By Alysha Webb, Editor and Publisher
In September, Open Road Group of Bridgewater, N.J. acquired the former Royal Cadillac dealership of Morristown. It was the first domestic brand acquisition for Open Road, which owns some 16 dealerships in the New York-New Jersey area.
Mike Morais and Rod Ryan of Open Road Auto Group
Michael Morais, president of Open Road Group, spoke with Automotive Buy Sell Report about the acquisition, his process for integrating a new store, and his hopes for the Cadillac brand.
The Cadillac dealership was owned by Frank Sassi Jr. for more than 30 years. At 78, he decided it was time to sell. Meanwhile, Morais had reached out to many manufacturers, including General Motors Cadillac division, to let them know he was in acquisition mode.
Angela Montgomery of GM Dealer Development met with the Open Road executive team to learn more about them. She also explained GM’s criteria. They were so impressed with GM and the Cadillac division that he began calling Cadillac dealers to see if they were interested in selling, said Morais. Sassi returned his call.
Sassi was familiar with Open Road because of its other stores in the area and within two days the two sides had come to an agreement for the real estate and blue sky, said Morais. He didn’t use a broker. Various blue sky reports have put blue sky multiples for a Cadillac dealership at three to four times pre-tax earnings. In this case, however, the dealership was not profitable. “This is all about potential,” said Morais.
There were a lot of positives. The facility had just gone through a complete upgrade to the new Cadillac image. And though the Cadillac brand is still not generally grouped with the German luxury brands in consideration lists, the Cadillac brand was attractive because of the Escalade SUV, which seats seven, said Morais.
“Our BMW customers have a Cadillac in their garage as well,” he said. “The Germans don’t have a major seven passenger car. [The Cadillac dealership] really is a perfect fit.”
Open Road already has three other dealerships within a five-mile radius of the Cadillac store—BMW, Mini, and Mazda stores, all in Morristown. They share personnel, advertising, and vendors, which cuts costs, said Morais. The new dealership can benefit from those savings, as well.
He is also enthusiastic about the recent appointment of Johan de Nysschen to head GM’s Cadillac division, and the decision to move the Cadillac headquarters to New York.
Open Road is already making changes at the Caddy store. It has “bulked up” the store’s website and added a business development center. Morais brought in one of his best BDC managers from another store. “We are still building that up,” he said.
The store’s planning volume was 900 units; it was selling 400. The previous owner was doing no advertising and had no loaner cars for customers. Now it advertises and has loaner cars. “I saw all the broken processes and said, ‘these are all things I can fix in 30 days,” said Morais.
It also had no pre-owned sales. Open Road brought in pre-owned units “from day one.” That was the fastest way to boost sales, he figured. The store had been selling seven new cars a month; with the addition of the used units it did seven cars in the first week, said Morais.
He figures service can increase 30 percent and sales can grow up to 40 percent just using the processes that have worked in other Open Road stores. Open Road has a five-year horizon on its acquisitions. It aims to be 100 percent paid back by then.
Hands on approach
To make sure the transition is done correctly, Morais himself takes on the General Manager’s job for 90 days when Open Road acquires a dealership. “I am the takeover person who comes in and brings our culture,” he said.
Morais gets involved in every aspect of the store’s operations during those 90 days, even doing test drives on Saturdays. He will start to interview candidates for the general manager’s job at the Cadillac dealership in about 60 days, and will most likely bring in an existing Open Road manager, said Morais. Meanwhile, any online feedback the store gets is sent directly to Morais.
He brought in a general sales manager and added a preowned manager. He kept the service and parts staff and added four sales associates.
Morais may be even more hands-on than usual with this Cadillac store because he owns 50 percent and is the operating partner. Though Morais has had a stake in other stores this is his first equal partnership. Rob Ryan, CEO and founder of Open Road, owns the other 50 percent. “To come into a closing and take ownership has been an incredible milestone in my life. This has been great opportunity,” said Morais.
So far he is very pleased with the acquisition. GM has been very supportive and sales tripled for September of 2014, said Morais. Open Road closed on the dealership sale September 6 and sold 44 new and 31 pre-owned in the month.
