The Value of a Brand

Having been a Dodge dealer for 22 years I realize the value of a brand.  During that 22 years the value of my dealership varied a great deal depending on how Dodge was doing.  The fluctuation was huge and ranged from zero to several million dollars.  Some brands remain strong all the time but most will suffer through fluctuation like the Dodge brand.  Ford and GM brands have greatly fluctuated.  Even Toyota has not been immune due to recent quality problems.  Almost all dealers understand that the value can vary depending on how that brand is doing at the time.

At AutoStar we are building a national brand for used vehicles. We have a unique brand because we offer the only new or used car that offers a Lifetime Engine Guarantee as well as lifetime brake pad and wiper blade replacement.  Smart dealers, like Wendell Hardy from Sarasota, Florida who spent the last couple of days here at AutoStar headquarters, understand the value of having a nationally branded preowned vehicle.

Why Do I need a Branded Used Car?

Not so smart dealers just don’t get it!  They ask the question, “Why do I need a branded used car?”  There are many reasons why the AutoStar brand is so valuable.  With the EverStar Lifetime Engine Guarantee and Lifetime Safety Features, the perceived value of a vehicle with that protection is $1500-2500 higher than a vehicle without that protection.  To upgrade the EverStar program to a more comprehensive extended service contract is easy.  Many of our dealers are enjoying 70% or more extended service contract penetration.  The most important reason to sell the AutoStar nationally branded used car is that customers must come back to the selling dealer every three months or 3000 miles, whichever comes first, for all scheduled maintenance to maintain eligibility for the EverStar Guarantees.  This equates to huge service absorption in AutoStar dealerships.

It’s a No-Brainer

Let’s see now; AutoStar dealerships sell more cars because of the unique brand, the dealers make more gross profit per car because of the perceived value and the dealership sells more service and parts because of of the EverStar Lifetime Engine Guarantee and Safety Features.  It seems like a no-brainer to me.  I would want to be selling the AutoStar car!  Smart dealers get it, the not so smart do not…

Why Do I Need a Nationally Branded Vehicle?

As Chief Operating Officer of AutoStar National Dealer Network I am often asked by potential dealers “Why do I need a nationally branded vehicle?” My initial answer to that question, at least in my head, is that is a stupid question.  Dealers who have been terminated by GM and Chrysler already know the power of national branding because they were part of a national brand. These dealers enjoyed the collective buying power of Chrysler and GM on parts and all other infrastructure although the manufacturers did not pass on all the savings to the dealer. Why not use the leverage of a national used car brand?

The Power of Partnering With Strong Brands

There are many advantages to marketing an AutoStar vehicle.  AutoStar National Dealer Network is supported by and partnered with some of the strongest brands and companies in the automotive industry, including Shell Oil and Genuine Parts (NAPA.)  Both are listed on the Fortune 500 as two of the most profitable businesses in the world.  In addition to Shell and NAPA AutoStar has strategic alliances with several other strong companies including Driven Brands, the parent company of Meineke Auto Repair Centers and MAACO Paint and Body Repair shops. We put complete infrastructure back in to the dealership just like the dealer had with their former brand but for way less money.  Smart dealers get this right away and jump on board with AutoStar.

When a customer buys an AutoStar car, they get the backing of the strongest companies in the world. That is why our dealers are selling peace of mind to the AutoStar customer and not just a car.  The customer gets a Lifetime Engine Guarantee and lifetime safety features, including brake pad and wiper blade replacement. The EverStar car offers the customer unparalleled protection and gives AutoStar dealers a unique vehicle in the market place. No new car dealer has it and no independent used car dealer has it.

Dealers tell me that they can do everything we do at AutoStar but they can’t.  The secret sauce is the strength of our partnerships with the best companies in the business.  All of our deals with our partners were based upon us having the largest used car network in the world. So the pricing that is available to AutoStar dealers for parts, bulk oil, shop supplies, computer systems and F&I products is by far less than any pricing they can get on their own, even if the dealer has ten locations.  This alone is worth a dealer’s investment in an AutoStar dealership.  Call me for more information at 877-265-5123 and ask for Ken Zangara.

3 Times More Sales Projected for Used Cars over New Cars

I visited the National Automobile Dealers Association’s Convention in San Francisco last week.  The mood was definitely more upbeat for dealers, the manufacturers and the exhibitors. There will be an increase in new vehicles sold this year, maybe to about 12.5 million units and analysts are expecting 35 million or more used vehicles to be sold.

My good friend and fellow director of AutoStar National Dealer Network, Jerry Shroff, for over 20 years has preached to me and whoever else would listen that advertising dollars should be spent by dealers on the bigger market which is the used car market.  Even if you are a Ford, Toyota or Honda dealer and you have high market share of new cars, you are hitting less that 3% of the people that will buy when you advertise new cars in your market.  Why is that?  When you factor in all the used cars that will be sold in your market then 3% of the total vehicles sold in your market will actually be new Fords, Toyotas or Hondas.  Why not spend the advertising dollars on the almost 70% who are going to buy a used car in spite of the deal of the day from the new car manufacturer?

EverStar – The Unique Brand

AutoStar National Dealer Network is the perfect solution for the smart dealer who wants to focus on the huge used car market.  AutoStar dealers have a uniquely branded car in the AutoStar car with the Lifetime Engine Guarantee, brake pad and wiper blade replacement.  Couple that with the StarCard owner’s reward program and AutoStar dealers have vehicles that are exclusive in the marketplace. No other new car or used car dealer has that protection.  Customers really love the EverStar Lifetime Engine Guarantee, the safety components and the StarCard program.

In earlier blog posts I talked about CarMax.  They do a great job. They had 349,000 sales at 103 locations last year.  They have a simple message.  We treat you right, offer no haggle pricing and we will buy your trade no matter if you buy from us.  All car dealers know that they don’t do it on price.  Dealers can beat CarMax prices any day of the week.  CarMax pays no attention to service or parts–AutoStar does.  Why wouldn’t a customer buy a car from an AutoStar dealer with all that protection and save money versus CarMax?  The answer is that they can and do buy the AutoStar car.

Many of you dealers or managers have considered or are presently considering becoming AutoStar dealers.  I made numerous presentations to many of you at the convention.  Now is the time to make the decision to become an AutoStar dealer before your market is taken by your competitor.  Please give me a call at AutoStar headquarters at 877-265-5123 or email me at ken@autostarsuperstore.com

CarMax’s Performance in 2010

Thanks for all the positive messages about my blog last week.  It seems that many of you were quite surprised by the history of CarMax, the way that company got started in 1993 and its deliberate and slow growth.  If you would like to see and substantiate their history, use the following link: http://www.carmax.com/enus/company-info/about-us-timeline.html

Having just finished reading the CarMax 2010 annual report to stockholders, I wanted to make a few further comments on their performance in 2010.  The company does not mention in their report how many vehicles they sold in 2010, but their total sales and revenue for the year was up 7% over 2009, while the company’s net income rose a whopping 376% to a record level of $281,700,000.  The company added three stores in 2010, bringing their current number of locations to a total of 103 nationwide.  That means that the average net profit per store was $2,728,000.

AutoStar Can Beat CarMax Pricing and Also Deliver a Unique Brand

Carmax sold 349,000 cars in 2009 which was an average of 291 cars per store each month.  Dealers who really keep up with the used car market know that a dealership can beat their pricing on every deal any day of the week.  It’s just a matter of getting those  customers to shop at your dealership.  That is why dealers need a nationally recognized brand.  AutoStar is the answer.  Not only can we compete with CarMax, but we can beat their pricing and deliver a unique brand in the marketplace in that the EverStar vehicle comes with the industry’s only lifetime engine guarantee and lifetime safety components.  It is the EverStar program that drives customers back into our dealerships every three months or 3,000 miles because they must maintain that car at the AutoStar dealership to maintain program eligibility.

Give CarMax a lot of credit–I certainly do.  They realized early on that three times as many used cars are sold each year as new ones.  They also realized that the consumer’s view of the experience of buying a car compares to getting a root canal at the dentist’s office.  It was an experience the customers just didn’t like.  The CarMax message is simple: All of their vehicles are guaranteed, there is no haggle pricing and CarMax will buy your trade in even if you don’t buy from them.  We at AutoStar can do all that and more because we offer a lifetime engine guarantee and safety features.  AutoStar wants to service our customers’ cars after the sale, CarMax does not.  Just think of what a healthy service and parts business would do to their bottom line average of $2,728,000 per store!

AutoStar’s Huge Untapped Growth Opportunity

One of the closing statements in the letter to shareholders in the CarMax annual report for 2010 states “We remain confident in the long-term opportunities we provide for associates, customers and shareholders.  We continue to be fortunate to have no similar-format, multi-market competitors, and we believe this concept development advantage, together with our culture of continuous innovation and process improvement, provide us a defensible competitive advantage.  At the same time, while we are by far the largest used car retailer in the U.S., our share of the overall late-model used vehicle market is less than 3% and we are only in markets that represent about 45% of the U.S. population, reflecting our huge, untapped growth opportunity.”

I couldn’t agree more with the observation that there is a huge untapped growth opportunity in the used car market.  We at AutoStar are the competitor that CarMax does not see yet but will definitely be aware of by the end of 2011.  You, as an auto dealer have a tremendous opportunity to get in on the ground floor of AutoStar as it becomes real competition for them.  Please email me or call me, Ken Zangara, at AutoStar today at 877-265-5123.

Important Strides Forward

It’s been a busy two weeks since the start of the year here at the AutoStar National Dealer Network^®.  As with all businesses it has been a time to analyze what we accomplished last year and set goals for this year.  While we have not grown as quickly as we wanted to when we started the Network, we have made some important strides and accomplished a great deal thanks to the partnerships we have with some of the biggest companies in the automotive industry.

From the beginning our goal was to become a quality used vehicle retailer like Carmax^®, but with much more emphasis on the service, parts and body shop part of the business.  Let’s face it, at Carmax^® it’s buy the car and then goodbye.  Don’t get me wrong, they do a great job selling cars. They sold 349,000 cars in 100 locations last year.  Their message is simple: they will treat you nice and buy your trade in even if you don’t buy from them.  Guess what?  AutoStar Superstorestores^® can treat you nice and buy your trade in even if you don’t buy from us, plus we have the EverStar^® Lifetime Engine Guarantee with lifetime wiper blade and brake pad replacement.  No one else has EverStar^®, and it ensures that customers will come back to the selling dealership every three months or 3,000 miles for all service.

Becoming a Dominant National Dealer Network

When you look at the history of Carmax^®, it is clear that they started out slowly. Carmax^® is a public company which started out with one store in Richmond, VA in 1993. Those of you that have been around a while remember that it was not wildly successful at first.  The second Carmax^® store opened in 1994 and the media skeptics-including Automotive News-were predicting an early death for the brand.  It took four years for Carmax^® to equal the number of stores that signed up as AutoStar Superstores^® within the first year of operation.  Carmax^® persevered, made changes and improvements in their model and is thriving today. Of course they funded their expansion through public, rather than private capital, as they have always been a publically traded company unlike AutoStar National Dealer Network^®, which is a privately held company.

For those of us in the car business, we know that the success of Carmax^® is not due to their pricing.  Dealers can beat Carmax^® pricing any day of the week. As a dealer, I hated to be at the auction next to the Carmax^® buyers. Their hands knew of only one direction to go, and that was up!  But it’s hard to beat their marketing.  They have convinced the buying public that they are a easier and cheaper way to buy even though it is not always true. That is our golden opportunity at AutoStar National Dealer Network^®. We will become a dominant force by signing up additional dealers in 20110 and 2012.

Why didn’t more dealers sign up?  I have not been involved in the formation of a franchise in the past, but have owned several new car franchises.  Car dealers have been willing to risk signing up new franchises for new car dealerships. Remember when Hyundai^® was considered a risky or throw away franchise?  Our Chairman, George Lovato Jr., has been involved in the formation of several other franchises including Rent-Rite Car Rental Agency in the 1980′s (please see his biography on www.bhcapitalltd.com)  He tells me that every franchise starts out this way.  Even McDonald^®‘s had its share of skeptics and doubters who did not have the guts to sign up for one – even when the franchise only cost $12,500 to start.  Today it takes millions to become a franchisee.  AutoStar National Dealer Network^® has all the ingredients and the “secret sauce” to become a successful franchise too.

2010 Accomplishments

Positive things happened in 2010.  We eclipsed Carmax^® growth more than tenfold in comparing the first two years of both companies inceptions.  We signed a strategic partnership with Driven Brands^® to allow our dealers to open Meineke^® Auto Repair Centers and Maaco^® Paint and Body Shops in AutoStar Superstores, and to put AutoStar Superstores^® in the current and future Driven Brands^® Stores.  We also signed a major deal with one of the world’s largest real estate firms to put AutoStar Superstores^® and Driven BrandsV in over 100 empty dealership sites across the United States.  That means that a dealer or general manager with just $250,000 worth of working capital can open one of these empty dealerships and make the real estate play of a lifetime.

There is no doubt in my mind that AutoStar Superstores^® will grow into a powerful National Dealer Network of individually owned stores that will continue to increase in value like new car dealerships did for years.  Now is the time for you to get in on the ground floor. We have made it easier than ever to become a dealer and can provide you complete infrastructure and a turn-key operation.  Call me today at 877-265-5123 or email me at ken@autostarsuperstore.com.

Driven Brands/Jump Start Strategic Marketing Agreement

Recently we here at AutoStar National Dealer Network had the pleasure of announcing that we had reached a strategic marketing agreement with Driven Brands/Jump Start.  What that means to our dealers, driven brand dealers and potential dealers throughout the United States and Canada is that we can now combine the AutoStar Superstore brand with Meineke Car Repair Centers and Maaco Auto Paint and Body Shops.  By doing so dealers and dealership locations become a powerful front and back end solution for any dealership, especially those stores that have lost their new car franchise or maybe have a weaker new car brand that can be dueled with AutoStar.

CB Richard Ellis Strategic Marketing Agreement

This week we have more great news!  AutoStar National Dealer Network has signed a marketing agreement with CB Richard Ellis, the world’s largest commercial real estate firm, to negotiate real estate deals with dealers and general managers. The plan is to reopen over 100 empty dealership locations across North America as AutoStar Superstores with Meineke Car Centers and Maaco Body Shops where there is no conflict with existing franchises.  CBRE has great locations in many strong markets listed on behalf of General Motors, Chrysler, Key Bank and many others.  Many of these locations are located in heavily concentrated dealership business centers or car rows.

Own Your Own Dealership

It’s a perfect opportunity for dealers wanting additional dealerships or general managers looking to own their own dealership.   Working capital requirements vary from market to market but are very reasonable and affordable and AutoStar can provide the rest of the infrastructure for the store including floor plan, vehicle inventory, parts, dealer computer management systems and all the rest a dealer needs to open an AutoStar Superstore very quickly.  There are some great opportunities to secure real estate at prices that make the real estate deal worth it in itself.

For more information, contact Ken Zangara at 877-265-5123 or by email at ken@autostarsuperstore.com.  Our website is www.autostarsuperstore.com.