area. But we do very, we do very well considering those facts. I mean we're a retail only dealership at this point and we're selling on average in the low 30s is a very safe number. That new location, it's very close to my house. It's in a city called Chardon and within five miles of Chardon, our population over there is going to be over 100,000 people. And it's a much, there's a lot better credit, there's a lot more money. It's a big opportunity for me. So the reason I looked at that opportunity and is because of those reasons. But I'm going to, I probably over calculate more than most people. Most entrepreneurs are Kind of their slingshot guys, they just, they run with it, you know. And I've looked at this opportunity of having a second store for 10 years and it's never been the right time, it's never been the right facility, never. All the, it's got to, it's got to equal, everything's got to work out for me. I like risk, but I don't love it. So I just, this opportunity for me, I like to run a lean, a lean business with my expenses and we do very well with that here at our first location. And the second location is going to, going to mimic that without being lean. I was able to buy property that has revenue generating tenants on it already as well. So it's a larger parcel, four acres. So it's, it's going to be pretty lean operation too. It'll be retail sales, it'll be larger than my current location by double in inventory. So it's going to, there's going to be, there's going to be some, some growing pains there. But I truly look forward to it. I've told myself for like the last 10 years as I've grown as a dealer and went from kind of being a boy to it to a young man to now being a 41 year old man with gray hair. I've always said, you know, Orwell, as much as I love it where our current location is, I always felt held back, like I needed more. Like I love the rat race of life. I love going out and buying cars. I love dealing with people and I can't, I can't sit idle. So I think this opportunity is going to keep me, keep me busy and it's going to really test my potential. You know, we're all going to take, Go ahead, go ahead.

I'm sure that Nicole loves hearing that, that you're going to be, you know, extra, extra busy now.

You know what? And she's been so super supportive. And here's that, here's another thing that I had to sit back and I did. I had to look at what I do on an extracurricular basis. What I'm on boards or I was on a bunch of boards, both with the automotive association, auto dealers association and then with nonprofits and you know, different, various social clubs like Rotary, Aurora, Tan, you name it. You know, Dan, I was part of all that stuff. So last year I, last year I told myself pick, pick one or pick to put the rest, put the rest aside because if I can't be a hundred percent all in with those, it's not fair to them and it's not fair to me. So I stepped away from a lot of stuff which has freed up a lot of time for family, for events and obviously for business and to let me focus things as independent dealers were very community based people, you know, we're always sticking our necks out for donation, but we also, we're on boards and we do everything else. So I just had to tell myself, hey, step away from that stuff. So she's been pretty good about it and it's, it's going well.

That's super smart, Dan, because you know, we have a hard time saying no a lot of times and we want to do right by the community. That that's done us well. And you know, you do kind of over commit yourself at times and that's, that's a great piece of advice that you gave to maybe, you know, focus in on two things that are really important to you and do those 100% and that'll leave time for everything else.

Yeah, that's a good point. I mean Dan, had you not freed yourself of those obligations, you may not have come across this opportunity. Was this land, you said you're buying this piece. So it is a land play as well as a second location. You're going to be building some value and some equity and some physical real estate. Was this, was this something you had been searching for something? It's closer to your home? Well, it's about what, 30 minutes from your current location.

It's 38 minutes from store to store. I actually, and it's four minutes from my house. Okay. So I've been looking over, I've been looking over the last five years at different properties and none of them seem to, to add up. And this property, it just, it popped up on the market and I got really, really lucky. It's four, eight, it's four acres. It has a big building in the front and it has a service 5 bay service garage in the back which, that has a tenant on a lease. A great service garage with a great reputation. So he, he's paying, he's paying a lease payment which helps out with the overall expense of the property. But it's a, it's when I seen this real estate sign pop up, it's the second most trafficked intersect. I don't know if that's word traffic or traffic. It's. I like it.

That's awesome.

Word. It's the busy. It's the second busiest intersection in the county. And so my current, my current dealership gets 2,300 cars per day. This one gets 18,000 cars per day. And I was like, you know what? I'm gonna buy it. So I. I bought it. Now, the real estate in that. This particular area where my, where my new business will be, it's one of the. I hate the word wealthy, but it is one of the wealthier, higher tax areas in the state of Ohio. So my. The average. The average income of my current operation, household income is just just under 70,000, whereas the new place, the average household income is shy of. Just shy of 200,000. So you're talking a huge, huge difference. And now that I've kind of matured into a different side of business with the retail and with the finance, with the banks we have and all the different opportunities, well, I'm gonna. I'm gonna be right where I need to be, I think. I mean, it's a risk. Don't get me wrong, it's a risk, but I'm really excited about the risk.

Did you have any hesitation? I mean, everyone's trying to time the market just right. Do you feel like that was a hesitation for you, like you're overpaying for the property or you didn't want to do something where everything's so hyped up right now?

No, actually, that's one area that I did not really put a lot of thought into. This property. It went on the market, and I immediately made my offer, and I got really, really lucky on this particular piece of property because. Because the gentleman that was selling it was in a land contract with the owner, and he was, he was. He was in default. Right? So he was. He had to, He. He had to pay. He had to pay the whole thing off, like next. The month after I made my offer, and he, He. He had bought the property for $200,000 more than I bought it for 10 years ago. Right. Oh, wow. When. When I. When I went in with. I. When I went in with my offer, you know, he said no, but I mean, eventually he came back and said yes. So honestly, if my dealership doesn't do well, I am. I am very confident in the fact that that real estate is. Is worth. I already know it's worth more than I paid for. I know that today. And then with the. With the vast improvements that I've already thrown into and continue to put into it, the real estate itself is going to be worth substantially more than I paid for it. I mean, we're. That new location is. That new location is in a highly built area where they're just Continuing to build. You know, you got Home Depot and Walmart and a bunch of other big chain box stores that are three quarters of a mile away. You have tons of factories all over the place. You got just thousands and thousands of $300,000 homes everywhere. It's not a bad area. I'm not gonna lose money on the real estate, that's for sure.

So let's back up, Dan, to your decision to. So I know you bought a second store and you've gotten your current store, you think to. I guess I got two questions here. Do you have your current store to the potential that you think it should be? I guess is the first question. And the second question is, is that the reason you branched out or was the reason you branched out was, I guess the real estate play or the.

Want to do that? Okay, great, great question. So my current location in Orwell, we've been here for 21 years and I do feel that I have maximized it. Is it running 100% efficient? No. But I don't think I've ever met a dealer that's 100% efficient and just streamlined. It just doesn't happen. But we are maximized. Like when I look at my last spot, the five year trend of where we, where we were with our sales and we did continue to grow in gross sales, but that's because we continue to grow our value of the ACV of the car. Right. So, but when we look at, when we look at our profit, the profitability, we've, we've trimmed it up, we've maintained a lean position and had more net profit, but we have maximized this, this area as I think as best you can possibly get in a town of 1500-2000 people. We really truly have. And the more that we're doing retail, the more we're taking those people out of the market too. Right. So I mean as I go down the road, I see, I see my stickers everywhere. I'm like, man, they're out of the market for 48 months. They're out of the market for 60 months. I'm like, right. And when it's in a small town, you're. Now I'm drawing from a much larger area. And the people that we draw to our current location, they're coming from the east, they're coming from Pennsylvania, they're coming from a little bit south of us. You know, we, I did the study of how many people are coming from where I live, where the new store will be, and year to date it's like Four, four or five sales. Right. So when I, when I put, when I put my signs up in that new location is as close as it seems physically, 38 minutes away. I have old guys from the area go, what are you putting up? I'm like, I'm putting up a second store for reels auto sales, a dealership I own. Where's that? Orwell? Where's Orwell? I'm like, are you kidding? So that right there made me think this is a great idea. You know what? These guys, people don't even know where Orwell's at. That's the craziest thing about it. So. But I do think we, I think we've maximized that. I think my staff that we have right now here, if I'm gone for a week or two weeks or a month, and I have been for conventions or for travel or whatever, these guys are running as good or better without me than with me here. So that right there is the best feeling ever and that we finally have that. So that's a plus.

Well, that's a good problem to have.

Yeah, that'd be my question. Dan, is staffing wise, how do you plan on transitioning to the new store? Are you going to be overseeing it? Are you going to be moving a manager? I assume it's close to your house, so it'll probably be yours. And then your old store will go to a manager or how have you.

Yeah, so exactly.

Sales team and things like that.

We have started making some moves there. Our current location, we have people in place here already that will just step up roles. We're going to add another, another one or two employees to this location because we need them regardless. And then the second location, Nicole, my wife, who, thank God she's in the business, she does so much stuff for us. She's going to be there every single day. Myself, I'll be obviously out buying cars, but I'll be managing that store. But I do have a couple people that we've already recruited to bring on very quality people and we're excited to get going. That location is going to be a little different than our current store where there. We don't own the repair facility. Right. So this, this one here, if you want a repair facility in the car business, you know the headaches that go with it, that side's gonna. That side is gonna be retail sales only, you know, so it'll be. It'll be eight employees at that new place total.

So if you're. Is there a plan in the future for you to Take over the, the repair facility there or to use it as recon or are you kind of comfortable with the person leasing it and doing it that way?

You know, at this point, it's in its infancy. I'm, I'm very comfortable with the guy that's running this shop over there. Who knows, he might ever, he might listen to the podcast one day. So I don't want to say anything bad, but I did tell him straight up that I, you know, he's, he's, he's familiar. After finding out who bought it, he did the research on us and he's like, you want my, you want this garage, don't you? I go, listen, I go, I'm happy with you here. I go, if we could have a good working relationship, awesome. I go, but if it ends up being my service garage, I'm not mad either. I go, let's just hoping everything works out so ultimately it's an open door there.

So are you going to be reconning at your old place for the new lot or is it correct?

Correct.

Your old location will be able to recon and supply enough vehicles for both the old place and the new place. So you're doing 30 at the old place. You're going to do another 50 or 60 at the new place?

Yes, and we're going to be able to, we'll be able to recon. This year I was, I was right about to begin building my new service center in Orwell, which we're still going to build in the spring. It's going to be a six, six bay building. Now we, we are definitely without a doubt going to have to farm some workout, but that, I'm okay with that idea too, as long as it could be managed and it's still profitable to the business. But I'm not going to farm out any big, big jobs. You know, if it's a timing job or R and R on motor training, which we hardly ever do anyway, but if it's a big job, I got guys for that. But a lot of maintenance stuff, throwing on some rotors, doing belts, exhaust, whatever, I'll farm that to the guy behind me. I'll farm it to a couple other shops. But we're going to recon everything here. So from auction house, private sale, however we acquire the inventory, it's going to get lined up here, which we've tightened up that process drastically in the last year and we're going to continue to improve on that because that's a nightmare in any car business. But everything will get reconned here and then shipped out to either location. Shared websites, same name, same tax id. Federally all the banks are coming on board. So it's going to be a, it's not going to be a new, new up and coming operation. It'll just be literally taking a cookie cutter idea in business and moving it to another address.

Your, your cars will be a little more expensive over there to kind of line with the clientele I will assume.

Absolutely. So in Orwell I want to try to go back to basics. Where and what I mean by back to basics is we started as a buyer payer, we went to cac from cac, we started working with credit, credit unions. From credit unions we started getting into the bigger players, the national banks and the big lenders. So the back to basics at Orwell, I want my ACV to be lower. I want it to be, you know, seven to $19,000 where the new location is going to be more in the teens, to the, to the mid-20s and ACBs.

What is your, what do you figure? So let's talk about the building. What all goes into when you buy a building like you bought that needs recon, how do you decide, how do you decide what it's going to look like and how much you're going to spend and how are you going to set it up? That's interesting to me.

That's a great question. When I bought the building, I knew that it was in dire need of repair. Previous ownership. Literally a month before I bought it with a daycare. It was a daycare. How, how it was a daycare? I don't know because it was disgusting. I filled up 6 roll off 40 yard roll off containers. Just gutting the inside of the building out. I, I don't want to say I have a gift, but I have this ability to see things as their finished products which most, most car guys do. When you're in the office, you see a car, you know what you could do. So with this building, I saw it and I saw the potential. You know my wife, she opened up the door, she's like, oh my God, I got to get the heck out of here. I can't even come in this place. But, and then as, as for budget, that's, that's, that's great. I mean we did sit down, we talked about hey, this is how many dollars we're going to spend on this building, which is substantial, but that budget is just to get us open, right? There's going to be additional, there's going to be additional stuff as you get open. I want to get it to a point where it fits the area. Like when you go into a higher income area, you can't just slap the doors open and call it a day. You have to be able to accommodate the people of those incomes and those credits and their expectations, you know, so it's, it's a massive, it's a massive undertaking. But we are about 45 to 50 days into owning this property and we are way ahead of schedule. Were within budget. Still, I have the luxury of taking a lot of my Amish contacts out here in the country to that area and do the work for me. So it saved me a ton of money where people would give me quotes for quotes for windows for 12 or 13,000. The Amish guys would do all that same exact work with the same quality window and do it for five grand. You know, it's like I've been able to, I've been able to cut so many corners and dollars off our budget just using resources from the lower income area. You could, if that makes sense.

Yeah, no, it does. That's amazing, Dan. So the next question that I've got in my brain is, all right, so you, you got the new location and let's say you're gonna have to have 50 cars for that location, plus you still need cars in Orwell. How are you approaching your buy in right now? That, that makes it so that when it's time to open that day that you have the cars you need.

So what I'm doing right now actually is kind of preparing myself for that. We plan on having a grand opening in April, but we're probably going to open to the public hopefully in January. What I've started doing is just boosting up my inventory a little abnormally higher than I would just at a single location. So when I'm going out buying cars now, instead of buying say 10 this week, I'm going to try to buy 20, 20, 25 this week. And I'm just building up my inventory now to be able to transfer 20, 30 when the doors open and then just supply another 15 to 20 on top of that, you know, so I've started that process now, now maintaining the 80 car inventory that I'm going to need or 90 car inventory between two stores at a minimum. That's going to take a lot of work and a lot of preparation, which I think that might. That will single handedly be my biggest obstacle, I think in this business. Oh sure, there's inventory, there's inventory out there everywhere. But you can't overpay for it. So that's. That's one thing that I need to continue to grow. We could all go out and buy 100 cars today, but you're gonna overpay for them. So we just gotta. I gotta figure out ways to get the inventory efficiently for both stores.

Are you gonna still be the only.

Buyer for that many cars? I want to say yes. I love. I love it. That's my favorite part about the business is buying cars. There's nothing. And you guys probably can agree with. Agree with me. I love buying cars, man. I want to say yes, but will I have to hire or buyer, broker or something? There's a very good chance. I mean, as you grow, you're gonna have to delegate something and not micromanage every position. But that's the most important position in our business. If I. If I have to be the buyer, I'll be the buyer. If I got. If I got people that could sell better than me, they could finance better than me and service better than me, then I don't need to do those jobs. I just gotta pay them to do those jobs. So, like my sip, I got a sales guy at my. My first location. He'll outsell me all day long. You know, when it comes to finances, there's guys that are better than me at finance. So I don't have to do everybody's job. I just got to do one job really damn good. And hopefully that's fine.

Yeah, that's just. That's a lot of work.

It is. But I thought, I'm gonna call.

I'm gonna call my friends.

I'm gonna call my friends in the Carolinas and tell them. Ship me up a truckload and mail.

Them a check straight from Florida.

Yeah, yeah, I'll handle it for you, buddy.

That's right. I don't think I need to get anything else there to go to Orlando.

Oh, God. He would rather be there every week.

Truck them all up there. Well, Dan, we really, really appreciate your time. This is going to be fun. We're going to have to check in with you in a couple months, see how things are going, how the grand opening is and how the traffic is looking for you. I think this is going to be really cool if we can, you know, if you allow us to kind of peek in every so often and track your success. I think it helps any of us dealers that are looking at it or maybe thinking about it, you know, helps us see those kind of hurdles or things that we need to be sure that we've calculated and that we're being aware of, you know?

Absolutely. I look forward to that. Truly look forward to you guys checking in. And honestly, I. As excited as I am, I'm equally as nervous. And if I wasn't nervous, I'd be done. I'd be stupid. Right. There's a lot. There's a lot on the line when you open a second store. You know, I have a. In my 20 group, three people have second locations. Two of us are opening a second location at the same time. Eddie from our 20 group and myself. Right. So see the risk. I see the risk because you have a marketing, branding, and reviews that are so good over 20 years that you're putting yourself on the line now to kind of spread yourself thin, potentially. So trust me, I'm nervous, but I'm gonna work my butt off, and I. I'm gonna hope for the best, and we'll see what happens, you know?

Well, Dan, I think. I think, you know, don't sell yourself short. You're very good operator. I believe that you. You can do it. So if anybody. If anybody can do it, it's you, buddy.

I appreciate it. You're putting a lot on my shoulders, but I appreciate that.

Awesome. Dan, thanks for your time.

Thank you, guys. Have a good day. Sam.