At first glance, one would think Don Mealey had no reason to become a Republic Industries Inc. dealer.
Mealey, a self-made success, began by driving a parts truck, and rose to the point that he was able to invest in a Chevrolet store in Orlando in 1974.
From that base, Mealey continually reinvested his money and expanded his business. He bought his second store in 1979, and by 1997 he had nine thriving dealerships in Florida, handling 14 franchises.
But Mealey felt he would have to increase his resources to continue to grow. He was determined to be a part of the future.
'We had some success in growing our company with private capital,' Mealey recalls. 'But we felt we needed to do something different with the deep pockets of the public organizations like United Auto Group, Republic and the like. So we decided to go public. But I wasn't comfortable with the conditions of the initial public offering.
'We refiled our prospectus, and I liked the new conditions even less. So, we regrouped. We determined to become part of a group, but with $700 million in annual sales, there were only a handful of organizations big enough to buy us.
'I was familiar with all the public entities out there, and I decided that only Republic had a comprehensive, cohesive, sensible business plan, as opposed to just accumulating stores. Plus, I knew and liked their management.'
SAME AND DIFFERENT
Mealey began negotiations in December 1997. By April 1998, the deal was closed. Like all Republic dealers, Mealey signed a three-year contract.
'Operationally, we aren't that much different from when we were independent,' he says. 'We have tried to blend our operations with the new Republic initiatives.
'Of course, as an independent I had the last word, and now I don't have that luxury. But Republic typically moves very quickly. If I have a question, their first response is to ask me what I want to do, and I virtually always make the call.
'Two very positive differences are that, as measured by customer satisfaction and profitability, our business is better now than it was before we joined Republic,' he adds.
Another difference Mealey appreciates is Republic's emphasis on profitability, a factor most dealers would put lower in priority than sheer volume. He says Republic met its 1998 goal of 3.4 percent profitability and is well positioned to reach its objective of 5 percent margins within two years.
'Republic is very sensitive to keeping profit in the dealership,' he says. 'It's not sucked off by corporate; it goes on our dealer statement. That refocuses our attention at retail, and is a way of measuring that makes us better managers.'
Other dealers, though, remain largely skeptical of Mealey's decision.
His employees, although initially reluctant, have become enthusiastic supporters of the move, since the Republic benefits package is superior to what Mealey was able to offer on his own. Mealey has not lost any key people, and he has the same general managers he had the day he closed the deal with Republic.
Plus, the Republic acquisition made his succession plan much simpler. Two of Mealey's four sons are active in the business as Republic executives, and all his children received significant sums when the deal was made.
Mealey is convinced that the future favors his decision. 'I am convinced the retail market is changing fundamentally - and for the better,' he says. 'I'm 63 years old, but I'm going to stay around to see how all of this settles out. Everybody has to look at their own frame of reference, but this is the best time to be in this business.'
He adds: 'I've bought 26 dealerships in my career, but I never paid anything remotely close to the money Republic and the other public organizations can afford to spend. Those dealers who think the business is going to go back the way it was better think again. Because it won't.'