Reynolds reshaping image as a more flexible partner to dealers

Reynolds and Reynolds Co. said it has chopped the size of its contracts and is offering more flexibility to dealerships as it works to improve its reputation in the market.

Executives with the Dayton, Ohio, dealership management system provider say changes will show up in contract negotiations with new customers and with existing customers whose deals are expiring. Examples include allowing dealerships to cancel a product they purchased that doesn't work out for a store's operations or making accommodations for a dealership that might engage in a buy-sell discussion, company leaders told Automotive News last week.

"We've been able to structure some new deals going forward that do have different terms in it than what we typically would have had," said Dave Bates, Reynolds' chief customer ambassador.

The change in approach is an effort to counter the perception among dealers that privately held Reynolds and Reynolds is an inflexible and challenging business partner, executives said. They say they hope that offering more flexibility will improve the company's relationships with retailers, with aspirations that Reynolds will be able to attract and retain more customers.

Reynolds executives say the company is drawing more dealerships back to its systems, though it does not disclose financial or dealership customer data.

Reynolds, one of the industry's largest DMS providers to franchised dealerships after segment leader CDK Global Inc., has faced pressure in the market, and its longtime position as No. 2 is not so certain anymore. Court filings from 2017 in a federal antitrust lawsuit against CDK and Reynolds indicated Reynolds had lost market share. New competitors have entered the market, and an executive for Cox Automotive has said he believes Cox's rival Dealertrack platform is close to overtaking Reynolds.

Executives at Reynolds said last week there are early signs that some of the company's changes are paying off.

Reynolds' dealership DMS customer renewals increased roughly 15 percent during a six-month period from March 1 through Aug. 31 of this year, compared with the previous six-month period from Sept. 1, 2020, through Feb. 28, 2021, company executives said last week. Reynolds started rolling out the business changes in March 2021.

The internal review of business practices at Reynolds was prompted by new company leadership that took the helm last fall, Reynolds executives said. Tommy Barras, Reynolds' former COO, was promoted to CEO in November 2020 after the departure of longtime CEO Bob Brockman, who is awaiting a competency hearing in November after being indicted a year ago on federal tax evasion charges.

Reynolds is transitioning away from the centralized leadership style Reynolds had under Brockman, whose Universal Computer Systems merged with Reynolds in 2006. The company also plans to continue investing in technology and product development.

"The goal at the end of the day is: How can we have a relationship with our customers that is deeper and broader than the one we have today? That focuses on how do they utilize our products and services better than they do today?" said Chris Walsh, the company's executive vice president of sales and marketing. "To achieve the business goals that they have short term and long term — that's what we want to accomplish."

Reynolds' DMS contracts historically were "nightmares" to understand, said Wayne Youngs, president of Wayne A. Youngs & Associates and a Texas-based consultant who works with dealerships on DMS contract negotiations.

One of the most painful elements, Youngs said, were the fees Reynolds charged to integrate third-party dealership software vendors that access data stored in the DMS. The company had not yet eliminated those fees as of last week, but Kasi Edwards, Reynolds' senior vice president of marketing, said changing that structure "is a longer-term initiative" as it is complex.

Reynolds executives said they informally reached out to Youngs as they worked on the contract changes to seek advice about the areas that needed improvement. Youngs and Reynolds leaders told Automotive News that he was not paid for his input.

"When they called and asked me what's hurting them in the marketplace, I said the first thing that's hurting you is these integration fees. People are just tired of it," Youngs said. "They're buying some third-party products because they're better than your product."

He said he told them that if Reynolds wants customers to use its products, then the company needs to make its products better than other vendors' products, not make it cost-prohibitive for dealerships to use an alternative.

Tom McCollum, CEO of Forbes Todd Automotive Group in Dallas, said gaining more flexibility with its software vendors was "a critical part" of the four-store group's recent DMS contract negotiations with Reynolds.

When its three-year DMS contract with Reynolds neared its end, the group decided to shop other providers. With Reynolds, McCollum said he prepared his team to expect "that historic inflexibility" in negotiations and noted that "we certainly took them through the paces." But McCollum said the company made concessions he hadn't anticipated.

Under his new contract, "if I see a product on the marketplace that's better than one of the strategies currently in my Reynolds agreement, I have the flexibility to do it without being penalized contractually, financially — any way, shape or form," McCollum said.

Youngs said he has seen some of Reynolds' flexibility in action while negotiating deals for his dealership clients.

One undisclosed large group returning to Reynolds will be able to add any stores it acquires to its agreement at the same price as its existing stores, Youngs said. He also said Reynolds notified a client in an addendum letter that the company planned to reevaluate the third-party integration fees over the next 12 months, and any changes would be applied to that client's existing contract. A Reynolds spokesman said the examples cited by Youngs are not part of the company's standard contract.

Some dealership leaders who have extended contracts or switched to Reynolds said they believe the management transition enabled the company's new strategy. McCollum said he also believes the DMS market is evolving and Reynolds understands it, too, must evolve.

"If they don't change," McCollum said, "they will become a victim to progress."