Ben Faricy’s dealership in northeast Colorado Springs is next to or across the street from three other dealerships that in the past 1½ years have become part of much larger groups, including the nation’s largest automotive retailer, Florida-based AutoNation.
The Faricy Boys, owned by brothers Ben and Paul Faricy, operates a Chrysler and Jeep franchise in the Powers Autopark, southeast of Austin Bluffs Parkway and Woodmen Road. The autopark includes AutoNation Dodge Ram, Corwin Toyota, Groove Honda, Bob Penkhus Mazda at Powers and two used car dealers.
While Faricy Boys owns other dealerships in Cañon City and Salida, it is among a handful of Colorado Springs-area dealerships that are not part of a large dealer group.
“We want to remain independent,” Ben Faricy said.
“We believe the future is bright for this industry, whether you are a small or large dealer. We anticipate continued growth and welcome new competition from AutoNation and others.
“It all comes down to the people (working for the dealership). Employees lead to loyal customers, and 40% of our employees have been with us for more than five years. We have a team of people who love what they are doing, so customers choose to do business with us.”
Consolidation has helped The Faricy Boys in some key ways. Ben Faricy said the dealership has been able to hire key talent from dealers acquired by large groups, because some employees in the auto industry don’t want to work for a large bureaucratic corporation. While larger groups might offer more rapid career advancement for employees, those promotions often require frequent moves, which some families see as a major drawback.
Phil Winslow, co-owner of Winslow BMW of Colorado Springs, said the north-side dealership has turned down purchase offers and all three partners “have no interest in selling” or any plans to buy other dealerships.
Winslow, who is one of three single-location dealers in the Colorado Springs area, said he and his two partners believe they have an advantage over larger competitors because “we have ownership right there” in the dealership started by his father in 1961.
AutoNation has been among Colorado’s largest auto dealers for 25 years since acquiring dealerships from former Denver Broncos quarterback and general manager John Elway and two other major Denver-area dealership groups. The company expanded into the Pikes Peak region in December by buying Colorado Springs Dodge and Pikes Peak Acura from Moreland Auto Group in the Springs and a Chrysler, Dodge, Jeep and Ram dealer in Cañon City.
North Dakota-based Corwin Automotive Group acquired Larry H. Miller Liberty Toyota and another dealership in Boulder a year ago from Georgia-based megadealer Asbury Automotive Group. Asbury also sold Larry H. Miller Toyota of Colorado Springs, in the Motor City area, to Baxter Auto Group.
Omaha, Neb.-based Baxter also owns Lexus of Colorado Springs. Centennial-based Summit Automotive Partners bought Freedom Honda in late 2021 and renamed it Groove Honda.
The AutoNation, Baxter, Corwin and Summit deals are part of a consolidation of dealer ownership by large chains. Each owns at least 15 dealerships spread across multiple states.
The nation’s 150 largest dealership groups and those with publicly traded stock bought nearly one-third of the 1,186 dealerships sold between 2019 and the first three quarters of 2022, according to The Blue Sky Report, a quarterly look at dealership transactions compiled by Kerrigan Advisors.
That trend is expected to continue nationwide, especially in high-growth markets like Colorado Springs that are attracting a lot of interest from the nation’s largest dealership groups, said Erin Kerrigan, founder and managing director of Kerrigan Advisors, a California-based company that represents those selling dealerships.
The only factor slowing consolidation is a lack of dealerships on the market, she said, since there are many more buyers than sellers.
“We estimate that the majority of the industry is in some sort of transition between generations (of owners), and under half of them (dealerships) make it to the third or fourth generation,” Kerrigan said.
“As the business becomes more valuable with consolidation and tremendous profitability, many families are deciding now is the time to sell.
“The auto retailing business has become more focused on technology and will rely less on human capital (labor), and that is hard to do when you don’t have the balance sheet to invest in technology.”
The trend toward increasing use of technology, driven by the computerized equipment needed to service most vehicles and growing use of technology in the sales process, means dealers face an investment of tens of millions of dollars just to keep up, Kerrigan said.
That has prompted many family-owned dealerships to sell to larger groups who can raise the funds needed to buy the latest technology, she said.
Dealers also have been challenged by a change in how they operate. Shortages of computer chips triggered by the pandemic resulted in a shortage of new vehicles available to sell, leaving most dealerships with a fraction of the inventory they had before the pandemic, Kerrigan said. As a result, many dealers don’t expect to return to high inventory levels or resume sales incentives formerly needed to sell those vehicles.
That shift and improved sales productivity from technology doubled profits in the past three years for the average dealer to more than $4 million, the Blue Sky report said.
The number of dealerships being sold increased every year from 2017 through 2021 before declining slightly last year, the report said.
Even so, nearly half of the more than 600 dealers surveyed in November by Kerrigan Advisors said they planned to add one or more dealerships to their group (likely by acquisition) in the next 12 months with just 2% planning on selling one or more locations.
Consolidation has reduced the number of owners of Colorado’s 269 new vehicle dealerships to fewer than 100 with just 49 dealerships owning a single location. That’s one fewer than the 50 locations owned by the three largest groups — AutoNation, Asbury and Colorado Springs-based Phil Long Dealerships — according to data compiled by the Colorado Automobile Dealers Association.
“The trend is definitely toward consolidation. Everybody is trying to grow. Faricy will try to grow (in southern Colorado) and AutoNation will try to grow in Colorado Springs, but they have to compete. Every dealer that goes on the market has 40 to 50 bidders,” said Tim Jackson, president and CEO of the dealers association.
“There are some (dealerships) for sale now in northern Colorado, but there are more buyers than sellers,” limiting the number of sales.
Jackson expects AutoNation, Asbury and Lithia to be in the market to buy dealerships. All three have acquired dealerships in Colorado in the past year or so and have ambitious plans to continue growing over the next several years.
AutoNation plans to acquire 130 dealerships by 2026. Lisa Ryans, an AutoNation spokeswoman, said this month via email that “Colorado is one of AutoNation’s strong markets, and we are always open to adding additional locations that fit.”
Asbury expanded into Colorado in late 2021 by acquiring the Larry H. Miller Group but was forced to sell the two Colorado Springs dealerships by a dealership cap imposed by Toyota. Asbury later acquired another major Denver-area dealership group.
The Georgia-based company plans to double its revenue by 2025 to $32 billion, with most of the growth coming from acquisitions and expanding its Clicklane online vehicle sales operation.
Lithia operated a Chrysler-Jeep dealership in the Motor City area until Chrysler terminated that franchise along with nearly 800 others in its 2009 bankruptcy. Oregon-based Lithia, the nation’s third-largest dealership group, returned to Colorado in December, when it acquired a Ferrari dealership in Highlands Ranch as part of its plan to nearly double annual revenue to $50 billion by 2025.
Even smaller dealer groups like The Faricy Boys have been buying other dealers in Colorado. Founded by Ben and Paul Faricy’s grandfather in 1944 with a Nash dealership in Pueblo, the brothers bought the Colorado Springs company from their father more than 20 years ago and acquired a Ford dealership in Cañon City in 2017 and Town & Country Salida, a dealership that sells Buick, Chevrolet, Dodge, GMC and Ram vehicles, in 2021.
“I do see more rounds of consolidation coming as result of the capital investment requirements coupled with the increasing complexity of regulatory compliance and the (potentially difficult) economic cycle in the next year or two,” Ben Faricy said.
“We aspire to grow as a regional (dealership) group, but only will do so when the timing and the opportunity is right. We are just the right size — big enough to make the investments necessary to compete with the larger groups, but small enough to maintain the family atmosphere in all of our stores.”