Thomas A. Moorehead was one of the lucky ones. When BMW decided to build a handful of new dealerships in the U.S. for the first time in 14 years, he was fortunate to score a letter of intent. Dealers had pleaded with the automaker to do so for years, but the answer was consistently “no.” But when market analysis pointed to vast development and growth opportunities in the Washington, D.C. Metro area, BMW changed its position, and dealers scrambled for a stake. One learned that Moorehead was slated to receive a coveted shop and rushed to purchase the same land for which Moorehead was negotiating. “Obviously, he failed to steal the land from me,” Moorehead boasts. Now, as the owner of BMW of Sterling and MINI of Sterling, both located under one palatial roof in Sterling, Virginia, Moorehead still has a good deal of luck. And the rewards have been plentiful. His 39,000-square-foot dealership is a large-volume facility including 24 service work bays; several showrooms; retail, parts, reception, and cashier counters; a children’s room and lounge area; a cafeteria; a conference room; and executive offices. Completed in January 2001 after 18 months of securing financing, planning, and construction, it has become the prototype for all BMW dealerships built in the U.S. since 2002.
First-year sales for BMW of Sterling/MINI of Sterling (No. 20 on the BE AUTO DEALER 100 list with $122.3 million in sales) were roughly $70 million, placing it as the third top-selling MINI dealer nationwide and the eastern region’s No. 1 BMW dealership for customer service. Overall sales have grown steadily, from $84.9 million in 2003 to $108 million in 2005, and over the last five years, saw an increase in sales of 69.9%. Growth has not been driven only by vehicle sales; service sales contributed significantly to the bottom line, spiking to $9.2 million from $5.8 million just one year earlier. Moorehead’s commitment to a solid business philosophy, strategizing, and his involvement in the community have earned BMW of Sterling and MINI of Sterling the coveted title of BLACK ENTERPRISE 2007 Auto Dealer of the Year.
Watershed Growth
From the beginning, Moorehead’s philosophy was simple: provide the best customer service. He continually trains his employees to maintain the company’s values through methods that include monthly audio books on success, which are discussed weekly. And although he says the company’s success has surpassed his own expectations, Moorehead knew, even before his petitions to build, that the market was ripe–based on growth projections and development information released by the state. Located near Redskins Park, the training facility of the NFL’s Washington Redskins, the dealership is experiencing growth parallel to the area. Within about a three-mile radius are the corporate offices of AOL, Verizon, Airbus, Oracle, Microsoft, Sprint, Xerox, and USA Today. According to the most recent data from the U.S. Census Bureau, Loudoun County is the richest county in America, with a median household income estimated at $98,483. “This area is the new Internet capital of the world, the Silicon Valley of the East,” says Moorehead. “When you look at the individuals that are going to move into those homes, I see them in Z4s, 3-series, X3s, X5s, and the 1-series BMW is releasing next year.”
Before building the Sterling dealership, Moorehead owned two General Motors dealerships, first a Sentry Buick and Isuzu shop in Omaha, Nebraska, and later Moorehead Buick GMC in Decatur, Illinois, which he later sold. To build BMW of Sterling/MINI of Sterling, Moorehead spent $8 million and raised another $2 million in working capital for the first year. He is expecting to spend another $5 million to $6 million to expand his shop to 57 service bays. The investment should be well worth it: Each work bay earns the company $20,000 per month on top of car and parts sales, and service covers nearly 80% of the company’s operating costs. Car sales fill the remaining 20% and all other sales are pocketed as profit. In 2006, BMW of Sterling/MINI of Sterling sold a total of 2,480 vehicles, including 1,005 new BMWs, 386 pre-owned BMWs, 715 new MINI Coopers, and 96 used MINI Coopers.
The foreign import market also factors into the equation. Having experienced tremendous growth, analysts speculate that the market won’t be cooling anytime soon, especially for BMW. “BMW is one of the most well orchestrated, well executed brands and continues to do extremely well in the United States in terms of sales and profitability,” explains Rebecca Lindland, automotive analyst for Global Insight, an economic and financial analysis and forecasting firm. “While not a huge volume player, they are virtually immune from the generational pressures every other brand faces. In other words, regardless of age, most consumers would rather have a BMW than any other vehicle, if money were no object. And many ‘Gen Yers’ would take a used BMW over a new anything else any day–which is significant because there are 75 million Gen Yers.”
Moorehead fully agrees: “The product has been hitting the marketplace in the correct income and age segment. They’re really controlling this segment with key marketing. Everybody knows what a 3-series is whether you say the brand name or not.”
Luxury Service
Although attracting consumers was never a problem, Moorehead admits that after a few years of strong sales, servicing customers had become challenging. Many were waiting three weeks for service and they weren’t happy about it, explains Barry Jordan, internal consultant for BMW of Sterling/MINI of Sterling.
“Last year, our [Consumer Satisfaction Index] score was a little bit below the market,” points out Jordan, referring to the measurement system used by clients who report to BMW of North America regarding their satisfaction with customer service and their dealership experience. “The management team had to decide what we were going to do to change the outcome of the story.”
The new strategy included a series of management changes, the addition of several service technicians, and adding a night shift to the service department. “We replaced the manager we had with a manager with vision–[someone] who understood that you can’t make a customer wait on you. You need to have the vision to change your marketing strategy,” says Moorehead, who sought Chuck Joffe, director of service and parts and an industry veteran with more than 40 years of experience. Three more technicians were hired for a total of 32, with 24 at master’s status, meaning they are the most skilled techs available.
“Now our CSI score is above the national market and customers only wait one day for service,” reports Joffe. “People can bring their car in after work and take a loaner car home. We work on the car overnight, and they pick it up in the morning.” The adjustments have caused volume in the service department to triple. BMW of Sterling/MINI of Sterling offers rental cars from Enterprise Rent-A-Car Co. (which rents space on the lot) to customers whom it can’t accommodate in a loaner vehicle. There’s also a pick-up service for vehicles and a repair vehicle equipped for minor maintenance on the road. “Sixty percent of cars we service come from other dealerships,” Joffe offers. Jordan adds, “This is representative of how we stand up against the market. People can buy BMWs from a lot of folks, but they come here for a reason.”
Personal Touch
Moorehead’s exceptional commitment to people also extends to the community. Shortly after Hurricane Katrina battered the Gulf Coast, Moorehead and several of his Kappa Alpha Psi fraternity brothers packed his corporate jet with supplies and flew to Baton Rouge, Louisiana, to offer their support. Moorehead donated a car to a family who had lost everything. “Having an opportunity to do something like that and to have that young man actually cry because he was so appr
eciative–that made it worthwhile.”
Damon Lester, president of the National Association of Minority Automobile Dealers, has witnessed Moorehead’s generosity: “Tom’s contributions through his charity golf tournament to benefit
About every six weeks the dealership hosts clinics for new BMW and MINI owners. They have even entertained customers with defensive driving techniques at nearby Summit Point Raceway. “Defensive driving is a thinly veiled disguise for having a hell of a good time without any interference,” shares Joffe, who is a racing enthusiast and aligned the dealership with BMW Formula Racing, a national team participating in about 12 races per year.
Moorehead uses these events to reach out to the African American community. It’s why he hired Harold Amaker, community relations director at BMW of Sterling. “He wanted to make sure that every African American within a 50-mile radius knew that we’re here,” says Amaker, who previously worked for Mercedes-Benz North America for nearly 19 years and was retired for a year and a half until Moorehead called him. “I connect with students at Virginia State University, Hampton University, and Norfolk State University to let them know that there are opportunities in the automobile industry.”
In the Right Direction
Whether it’s having his wife, a seasoned lawyer, act as in-house counsel; his son, Tony, serve as MINI general manager; or Joffe lead the profitable service department, Moorehead understands the importance of hiring knowledgeable and loyal staff to support the organization. He points to Jack Welch’s book Winning (Collins; $12.95), which stresses the importance of hiring the right people in the appropriate positions to drive success. “The product goes without saying. So hire people with the skills that serve the job, give them the direction and the philosophy of the organization, then just get out of their way.” And what organizational philosophy does he give them? Always take care of the boss. “Not me,” Moorehead jokes, “Mr. and Mrs. Boss–our customers.”
General Manager Carroll Stewart is a faithful steward of the company’s core values. “I’m his eyes,” says Stewart. “Our goal and mission is to make our customers feel valued and make our customers feel that they are a part of our organization.”
Together, Stewart and Jordan are now helping Moorehead hammer out his strategy for continued success, both in and outside of BMW of Sterling/MINI of Sterling. In the works
are several deals to acquire more dealerships, including a Harley-Davidson dealership. Moorehead, in a joint venture with Marriott International Inc. and Integrated Capital L.L.C., is investing $39 million to build a Marriott Residence Inn Hotel in Prince George’s County, Maryland, which will open in April of 2008. Moorehead says that real estate will be his focus once he’s ready to retire from the dealership.Retirement, however, is not pending. “My first goal is to run this dealership in a way that my fixed expenses will be covered out of my parts and service operation and I won’t have to depend on new car sales to make a profit. I think if we can just do the renovation and keep our costs in line, and if BMW continues to produce the right product for us–and so far they have been–we should be able to do that,” reveals Moorehead. Next, he wants to be in a position to sell 1,000 new MINIs and at least 2,289 new BMWs next year. He also hopes to increase used-car sales, which he hopes will be easier once the city extends a road past his dealership. “Drive-by traffic really helps used-car sales. With them opening up the street, the city estimates that 21,500 cars will be passing the dealership per day. I know once that happens we’ll be able to move our monthly used cars sold from around 43 to around 100. Lastly, Moorehead hopes to bill at least 10,000 service hours by the end of the year and improve his Website so that it doubles the number of people coming into the dealership and adds another branch of service to the customer.
“Running the dealership is tough because we’re dedicated to our success and the service we perform,” says Moorehead. “We won’t be the most expensive; we won’t be the cheapest. But we will have the best service component in the marketplace.”
B.E. 100s Flashback
For 15 years, auto dealers had been top revenue performers on the Top 100. By 1988, there were so many successful franchisees that they couldn’t be contained within one list. As a result, the BE 100S was born, ranking the 100 largest black industrial/service companies and the leading 100 black auto dealers on two separate lists. Shack-Woods & Associates, the BE Auto Dealer of the Year, was in the driver’s seat at the time. No. 1 on the BE AUTO DEALER 100 with sales of $89 million, the Ford franchise run by partners William Shack and Timothy Woods was one of the first black mega dealerships, with seven outlets in three states–California, Arizona, and Colorado.