Why We Sold Our Dealerships Part 1 of 2

Why We Sold Our Dealerships Part 1 of 2

Eric and I grew up in the automotive dealership industry.

I watched my father, Mike Naughton, steward Mike Naughton Ford in Denver, Colorado for more than 47 years. My grandfather was John B. Naughton Sr., Vice President of Ford Motor Company. Yeah, right up there working alongside Lee A. Iacocca.

And it didn’t end there. My uncles owned and operated dealerships across the United States.

Eric grew up watching his mother operate her leasing company in Toronto, Canada. This was quite a feat back then, a female in the industry. And she inspired him. For as long as he can remember, Eric wanted to be in the car business just like his mother. When he was old enough, he landed his first job as a car jockey at Roy Foss Motors. His career took off from there.

I guess it’s fair to say the car business is in our blood.

Always has been.

Always will be.

Eric and I met at the National Automobile Dealers Association (NADA) Dealer Academy in 2008. Eric was the General Manager of Pfaff Porsche, the largest Porsche store in Canada. I was the General Manager of Mike Naughton Ford, running the dealership alongside my father.

In 2010, I made the decision to leave everything I knew in Colorado and relocate to Toronto. I can confidently say it was a good decision, maybe one of the best of my life, because the weight of the choice and the move itself pushed us to purchase our first dealership together.

In early 2012, Farid Ahmad, President of Dealer Solutions Mergers & Acquisitions (DSMA), presented us various opportunities throughout the Greater Toronto Area, and we ultimately settled on 401 Dixie Kia in Mississauga, Ontario.

Eric and I were beyond excited.

We were young, eager, ready to take on the automotive world.

We worked six to seven days a week for the first several years. We celebrated wins and licked our wounds after tough business lessons. I was full of enthusiasm and pride. A 32-year-old female in a male-dominated industry, we purchased our own dealership, and for me, in an entirely different country.

We didn’t inherit this business.

This wasn’t nepotism.

This was us.

Eric and I owned and operated 401 Dixie Kia for more than nine years. Some years were amazing, and others were a complete grind – I try hard to supress those memories. We loved the thrill of the business. What is better than walking into the service department and seeing cars lined up in the drive thru, advisors busy helping customers, and the technicians’ radios blasting while they’re singing and fixing cars?

The buzz in the new car showroom on a Saturday afternoon when it’s full of customers, excited to pick out their new vehicles. Everyone is smiling or laughing. It makes me smile writing about it.

These are not the reasons we decided to sell 401 Dixie Kia.

In fact, this decision wasn’t instantaneous or easy. It came after several years of different events being thrown at us and not being sure we were prepared to take on the fight anymore.

Let’s start with the manufacturer.

Eric and I had a fantastic relationship with Kia and will always value them as a business partner. But if we are honest about the situation, every manufacturer has their own agenda as a business. As much as we were partners, they are still very concerned about their own financial statements. And sometimes that agenda appeared to be projected onto the dealer body. It wasn’t immediate, it was progressive, but eventually, we had to act for ourselves.

We were a single point, independent dealer who heavily relied on our partnership with Kia. Over time, we’ve seen the entire industry evolve into something completely different from what we knew the automotive business to be 10 years ago. We started to the see the franchise model under pressure, increased OEM involvement in the sales and service process, threats of an agency model, destruction of our brand identity, sunk and stranded costs in facility and equipment, as well as chatter of data sharing agreements.

We always tried to be progressive in our approach to running the business and knew sticking our heels in the mud would not be the best path for success, however the increased involvement from the OEM was not always supported by the staff or dealer body. Although the initiative may have been appreciated, the execution was not always well received. With threats of an agency model entering the industry, it appeared the writing was on the wall.

During our tenure with Kia, Eric and I worked hard to build a brand for our dealership that separated us from the rest of the pack. We marketed ourselves as, “Katie and Eric’s 401 Dixie Kia.”

We had a unique logo and a recognizable jingle used in all our radio and television advertising. Eric and I were the faces of the dealership, and we prided ourselves on being a ‘mom and pop’ dealership in the heart of the big city. When Kia updated their image, we were required to do the same, which meant what we had built over the years was no longer acceptable. While we understood the principle behind their actions, it did take away a lot of the individualization we built up over the years.

When Kia announced the new Red Cube image program (Canada) to the dealer body, Eric and I fully supported the new image design and quickly jumped on board to upgrade our dealership. We completely gutted a vacant Honda building and renovated the entire facility into the new Red Cube design, costing us millions of dollars, time, and energy. We moved out of our existing location, buried in the back of the auto mall, into our fully renovated facility conveniently located right off the highway with the most visibility in the mall. Our new facility proved to be more functional, profitable, and both customer and employee friendly. However, after spending only three years in that new home, Kia then announced they were changing their logo along with a new compliance program.

The paint had just finished drying.

Now, we were not expected to upgrade our facility by the OEM. After our sizeable investment, it was a deflating experience to say the least.

I know many of you can relate to our frustrations.

Eric and I have spoken to countless dealers in the United States and Canada who share the same sentiments and are questioning the future of their own businesses. We sold to a large Canadian dealer group and felt they would have a much louder voice and impact when trying to challenge the current transformation of the automotive business.

We were at a juncture in our careers where we either needed to expand our portfolio or reposition ourselves. We ultimately decided to call DSMA and have them conduct a full valuation on our business. Eric and I knew our numbers inside and out, however this allowed us the opportunity to truly see the value of our asset in an objective manner. This exercise helped reduce our emotions during the decision process.

If you are questioning your own future, we are happy to discuss our experiences in more detail and help you determine the best course of action for yourself.

We have walked the walk, and not just talked the talk.

Please look our for Part 2 of our blog where I will discuss why we sold our Ford dealership in Denver, Colorado.

You’ll find it was for very different reasons, however I know they will be very relatable to many.

You can reach us at:

Katie.Naughton@DSMA.com or 647-282-7842 (CAD) / 702-764-8810 (USA)

Eric.Levitt@DSMA.com or 416-801-0463 (CAD) / 702-764-8385 (USA)

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