Sonic Automotive Inc. sold three dealerships in the past few months to avoid spending millions of dollars on automaker-mandated improvements that the retailer deemed didn't make business sense.
The dealerships are Honda of Fort Myers in Florida, Toyota of Fort Worth in Texas and Massey Cadillac Dallas in Garland, Texas, said Jeff Dyke, executive vice president of operations for Sonic, the fifth-largest dealership group based in the U.S. Details of the transactions, including closing dates, weren't released. Each store was sold to a different buyer.
"The reason we sold the stores we sold is because the manufacturer wanted a huge facility action done on the store and it didn't meet our return on investment," Dyke told Automotive News. "And we're just simply not going to do that. And being a good business partner, we sold the stores."
The Honda and Toyota stores were profitable, Dyke said. But instead of seeking more brick and mortar, automakers should look at efficiencies and technology for dealerships, he said.
"If the manufacturers were growing and the dealerships were all making more and more money, then of course we would be investing," Dyke said. "We would be more than happy to put money into a facility, no problem. But what we're not going to do is put money into a facility in any brand that they're taking margin out of the dealer's pockets."
Honda said the Fort Myers store was sold to Morgan Automotive Group. It had been scheduled to be moved, a Honda spokesman said, but Sonic opted to sell instead.
Honda is one of the brands that Sonic in July said had lowered its factory-to-dealer incentives, hurting the retailer's second-quarter profits.
The Cadillac store is now operating as Garland Cadillac. Cadillac declined to comment, and officials at the dealership couldn't be reached for comment.
In addition to selling Massey Cadillac Dallas, Sonic in the first quarter closed St. Claire Cadillac in Santa Clara, Calif. The store wasn't making money, Dyke said, and Sonic used the building to expand a nearby BMW store.
Toyota Motor North America referred questions to Gulf States Toyota Inc., the distributorship with oversight of Toyota of Fort Worth. As of Friday, Aug. 3, Gulf States hadn't responded to an Automotive News inquiry.
On May 1, Sonic also sold Lone Star Ford in Houston but is keeping the dealership for an EchoPark used-vehicle store expected to open in December.
A dealership improvement wasn't requested, Dyke said, but Sonic is betting it can make more money with EchoPark.
"It's right in a location where we want to put EchoPark. And EchoPark's going to sell more cars and make about 10 times more money," Dyke said. "So EchoPark is just a much more profitable franchise than the Ford store."
Doggett Auto Group, an affiliate of Leslie Doggett Industries in Houston, acquired Lone Star Ford. Terms were undisclosed.
The dealership, renamed Doggett Ford, moved into a new location in Houston in late July and will have up to 700 new and used vehicles on its lot, a Doggett spokeswoman wrote in an email. A new dealership will be built on the site over the next 18 months.
William Doggett, general counsel, said in a statement, "Ford Motor Co. and Doggett Ford are eager to return this dealership to its former status as one of the United States' largest volume Ford stores."