In this episode David sits down with Franklin McLarty live from the Tekion Innovation stage during NADA 2023 Expo in Dallas, Texas. Franklin McLarty is a fourth-generation car dealership owner and CEO of McLarty Diversified Holdings.
Franklin has over 20 years of experience in the automotive industry, and in this episode, he shares his thoughts on the consolidation trend in the industry. Contrary to popular belief, Franklin believes that consolidation is not necessarily a bad thing. In fact, he believes that well-run dealerships in good markets are resilient and provide great investment opportunities.
During our conversation, we explore the trend of families in the auto space partnering with financial investors to get into the consolidation model. Franklin shares how this has allowed some small groups to expand from 7 to 40 or more dealerships. We also discuss the success of operators such as Rick Ford, who found underperforming stores in secondary markets and turned them around.
We dive deeper into the reasons why institutional capital and family funds are investing in the car business, including cash flow and asset appreciation. We also talk about the stickiness of revenue from parts and service, which is a key part of a well-run dealership.
As the conversation progresses, we discuss the challenges facing dealers in the industry, including rising interest rates, supply chain issues, and stubborn inflation. Franklin shares his insights on the current business environment and how these factors are impacting the industry.
We also cover the differences between private equity funds and distressed debt funds and how these differences impact the reputation and investor base of these funds. The conversation delves into the sustainability of dealer profitability and how focusing on parts and service businesses can lead to a stable business model for dealerships.
Overall, this episode provides valuable insights into the automotive business and how dealers can navigate the challenges they face in today's market. Whether you're a seasoned professional or just starting out in the industry, there is something to be learned from this episode. Tune in now to hear from one of the most experienced and knowledgeable voices in the business.
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