On today’s show, we’re pleased to welcome in Craig Peters, CEO of Byrider, one of the nation’s leading used car finance franchise companies. Craig is here to discuss all of the exciting things Byrider is tackling this year, including the upcoming NADA show. Be sure to check out their booth #739C.
Jim Fitzpatrick: Welcome into the show, Craig.
Craig Peters: Thank you very much, Jim. Appreciate it.
Jim Fitzpatrick: Sure. So as I mentioned in the opener, Byrider has been a name that’s been in the industry for quite some time, and I know that you had kind of a little bit of a change of the name and talk to us a little bit about that.
Craig Peters: Yeah, we felt it was time to, to refresh the brand a bit and really what we focused on, we want to do some consumer research to really see how consumers felt about the brand, which we did. And we found out that there was quite a bit of brand equity built up with the JD Byrider name. So we didn’t want to stray too far, but we knew we wanted to refresh the brand. And so we streamlined it and that’s where we kept Byrider, and then we also added kind of a descriptor, a tagline called Buy. Finance. Drive On, just so people had a much clearer understanding of what we actually did.
Jim Fitzpatrick: Sure. I know the dealer body gets it, that’s for sure. So, for some of the people that are out there, kind of give us an overview who is Byrider and Byrider franchising?
Craig Peters: Sure. So, Byrider is one of the largest used car and financing dealerships in the industry. We have about 150 stores, 32 of those stores are corporate owned and the remainder of those 150 are franchise. So we are actually the only franchised used car and financing business in America. So, that’s kind of our unique nature. And we’re in about 30 states across the country. And the franchising side of the business has been a successful part of this business for about 30 years.
Jim Fitzpatrick: Yeah. That’s for sure. How is Byrider franchising unique in the automotive industry?
Craig Peters: Well, as I mentioned, it’s the only one in the US that offers a franchise in the segment that we serve. It’s fully integrated. It goes all the way from, obviously, acquiring vehicles all the way through to servicing the consumers. So, not only selling the cars but also financing the vehicles. So it’s a full vertically integrated business. I think the franchising aspect, the unique part of that is really around it’s designed, to enable the owner to really control their business. So buying the inventory, reconditioning, underwriting the deal, selling the vehicle, and financing and servicing it as well. So it gives them complete control of the customer relationship.
Jim Fitzpatrick: Sure. Yeah. And who are Byrider’s main competitors in the space?
Craig Peters: It’s interesting. So, every market varies. There’s obviously a lot of, what I’ll call, smaller local car dealerships that might focus on the buy here, pay here space. But there’s also new car dealers that also sometimes hold their own paper on used car sales. So it’s a pretty broad competitive landscape. It does vary by local market, and then there’s some other regional and larger national players that we would compete with as well. But it’s a pretty, pretty broad spectrum.
Jim Fitzpatrick: Yeah. This is an area that a dealer doesn’t want to get caught in alone, right? I mean there’s a tremendous amount of money that can be made in this segment of the market, but it’s a segment that is almost an art form. And if a dealer jumps into this without the guidance of a Byrider they can get in trouble pretty quickly, can’t they?
Craig Peters: Yes, they can. And those are the things that we like to help them out with. And really as part of the franchising relationship we’re very engaged with the owner. Not only if they open up additional stores, but with new owners we’re very engaged in the process with them prior to them opening up for business. And the services range from helping them look for sites and locations so they can get the right building and the right location to attract customers. But then also really helping them through getting everything set up from a business and operations, doing all the training. We bring them on site, we go out to their site, we have consultants that help them. So we’re very engaged with opening up these stores with them because it is critical to have that guidance.
Jim Fitzpatrick: Yeah, for sure. In anticipation of today’s interview, we reached out to a few of your franchisees and not only did they have great things to say about you, but they said that in some cases they had tried this alone prior to getting with Byrider and they said it just wasn’t a pretty situation. You guys made all the difference. Do you find that to be the case among your franchisees?
Craig Peters: We do. I mean, the tricky part about the business, especially if you come from the automotive sector, right? A lot of dealers don’t necessarily hold their own paper. So, they’re used to getting applications and then having somebody else underwrite the deal and then hold the paper. But really the financing side is the most critical aspect in this business and understanding the consumer and their ability to maintain the relationship is important.
Jim Fitzpatrick: That’s right. And they also mentioned that the consumers felt good about the Byrider name. They felt as though they weren’t buying it from a buy here, pay here Tom’s Used Car Corner. You know what I mean? That they felt good that there was a national brand standing behind the car. Is that pretty much the case among the consumers that you’ve spoken to?
Craig Peters: Yeah, it helps. I mean, it’s obviously a very big purchase for any consumer, and our segment is no different. And I think it’s important for them to know that they’ve got a brand behind it. And in addition to that, there’s somebody there that’s going to help them post-sale servicing the vehicle, if there’s a necessity to do that. [crosstalk 00:05:53].
Jim Fitzpatrick: Yeah. One dealer asked me, that is thinking about going down this road, to ask you from date of application, how long does it take for a dealer to open up a franchise in best case scenario?
Craig Peters: Yeah, best case for a new owner, really the big item that takes up the time is really the real estate. So, if a new owner comes in with real estate and just some basic remodeling it can be pretty quick. We could probably have them opened up within the first probably five to six months. If they don’t have real estate, there’s a little bit of lead time there, especially if there’s some remodeling needed. So it could go out, we typically see a six to nine month range depending on the real estate is probably the timeframe that I would say. Some could take longer depending on the situation, but that’s probably a good timeframe.
Jim Fitzpatrick: Yeah, six to nine months goes pretty quick.
Craig Peters: Yeah, it does. It flies by.
Jim Fitzpatrick: Talk to us about the type of support that the franchisees receive.
Craig Peters: Yeah, so obviously once we get a new owner into the system, and we obviously provide support for existing owners as well, but certainly from a new ownership standpoint, there’s a lot of training involved. Obviously, we help with site selection. I talked about the real estate a little bit, but we’ll help with site selection. What location should they be in? If they already have a piece of real estate, we’ll evaluate that to give them some information about how well positioned that real estate is. So that’s a big element of what we do. And then, it really gets into training, right? We bring the owners and their operators on site, we help them hire if they need positions filled, and we’ll bring them onsite for training. We’ll run through the operations manual to let them know how to get the store up and running and operating. And we’ll help them with all aspects of that.
Craig Peters: Anything from acquiring inventory, how do you move through the sales process, how do you describe the program, how do you underwrite the deal? And we also provide fairly extensive risk and credit capabilities as well, which is, as I mentioned before, an important element of the business. And we bring that to the table for them and help them understand how to really understand credit and risk based on the deals, which is an important part of the business. And that’s an inherent element that we help with.
Jim Fitzpatrick: Wow. So you hold the dealer’s hands or the new franchisees hands all the way through every step. Does that support continue after they’ve opened and they’re up and running?
Craig Peters: Yeah, it does. We’ll continue. Certainly, if it’s a new owner, we’ll continue that support, probably, a little bit more hands on than we would with an existing owner. But we have franchise consultants internally that serve a certain number of our dealers and existing franchisees get similar levels. They can continue to get recruiting support if they need it. We have an advertising group that we have where we pull funds from the franchise network to really build out our marketing campaigns and media spend and so forth. So there’s quite a bit of that going on and we’ll continue that as much as needed.
Jim Fitzpatrick: Sure. We brought you on today because we’re looking for companies like yours that can help dealers grow their businesses and their bottom lines in 2020. As you know, the compression of new cars, it is what it is. So dealers are looking to expand in other areas of their operation and in their businesses as a whole. And, certainly, your name came up to the top of our list based on the research that we did because you’ve been helping dealers for quite some time in doing just that, growing their businesses, but yet staying in retail automotive, right? Just picking up a new segment.
Craig Peters: That’s right.
Jim Fitzpatrick: Yeah so let me ask you this. What is the ROI of owning a Byrider franchise?
Craig Peters: Yeah. Well we have a franchise disclosure document. So, we provide a lot of details on the performance of both franchisees, as well as corporate so that is disclosed. We tend to measure four years is about kind of how we look at the maturity of the business because it takes time to build up the portfolio and the cash flows. So, we look at the top core tile of our franchisees and, typically, that top core tile in that fourth year will be earning just over $1 million on an annual net income basis. So really good returns.
Jim Fitzpatrick: Wow. The average new car dealership doesn’t make $1 million currently. So that’s that’s pretty strong. So what does the future look like for Byrider? I know you guys are on an expansion right now. One of the reasons that we wanted to talk to you today, I know that you’re looking for key markets and key dealers to partner with in this area, so what does the future look like?
Craig Peters: Yeah, the future is strong for us. You mentioned growth, we’ve been growing the footprint, certainly from a corporate store standpoint, over the last few years. We want to continue that path, but more importantly, we want to continue to grow the franchise business. It’s a great way for us to advance the brand broadly across the United States. There’s a lot of markets that we’re not in that are out there that we would love to get some franchise owners into, but we’re really ready to scale the business, both for franchising as well as corporate stores. We’re in a good position to do so, and there’s a lot of markets out there that are available to expand into.
Jim Fitzpatrick: Sure. Have you found that some of your successful franchisees have looked to open up multiple locations based on the success they’re having currently in their stores?
Craig Peters: Yeah, I’d say about 60% of the franchise body has more than one store. So at least two-
Jim Fitzpatrick: Wow, 60%, okay.
Craig Peters: Yeah, and I would say, I think if you look, we’ve got several that have seven plus, so we’ve got some pretty big Byrider networks.
Jim Fitzpatrick: Wow. I think that’s a testament as to the job that you guys are doing for the franchisees, they’re not going to buy multiple locations, right? So to have 60% of your franchisees that own multiple units is pretty good.
Craig Peters: Yeah. And we have very successful ownership group.
Jim Fitzpatrick: Yeah. That’s awesome. Well, Craig Peters, CEO of Byrider, I want to thank you so much for joining us on CBT News. This has been very enlightening for our dealers and our subscribers. Dealers, for those of you that are out there that want to get into this segment of the audience out there or, I should say, of your market, now’s the time. Especially when you’ve got a partner like Byrider that’s going to hold your hand, that’s going to show you the way, that’s going to keep you away from some of the trouble areas, and focus on best practices that they know from their 150 locations around the country. These guys know this market and, certainly, I feel confident suggesting them in a very big way to partner with you as you move into 2020 and looking for those additional revenue sources. So again, Craig Peters, CEO of Byrider. I want to thank you so much for joining us.
Craig Peters: Yeah, Jim, thank you very much. Appreciate the time.