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Car dealer quick-repair operation's expansion boosting service sale

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ASHLAND, Va.—Sheehy Ford Ashland's new dealership location was built for one explicit purpose: to expand its service business.

The new store in Ashland opened in June 2012 with seven Quick Lane service bays, new tire displays, larger tire inventory and more technicians and service advisers.

“Service was probably the biggest reason we decided to spend money on a new facility,” said Kevin McLaughlin, general manager of Sheehy Ford Ashland. “But the speed at which we've grown has been pretty shocking to me.”

At year-end, Sheehy Ford Ashland's service traffic was up 40 percent from a year earlier when service was in the old dealership at a different location, according to Mr. McLaughlin.

In 2012, its average monthly service sales were about $450,000, a 20-percent increase from its service sales before the move.

The store's service success inspired Sheehy Auto Stores to start implementing similar changes at each of its 18 dealerships. The group plans to hire 40 to 50 technicians at the stores over the next six months so that quick service is faster, technicians can efficiently spot other repairs and new tires are displayed better.

Finally, the dealership group is methodically calling customers to make service appointments.

“We're working on all that feverishly right now and have put a lot of resources behind it,” said Vince Sheehy, president of Fairfax, Va.-based Sheehy Auto Stores. “We don't want to give the customer any reason to go somewhere else.”

Mr. Sheehy is investing more than $4 million over the next year in new facilities and renovating service departments to grow his service business, which he estimates will take about two years to yield consistent results.

He said he wants to build service revenue because he expects new-vehicle profit margins to shrink further in 2013 and beyond.

“That puts more pressure on us to make sure we're generating higher margins in our service and parts business,” Mr. Sheehy said.

Sheehy Auto Stores ranks No. 31 on the Automotive News list of the top 125 car dealership groups in the U.S., with retail sales of 15,669 new vehicles in 2011.

Sheehy Ford Ashland's old dealership was drab and lacked space to stock enough inventory.

“If you've ever been to jail,” Mr. McLaughlin said with a chuckle, “our old facility was dreary like that.”

It also lacked enough service bays to meet demand. As a result, the store lost some quick service customers and other repair jobs, such as tire sales, he said.

“Selling tires will give you an opportunity to sell many other things,” Mr. McLaughlin said. “You get the wheels off of a vehicle, you can look at brakes and a number of things. We didn't have the ability to do it because we didn't have enough bays.”

Mr. McLaughlin said the dealership also didn't have enough technicians or space to stock tires.

“You'd need tires and we'd say, 'Can you leave the vehicle with us or can we reschedule?'

“That customer would say, 'I'll be OK,' and then go to another merchant that had the tire,” Mr. McLaughlin said.

So when Sheehy Ford Ashland—which sells about 2,100 new and used vehicles a year—moved into its larger store, Mr. McLaughlin hired six more technicians and two more service advisers. His service staff rose to 12 from four.

The store's managers set up a tire display in the updated Quick Lane lounge, which has a TV, PlayStation and iPads.

Nine tires are on the display, ranked as good, better and best. They sit in rows of three. The dealership also displays an eight-foot-tall inflatable tire outside nearly every day.

Sheehy Ford Ashland also partnered with a tire distributor it did not name to increase its tire inventory to more than 300 tires from 20 in stock at the old shop.

“We looked at our past service work, the vehicles coming through, what kinds of tires were on them,” said Frank Tinney, the service manager. “The tire distributor helped us get the correct inventory of what would be in demand and helped us in training.

“You can always learn more about tire size, tread and anything about the dynamics of the tire that helps us sell.”

If there are any tire warranty issues, the distributor covers it. Because Mr. Tinney stocks so many tires, the distributor makes the store a priority for daily deliveries, he said. That helps Sheehy Ford Ashland to be competitive in pricing and service speed.

As of year-end, the store had about an 8-percent penetration rate in tires sales. That means for every 100 repair orders Sheehy Ford Ashland wrote, it sold a tire or tires to eight customers. A year earlier it was a 1- to 2-percent penetration rate, Mr. McLaughlin said.

He wants the store's penetration rate for brakes, batteries and tire sales combined to be at least 15 percent.

It's beating that target, running on average about 20 percent, Mr. Mc-Laughlin said.

He is selling more work in the quick lanes because he has squeezed in multipoint inspections, Mr. McLaughlin said.

“Our goal is to have the multipoint inspection sheet back to our service writers in 15 minutes so they can discuss other service needs with the customers,” Mr. McLaughlin said. “To be successful in upselling, especially to a customer there for quick service, you've got to get to them quickly.”

In an expanded business development center, service appointments are scheduled and confirmed. The staff there also monitors service sales.

“If someone comes in and we recommend tires or brakes and they deny the work, we'll follow up within two weeks to say we really recommend you get new tires,” Mr. McLauglin said.

“If they don't come in, they get hit with an email in about 30 days reminding them of the recommended repairs.”

Repair work is up “slightly,” Mr. McLaughlin noted, but the real future growth lies in quick service.

“We never would have thought of getting a Toyota in here. Now we can bring anything in here,” he said. “I'm pretty tickled as to where we are. It's scary as to where we can really go.”

This report appeared in Automotive News, a Detroit-based sister publication of Tire Business.

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