Maybe the next franchise shouldn't be an auto brand
Dealer buoys business with Payless rental, used-car operation
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To fortify his Hyundai-Kia retail business, Florida dealer Scott Dance has turned to a nontraditional franchise for daily rental cars and used-vehicles sales, under the Payless brand.
Acquiring multiple franchises is nothing new in auto retailing. Car dealers have been diversifying their dealerships for decades, counting on the good fortunes at one showroom to balance downturns at the other.
But Dance's strategy is different.
Dance, owner of Bob Dance Automotive in Sanford, Fla., on Florida's Space Coast, wanted more flexibility in expanding than the new-car factory franchise system offers. While automakers limit the density and locations of new-car franchises, Dance sees the Payless brand as a way of putting used-car sales and rentals where he wants around his market. He began opening Payless operations a year ago as a private label sales and marketing channel. He now has two Payless rental centers and one Payless sales store.
As the dealer envisions it, the independent channel will connect used-car customers with his new-vehicle dealerships, and vice versa. It will allow him to capture daily rental customers that his service shops previously referred to corporate-owned providers such as Enterprise or Budget.
And it will create a stream of low-mileage used vehicles for his Hyundai and Kia lots. Payless currently inventories Ford, Toyota, Nissan, Dodge and Jeep vehicles as rentals -- all products that might be a little tough for a Kia dealer to acquire. Dance can sell those used rental cars from his Payless lot, or shift them to his Hyundai and Kia lots. Likewise, he can move used cars from his new-car stores to the Payless lot.
"This complements everything we do currently, and have been doing in the business," says Dance, 48. "And it fulfills a wish that my father and I talked about for years, of owning a franchise for certified pre-owned vehicles."
But Dance's motivation is also to balance his reliance on auto manufacturers.
"This hedges us," he says. "Let's face it -- sometimes the manufacturers like you and sometimes they don't. This gives us another life. If the factory ends one life, we have another."
The St. Petersburg, Fla.-based Payless Car Rental System, a subsidiary of Avalon Global Group, has 80 locations in 20 countries. Most U.S. locations are still corporate-owned. But at the end of 2011, the company changed direction.
Payless recruited Keith Wiesman, a former executive with the Florida automotive finance giant JM&A Group, to become CEO of Payless Development LLC. The company removed a number of independent operators around the country and instead began recruiting new-car franchisees to own and operate locations in conjunction with their auto dealerships.
Last month Dance opened his second Florida Payless Rental location, putting a daily car-rental store in Port Canaveral, about 10 miles away from his Bob Dance Kia store in Merritt Island, Fla. It costs $30,000 to obtain a Payless franchise, in addition to signs and real estate. The new facility sits in plain view of passengers disembarking from cruise ships at Canaveral, one of the busiest cruise ports in the world.
Dance wants the nonfactory branding to give him a bit more buffer from the sort of manufacturer policy changes and retail turmoil that have roiled the dealer world over the past decade. He and his father before him, the late Bob Dance, lost franchises as factory fortunes changed.
Since acquiring their first dealership in Florida in 1973, the family's lost franchises include AMC, Renault, Peugeot, DeLorean and Dodge.
"We were one of the 789 affected Chrysler dealers," Dance says, referring to Chrysler's decision to eliminate 25 percent of its dealer body in 2009 as part of its bankruptcy restructuring. The decision pulled the plug on his Bob Dance Dodge in Sanford.
"We had the rug pulled out from under us," he says. "That won't happen to me with this business. Having another branded franchise selling like-new and affordable used vehicles protects you. Otherwise you can dedicate years to a brand that might be taken away from you one day for reasons beyond your control."
Independent streak
The Dance retail organization has a long history of independence.
Dance's father and company founder Bob Dance, who died in 2008, started his career working on the assembly line at a muffler factory in Detroit. In 1961, after balking at orders given to him by the shop union, he quit, loaded up his car and drove to Florida with his young wife and $25 in cash in search of fortune.
The couple landed in the Cape Canaveral area, where Dance got work as a service writer at a Pontiac dealership. By 1970 he had become a partner in a Dodge store. He became a Dodge dealer principal in 1973, and acquired various other dealerships over the next four decades.
Scott Dance's main focus now is the Hyundai store the family acquired in 1988 and the Kia store he acquired in 2004.
Dance's Hyundai franchise is a high-volume used-vehicle dealership, selling about 1,000 used cars a year, on top of 1,000 new cars a year.
"Used vehicles have always been important to us," he says. "My father taught me that the best new-car dealer is going to be the best used-car dealer. So I've always loved the used-car business.
"He was concerned in his later years that new-vehicle prices were rising beyond the reach of many consumers," Dance says of his father. "He and I talked about how we might do a private-label used-car operation someday.
"Over the years, the factories have tried dealer rent-a-car programs. And a lot of dealers tried them and had a bad experience. We didn't want that."
Link with JM&A
Dance compares his new Payless operations to the CarMax chain. Payless offers customers the same kind of reassurance as CarMax, adhering to a 125-point inspection and reconditioning process. It offers customers brand-name financing and insurance from JM&A Group.
JM&A also offers a Payless Assurance product, providing used-vehicle customers with vehicle-history reports, limited warranties, travel breakdown protection and roadside assistance.
But CarMax is corporate-owned, Dance points out, as are the various daily rental companies. Payless allows dealers to own their own operations.
"I keep all the money this way," he says. "I call the shots. I decide what cars to buy out of the rental fleet. I move my cars where I want them. I can circulate my vehicles as I need to, and it helps my overall profit picture."
Having an independent brand at his store also gives Dance a way to do business with local competitors who might not be so keen to work with a new-car franchise, he says. Local garages and service shops are more willing to consider referring customers to a daily rental company or a used-car sales outfit or that's not out gunning for their service customer.
For Dance, the bottom line is business flexibility. He believes the private label approach will let him reach beyond his new-car franchises to tap into daily rental revenues and a broader used-car customer base, while at the same time supporting the new-car franchises that are his mainstay.
Age: 48
Became a dealer principal: 1988
Location: Sanford, Fla.
Dealerships: Bob Dance Hyundai, Bob Dance Kia
New ventures: Payless Car Sales (1 location), Payless Car Rental (2 locations)
You can reach Lindsay Chappell at lchappell@crain.com.
