Doug Callahan owns Helms Brothers Mercedes Benz and Volkswagen in Long Island, NY. His Mercedes store is one of the most successful in the country. The store began as a Studebaker franchise in 1934. After growing up working at the dealership, Doug and his father bought out Frank and Charlie Helms in 1977.
Doug recently sat down with Suzanne Cochrane, his general manager since 2000, and with Dealer magazine. Together, they talked about the way the industry has changed over the years, and how they have adapted to stay current in one of the country’s most competitive and diverse markets.
Their story reflects the important role entrepreneurial franchise dealers play in the lives of their employees and their communities.
Doug, share with us the history of the Helms Brothers Mercedes Benz dealership.
Doug: It was started in 1934 by two brothers, Charlie and Frank Helms. Originally, it was a Studebaker dealership. For a while, Studebaker was the importer for Mercedes.
So Studebaker was my first introduction to the car business. My father worked for Charlie and Frank as a general manager.
I started working at the dealership washing cars when I was 14. It sounds cliché, but that is what happened. Through the years, I basically worked every job in the dealership.
How did you acquire the dealership?
Doug: It was sometime late in 1976. We had Dodge, Volvo and Mercedes franchises and at the time I was running the Mercedes store. I had an opportunity to go in with a partner as a dealer principal in another store in New Jersey.
I went to my dad and told him about it. He decided he would come with me. It worked out since he didn’t have any ownership with Helms.
We talked with Charlie – Frank had retired by then. But he flew up the next morning and they told instead of going through with moving to another store, we could buy them out.
So that’s what we did. We completed the deal in 1977.
That was a tough time for the U.S. economy with interestrates pretty high. I imagine you had to finance the deal.
Doug: We were fortunate, actually. Frank and Charlie helped us with the financing. We probably wouldn’t have been able to do it otherwise.
Obviously, they had a lot of faith and trust in us because of our history with them. We worked hard through the years and had been pretty successful with the business. I ended up buying my dad out in 1984.
You no longer have Dodge and Volvo?
Doug: Right. At the time, we could see Mercedes was gaining ground as a brand. So by 1980, we had gotten rid of both Dodge and Volvo.
You bet on the right horse.
Doug: You could say that.
Suzanne, when did you join Helms?
Suzanne: I started here in 1982 in the billing department. During high school I had worked at Chevrolet dealership in the office. But that store went bankrupt, so I was able to get a job here. It was close to home.
What’s been the biggest change for you through the years?
Doug: Aside from the product, which obviously is so much better today, the technology has changed the business the most over the last 10 years. The Internet, the customer relationship management software, data – it’s changed the way we do business.
We can’t do business the same way we did 20 years ago. It’s forced us as an industry to be better with the customer.
From an employee standpoint, I’ve been lucky here. We’ve had very little turnover through the years.
Suzanne: The focus and redirection on the employees and the human side of the business is the biggest change for me. We were always focused on the businness part – selling and servicing cars, but in the last five to 10 years, we have had such a different level of engagement with our people.
Some of that was dictated by Mercedes having introduced us to certain employee related initiatives for which I’m extremely grateful.
But we were able to recognize the need to make changes. We were in a place where the client experience, our team, the morale and the culture now has grown by leaps and bounds for us.
Tell us about the growth.
Suzanne: Well, when I began here, we had only 35 employees. Today we have over 180.
Doug: I think it was seven or eight years ago when we invested in a 52,000 sq. ft. service facility off site. And we now have two acres of storage real estate that can accommodate more than 400 vehicles.
But by investing in the service facility, we were able to turn our showroom into a fifty vehicle showroom as opposed to the six it had been before.
I’ve heard about this employee initiative from other Mercedes dealers.
Suzanne: In 2012, Mercedes conducted an employee engagement survey that took a progressive approach in evaluating how strong its dealers were in employee relationships. It was a real eye opener for Doug and me. It showed us areas where we needed to make some real adjustments.
We made a lot of changes based on the feedback we received. Since 2012, we’ve had two more surveys and our scores have increased significantly.
Walk us through some of the changes.
Suzanne: Some of the specific changes include doing what we could to reduce some of the health care premiums our team members were paying; creating employee incentives and developing an Employee Advocacy Group.
We also began focusing on supporting charitable events with our team and added a picnic in the summer. We also sponsored an employee softball team.
Once we received the initial results, we began holding quarterly meetings where many of these initiatives and action plans got their start. It’s added to the interaction between the employees and management.
And we’ve seen our leaders take personal responsibility in the development of our employees.
Our team loves the meetings because they get to hear about the growth going on – today, we’re the 15th best-selling Mercedes store in the country. Meanwhile, they offer suggestions, develop initiatives and action plans. They’re part of the process now.
Doug: One thing we realized was that we weren’t having enough interaction with our technicians. It was hard because they are at another facility. But Suzanne and I rotate every other month where we take at least five technicians to dinner.
Getting out of the dealership environment helps create a more relaxed atmosphere.
Suzanne: From 2013 and 2014, our level of engagement with our technicians has jumped 30%.
Doug: I do want to say, probably the best thing to come out of the surveys and the initiatives is the relationship with our customers. Our CSI currently is one of the highest in the country. We’ve been able to create a culture that gives our employees ownership and that is reflected in our customer relationships.
I’ve talked with numerous other Mercedes dealers who speak highly of the employee surveys. Which is a bit different than the normal response when a manufacturer implements a new program or initiative for its dealers.
Suzanne: Certainly, I know as dealers, we are concerned with how much involvement the manufacturer has in our business.
But with Mercedes Benz over the last five years, I know they have made me a better dealer – even beginning with the Dealer Performance Scorecard. Let’s be honest, we do earn our margins now.
But there have been so many initiatives in recent years that have helped us improve as dealers.
The market you’re in – Long Island, that’s one of the most competitive in the country.
Doug: It is very competitive. We have 11 Mercedes stores in our market. We’re on Northern Boulevard in Bayside – that’s one of the main thoroughfares in Long Island. And there is a Mercedes store eight miles to the west of us, eight miles to the east, both on Northern. And there is a dealership eleven miles to the south.
Suzanne: It’s also one of the most diverse markets in the country. But you can’t be afraid of that. You have to embrace it.
Doug: And our team members reflect that diversity. Today we have five sales women, in addition to several women managers. We have Chinese, Korean, Polish, and Latino team members.
Doug, has it always been that way, or have you had to change the diversity along the way? And was the change intentional?
Doug: From a management perspective, in hiring women, it wasn’t necessarily intentional. We just hired the best person for the job, whether it was a man or a woman.
But you’re right. We saw the importance of having an employee base that customers feel comfortable speaking to. So that was more intentional.
Suzanne, when did you become general manager of Helms Brothers?
Suzanne: It was 14 years ago, after I went to the NADA academy in 2000.
That was long before the industry began pushing for more women managers.
Suzanne: You’re right. I don’t think I knew any better. I didn’t really see it as being in a man’s world. I love the business and just worked as hard as I could. But I certainly couldn’t have seen the career path working out the way it has.
Doug: Suzanne excelled at every position she’s had here. It wasn’t easy for her. I made her the Saab sales manager back when we had Saab.
Suzanne: I would look at him and ask, “What about Mercedes?”
Doug: Right. But then I had her running both the Saab and Volkswagen franchises at the same time.
I ended up selling the Saab store before the recession.
Volkswagen dealers have not had an easy time the last couple of years.
Suzanne: That’s true. But we’ve learned we can still make good business decisions from an expense standpoint and with inventory management.
And if we maximize the programs they offer, it may not be everything we want, but we have been able to get it to the point where it’s manageable.
Does having a brand that’s not flourishing make you a better dealer?
Doug: There’s no question that it does. When you look at it, as a Mercedes dealers, we have some luxuries.
But with Volkswagen, every action we take could be the difference between being profitable or unprofitable.
Suzanne: There’s no doubt, being a Mercedes dealer, we want it all. We want both the gross and the volume and we can get it.
We recognize with Volkswagen, we can’t have that right now. So we have to manage how many we sell, we have to maximize each sale and be functioning with a laser-like focus on the areas that matter.
I’ve learned, if we have a good plan at the beginning of each month to maximize their programs, we can get to the end of the month in good shape.
As you look to the future, how are you preparing to position your dealership?
Doug: My biggest concern is where the industry is going with electric vehicles. It’s not going to happen overnight, and no one really knows how it will play out. But if they take off, we’ll have to change a lot of what we’re doing.
Suzanne: We had a record breaking month in November with Mercedes. But in the midst of the 12 hour days and the day-to-day responsibilities, I have to spend some time planning for the future.
Mercedes is a forward-thinking brand, and it’s made that decision to focus on volume. So that’s one area I’m thinking about what that means for our marketing and how we reach those segments.
Doug has always told me there will be up years and re will be down years and that we have to prepare for that. I was here in ’08 when we had to make some tough decisions.
Having lived that, we know the importance of being prepared for when things don’t work out as we expect.
What about your pre-owned business?
Suzanne: In 2013, we sold 2,300 new vehicles and 400 pre-owned. This year, 2014, we’ll finish with 600 pre-owned sales. It’s a great profit opportunity for us, but it’s not easy in these type of urban environments.
Doug, any thought of adding new stores?
Doug: We’ve had our opportunities through the years. But real estate here in Queens is the challenge. I’ve looked at it and to develop a new brand would take about $30 million for land and another $15 million to $20 million in other costs. That’s hard to find a brand that will generate a return on investment.
I do have real estate next door and if I was offered the right brand – one that we could develop on that land, then I would consider it.
With such a diverse population, how has your marketing changed?
Suzanne: We focus on cable and have created many of our own ads. We’ll also do direct mail with our pre-owned market. That does drive a lot of response for us.
Much of what we do, does depend on the segment we’re targeting. We still do newspaper advertising – especially with the Asian community. And we also engage in event marketing.
Of course, digital marketing has become mainstream. We used Auto Alert for years to target customers that were near the end of their lease or had equity in their vehicles. We use Mastermind, and that investment has paid off well for us.
Do you envision a world in which true digital transactions is the norm?
Suzanne: I’ve talked with Doug about this, and we’re actually seeing a reversal toward the phone call.
We use a great tool called Call Source. It lets us listen to our phone calls and that was tough. But there’s nothing better than a tool that opens our eyes to more opportunities.
What we learned was how many people were using the website to get our number, and now, with smart phones and click to call, our calls are increasing.
Doug: After listening to our calls religiously the last five months, I can see how important our handling of the call is.
How we handle that call determines whether we make the sale.
Suzanne: I’ve made a strong commitment this year to focus on training and getting everybody better on the phone. We’re already seeing our appointment to show ratios improve.
Integration is a big issue for us. Mercedes is implementing a new Digital Drive program. They’ve spent the last year evaluating the various solution and how well they integrate with each other. In this case, we’ll use what they suggest.
Doug: We’re already doing quite a bit in the service drive, using IPads that integrate with the DMS.
You mentioned Mercedes moving more toward a volume-based focus.
Doug: Our philosophy has always been that we don’t have to be the biggest in volume, but we do want to be one of the most profitable. We have a good balance here at Helms between the two.
But we do work very hard at optimizing every single profit opportunity. We have a large population in the market and people with money – two important ingredients for being successful.
Suzanne: You have to believe in your value story. You can have the profitability if you’re building the value of what you offer. And we control that story.
We’re not just about the car. We focus on that experience for the customer. We train hard and have a cohesive management team that works for the sales team.
If we get negative pushback on a number, then I know we missed a step along the way in telling our story.
One thing I’ve learned is that being profitable gives us the opportunity to positively impact the lives of our employees by letting them participate in that. We also can impact our community in a positive way. And we’re passionate about that.