By Alysha Webb, Editor and Publisher
Mike Darrow
President and CEO of Russ Darrow Auto Group
The Russ Darrow Group of Menomonee Falls, Wisconsin recently acquired a Mazda dealership in northwest Milwaukee. It brings the Group’s Mazda store count to three. Clearly Russ Darrow Auto Group likes the brand, but it didn’t chase after the new store. Rather, John Amato, the former owner called and asked if the Group was interested in buying it.
“We’re friends and he knows we happen to like Mazda stores,” said Mike Darrow, president and CEO of the Russ Darrow Auto Group.
Darrow spoke with Automotive Buy Sell Report about getting the deal done – hint, it wasn’t very complicated — his Group’s acquisition criteria, and what he sees as the Wisconsin dealership world’s special characteristics.
In early September the former Amato Mazda reopened as Russ Darrow Mazda Milwaukee in a new location next to Russ Darrow Nissan, also in Milwaukee. Mike Darrow wouldn’t reveal the price of the new store, or the multiple, but he did say it was fair. “I don’t know the real number,” said Darrow. I have known [John Amato] well enough over the years [that] he gave us a number and we did the deal.”
Amato approached Russ Darrow Group about buying the store because of that personal friendship, but also because the Group already owns two Mazda stores in the area so the automakers would almost certainly automatically approve the sale, said Darrow.
The deal included only the franchise and the new car inventory, said Darrow, not the real estate.
The dealership has been moved to a location in the same primary marketing area. There is a dealership building on the new site; it will be renovated to reflect the latest Mazda dealership image program, known as a Mazda Evolution retail facility. Darrow said he didn’t know how much the renovation would cost but “if you buy a new franchise you want to make the commitment to the brand to be successful and having the brand image is important.”
The nature of the transaction – the opportunity arose and the Russ Darrow Group took advantage of it – reflects the Group’s overall approach to expansion, an approach which Mike Darrow described as “if the right opportunity comes along, we will certainly look at anything.”
There is a lot implicit in that comment. What makes an opportunity “right” for the Russ Darrow Group? Location for one. The Group is based in Wisconsin and isn’t eager to expand to other states, said Darrow. The Darrow family has been selling cars there for more than 50 years, “a second generation company but a five generation family” in the business, said Mike Darrow.
The Group has name recognition and knows the advertising market quirks such as which radio stations that are statewide so it can realize economies of scale. It also knows the people in Wisconsin, which includes the Russ Darrow Group staff. The new store will be staffed with transfers from other Darrow stores. The sales manager, parts manager, service manager, and financial manager will all be current Group employees.
“As much as possible we like to promote from within,” said Mike Darrow. Those people are “darrowized,” he said, meaning they are familiar with how the Group operates .
The Russ Darrow Group has 8 brands, including domestics and imports. It does not have any luxury brands. “We don’t have a mantra that says we have to have everything” said Darrow.
Consistent Wisconsin
The buy sell market in Wisconsin isn’t especially active, according to Mike Darrow. He figures that is because dealership ownership is concentrated in the hands of relatively few groups, many of which have been owned by the same family for many years. Few are eager to sell stores, he said.
“Business is good right now. The guys I know are all second and third generation (dealership) guys. The have withstood the recession and are now reaping the rewards so why sell?” said Darrow.
That doesn’t make a store more valuable when it does change hands, however, said Darrow. He attributes that to the conservative nature of Wisconsin dealers. “We like to think Wisconsin is more consistent than the East Coast or West Coast or the Sun Belt,” said Darrow. “We don’t see the high highs or the low lows. Dealers aren’t going to over pay for franchises.”
Darrow thinks that consistency makes dealerships in the state more desirable to outside buyers. The customer base – with good credit and a good work ethic – as well as the good infrastructure are also a plus for Wisconsin, he said. Buyers from outside the state might be willing to pay more for a dealership because of that – if they could find one to buy, that is.
Speaking with Darrow I got the feeling that Wisconsin dealership owners are a pretty tight bunch.
One Comment
russ darrow group comparison in brown deer wi
If your lease expense really was $18,000, you’re looking at something like $1.10 per mile. That strikes me as rather steep. Are you planning to lease again?