The million dollar question you ask yourself every day: Do I start my own business or join a franchise? This applies to every industry, but one of the biggest industries this affects: car dealerships. With over thousands of dealerships throughout the United States, stepping into this industry takes some work, no matter which route you decide to pursue. Both a franchise and independently-owned dealership have their challenges, but they also come with rewards.
One of the biggest differences that set the two different types of businesses apart is their inventory. Franchised dealerships receive most of their inventory from manufacturers. They have a wider selection of new cars for consumers to purchase because they purchase most of their vehicles directly. The used cars they have for customers to buy are generally from trade-ins.
Independently-owned dealerships are not able to order directly from the manufacturers. Their inventory comes from customer trade-ins, auctions, private sellers, etc. This allows them to have a decent selection of used cars, but the new car selection lacks in variety. In this regard, it is easier for franchised dealerships because they have more sources that allow them to offer an array of cars.
Franchises for car dealerships, in general, have lower interest rate options. This happens through the manufacturer in most cases, which is why they are able to have better rates. Independent owners have higher interest rates, but they are more willing to finance a car to someone that might have a lower credit score.
As far as pricing, used cars at independently-owned dealerships will have more room for negotiation. Franchised companies will normally have a higher price tag for the same car than an independent dealer might have. Likely, this is due to the amount of used car inventory that independent owners have on their lot. They are able to work with consumers on prices because they might have older models or multiple options for a vehicle.
No matter which type of dealership you are, employees have to go through training for their jobs. Whether it is strict guidelines and coaching they have to go through or a general overview, everyone must complete it. The difference between the two types of training: specific standards. If you are running a franchised dealership, the company will have fixed training and expectations that you have to follow with each new employee. However, with an independently-owned dealership, training is set by the individual. As long as the owner has covered all their bases legally, they can train the employees in whatever process they deem fit. Both options are great in their own way, but this would need to be determined by the individual which type they prefer.
Every type of business must provide excellent customer service, and keep the customer happy when they visit. This can vary from business to business on what they view as the proper service to provide. The amount of effort put into the experience will show, however, both in the customer reactions and your money. Providing coffee, snacks, and other amenities does cost money to keep supplied, and most car dealerships like to offer these when customers are waiting for their cars to be prepped, serviced, etc. However, little considerations like this can set you apart from other dealerships and have people returning to you instead of the competition.
Car services are almost always available at franchised dealerships, but the same cannot be said for independent dealers. This can make a difference to some people, or not deter them at all. Servicing their cars is technically the aftermath of purchasing a car, so it is up to you whether you offer this or not. Do you want to service cars for more revenue? It’s not a bad idea, but it will cost you more money to maintain and add responsibilities to what you manage. However, if you own a franchised dealership, you don’t usually have the option not to have a service department. The dealership and services usually come hand-in-hand when you are investing in a franchise. Independent owners can focus all of their efforts on sales if they don’t want a service department.
Can’t decide which type of car dealership to operate? Another option in the auto industry could be the aftermarket. Car detailing is a viable option, and you can join a well-established brand like DetailXPerts. Check out our franchise opportunities today.