Cover Story ~ Lloyd Chavez
Interview by Michael Roscoe
Lloyd Chavez has been a guiding force behind the success of Burt Automotive Network for over fifty years. While waiting to be hired by General Motors, Lloyd became the 31st employee of sleepy Burt Chevrolet in Englewood, Colorado. Needless to say, he never left, and today he commands an automotive retail empire that grossed over $1,000,000,000 last year. He recently shared his story, and his thoughts on the business, with Publisher & Editor Mike Roscoe.
Lloyd, how did you get started in the car business?
After my graduation from high school, I enlisted in the Navy at the very tail end of World War II, at the age of 16. I experienced being in both Hiroshima and Nagasaki soon after the atom bombs were dropped. I came out of the Navy as a WWII vet and was eligible for the GI bill. I enrolled at the University of Denver and proceeded to earn my four-year degree in three years, by going year-round.
What is your degree?
My degree is in Business Administration. I minored in Business Law and Accounting. I had always loved automobiles, although I had never had enough money to get one of my own. While at DU, I did some term papers on the auto industry, the retail end of the business and on the manufacturing and wholesale sides of the business. With all of the interviews I had, with visiting dealerships locally and in talking to people from the manufacturing side, I took an even bigger interest in automobiles. By the time I got out of the University of Denver, I knew I wanted to be in the automobile business. I applied at General Motors, hoping I would be hired and move to another part of the country. I grew up in Littleton, Colorado. Back then, if all of the farmers came in at one time to shop on Saturday night, with the farmers and the townsfolk you might have about 2,000 people. I wanted to get out of the little town and go to a big city, other than nearby Denver. I applied with General Motors and they said, "Fine, you look great, we can use you in about three or four months."
What were you supposed to do in between?
I asked them that. All through college we were living in a 23-foot, canvas-roof house trailer in my folks' back yard, with nothing but a water hose and an electric light cord hooked to their house. I had married my childhood sweetheart who had lived across the street from me. We had a baby boy and we were living in this canvas-roof house trailer.
In their local office, I told GM I couldn't wait three or four months, I had to make some money. They picked up the phone and called someone, I didn't know who. The conversation went something like this, I could only hear the GM side of it, "I think we ran into the man you have been looking for on a short term basis. We are going to hire him in about three or four months, but in the mean time he would like to get a job where he can make some money." They were talking to Nate Burt, who owned Burt Chevrolet here in Englewood, Colorado.
You were going to sell cars for a little while.
Yes. Just until GM called to take me on. I took the job and I was the 31st employee at Burt Chevrolet, which was the smallest dealership in the market area. Sure enough, four months later General Motors did call me. By that time I had a chance to reflect and also had some success at selling cars. I had come to realize that I not only wanted to stay in the retail end of the business, but I wanted to stay in Colorado. So that was my start with Burt Chevrolet and I never left. That was 50 years ago.
Just think how different your life would have been if GM would have had something for you right away. What happened next?
I sold automobiles for 10 years and went into management. We went from the smallest to the largest Chevy store in Colorado. Generally, if you are number one in Colorado, you are more than likely going to be number one in the entire region. By 1963 we were the number one Chevrolet store in the region. I was Burt Chevrolet's only new car salesman when I started with them. Then I went into used cars to get that experience and I eventually became the used car manager. By that time, we started expanding as far as used car lots were concerned. At one time, I was running four used car lots for Burt around the metro Denver area.
Stand-alone used car lots?
Yes, with my headquarters at the Chevrolet store. I was a used car general manager. From there I went to general sales manager for new and used and then I went to general manager. In 1966, Mr. Burt had the opportunity to become the first Toyota dealer in the state of Colorado. Toyota had been in the country about ten years on the West Coast and they were just starting to branch out into the other states. I was allowed to buy into the ground floor of the Toyota store and I was made general manager and vice president of Burt Toyota. In the early '70s, we also became a Subaru dealer. There again, I got in on the ground floor and I was able to buy in. I didn't have the money to buy into the existing Chevrolet store at that time, because it was huge by then. We had Chevrolet, Toyota and Subaru right in a line here on South Broadway in Englewood, Colorado.
So when did you become a dealer?
That's the point. I was offered some opportunities of my own by manufacturers after my experience with Toyota and Subaru as the representing dealer. I was the dealer from the standpoint of representing the stores on dealer councils and different things like that. I just didn't own the controlling interest at that time. In fact, I only owned 25%.
So how did you end up owning all of the Burt Automotive Network?
To make a long story short, Mr. Burt had a son in the business who was president, but decided he didn't want to stay in the business. When the time came to have another president to replace him, Mr. Burt picked me. I think it was because I showed that I could handle it. He must have realized that I was doing a lot of the "president" work already. I became the president and Mr. Burt continued as chairman. By that time I had gained 35% of Toyota and of Subaru. In 1975, I bought 25% of Chevrolet. So I had 25% in Chevrolet, I bought the son's portions of Toyota and Subaru, which gave me his 35%, so I had 70% of Toyota and Subaru. It wasn't until 1987 that I was able to buy Mr. Burt out of the whole thing and I became sole owner of Burt Chevrolet, Burt Toyota and Burt Subaru. I've kept the good Burt name. We used to call it "Burt on Broadway." Eventually we had Chevrolet, Subaru, Toyota, Nissan and everything right in a line here on Broadway, where I am sitting now. I gave it the name "Burt on Broadway," it was kind of a catchy thing. We had a logo that was like a marquee, rimmed with light bulbs. That's the way we would advertise. We would line the whole outside of the page with the bulbs and the flashers; a marquee. Up at the top, in a special kind of mountain-looking marquee cap it said, "Burt on Broadway." That's the way we ran it for many years.
So early on, you were Burt Chevrolet's only new car salesman. Now you're chairman of Burt Automotive Network, which had over $1 billion in revenue last year. What have been the most important factors to that growth?
For almost 40 years, we have been the largest Chevrolet dealer, not only in the metropolitan area, but in the state and in the Rocky Mountain states. For nineteen years we were the largest Subaru dealer in the world. In the early '90s we had grown to just under three hundred and fifty million dollars in revenues.
In 1994, AutoNation came into the picture. They announced they were breaking ground and I read about them. It was a custom that our children would meet at Christmas time at our (the parents) home and bring their families. Some of our kids were living out of state then, and in some cases, overseas. My son, the one who was born in the trailer, was a Ph.D. in molecular genetics and microbiology and he was a vice president of one of the largest pharmaceutical companies in the world. One daughter had married a young man that she met in college who became an attorney. He was an attorney for Citibank for six years and for Manufacturers Hanover Trust for another six. This was all overseas; he was a troubleshooter for the bank. Another son-in-law had gained great experience in managing three of the existing stores. Our other daughter, his wife, also had gained valuable dealership experience over many years working right under me in the dealership.
At our Christmas gathering, in 1994, I expounded to them that the automobile business was changing very drastically. (By that time, the son-in-law attorney had come into the business. My son was still working for the pharmaceutical company.) I explained to them that there were going to be tremendous changes and I had to make some decisions. I said, "I am going to have to decide something and I need your help. I am either going to have to sell, or I am going to have to expand." By that time, we had already had plenty of feelers, some from big names that I won't mention. I told the "big names" that I had to make up my mind; I needed some time. At that family meeting, we not only decided that we should stay in the business, but that we should grow. I said, "We have to grow, because we can't stay the way we are," even though we were the largest group here in Denver, the Denver Metro area and in Colorado, for that matter. We had to grow to be able to compete with the public companies. They decided to come into the business, including the Ph.D. son, who is now a recognized expert in computerization and the Internet. I had a management company that started to oversee everything. We started our growth. We grew and grew. Last year, 1999, we did over a billion dollars worth of revenue.
When the decision was made that you were not going to go, but grow, what were some of the things you did to grow?
The first thing was, we actively went out and started seeking new points. We had never pushed our way around from the standpoint of our reputation, as far as the manufacturers were concerned. With Denver growing as fast as it was, there were some obvious dealer points that should be allowed. We started trying to get other brands. We would send out applications to all of the different brands. Some of that started paying off. Then it came to the point where it was hard to get new dealer points from the manufacturers for various reasons. For years General Motors had a policy that you could not have contiguous dealerships in one market area. If we had one in Englewood, we couldn't have one in Littleton. Littleton was growing like mad. We were stymied because of the dealer agreement. So we went out and started going for other brands. It was unheard of, at one time, in my experience, for a Chevrolet dealer to be a Ford dealer or vice versa. But I let it be known to Ford that I would be interested in becoming a Ford dealer.
And they say, "Gee, we can get this great Chevy dealer to be one of our dealers."
Right. That's exactly what happened. I got a relocation dealer point in Denver for Ford and put it out on East Arapahoe Road and it is growing like mad. The facility and revenues have already expanded three times so we are ready to do more.
To further facilitate our growth, I made it a personal responsibility to acquire land for building up a land bank; to go out and find raw land that we thought would someday be prime for commercial. If you combine everything, the land that we already have dealerships on, plus the land that we have scattered around the metropolitan area, we have well over 500 acres. Actually, some of it has yet to be built on, but as I speak, we are getting closer and closer to breaking ground in different areas where we are able to get brand new points, or relocation points.
Not all of the land bank will be used for automotive purposes. In some instances we stepped up and bit the bullet and bought existing dealerships of other brands that needed to be relocated. Maybe the dealer operator or owner didn't want to have to build all over again in a new area. We are used to it and we also have the land. Having the land is, I guess, the answer to your question; it's one of the biggest factors responsible for our tremendous growth. We built up strategically selected land that is commercially zoned. We can either buy somebody out and relocate an older dealership, or if we're fortunate enough, be able to get one of the very scarce new points that might be offered by manufacturers. That's where our growth has been and that's where our growth is going to continue to be.
Let me ask you this, Mr. Chavez: With the John Elway AutoNation stores here, AutoNation is having more of a concerted push in the Denver market than any other market...
They are a great competitor. A big competitor, obviously. There are a number of public auto groups operating in this market. We consider all of them competitors of ours, so it is not just AutoNation.
A lot of dealers have an eye on this market to see how it goes and to see if these guys come in and wipe everybody out. Give me your thoughts on what it is like to have them in the market and to compete against them.
In Denver, Colorado, and the Rocky Mountain area it is John Elway Auto Nation USA, and John has continued as their pitchman for advertising. It's a hell of a big organization. That's all the more reason for us to be able to operate the way we are operating and lay down the groundwork. First of all, we felt, from the beginning, and I think time has proven this right, that we were large enough to be in the business and to be known as the locally, family-owned dealership, and being able to advertise that proudly. What's more important than anything else is customer satisfaction. Our customer satisfaction ratings are as good, or better, than anybody's. We really work hard at that. Consequently we have a large foundation of satisfied customers and families. We get letters all the time saying, "I just bought my fifth car or we have bought the tenth car within the whole family." As long as we can continue with that kind of customer satisfaction record, we can compete with anybody in our area. When it comes to Colorado, and certainly the Denver metropolitan area, we can compete with anybody. That doesn't mean we will be as big as they are, they are public companies. But as far as being able to take care of customers and being able to compete with them, whether it be the Internet or anything like that, they could probably learn some things from us.
Would you say that it's a big advantage that your managers have much more ability to be entrepreneurs than AutoNation managers?
Our managers know the territory better because they are local. Also, as the public companies grow in the area, we find a lot of their top people come to us. A lot of their employees don't want to work for a public company. Some of their managers don't want to work for a public company.
There is a very definitive limit to the opportunity.
Right. Two of the very best managers, when they bought these different stores, worked for them for about two years, and then decided that they did have limits as to what they could do and they left. Whenever they take on another franchise or another store, invariably, we will have a lot of applications from some of those really good employees who want to work for a locally-owned business that is not a public company.
I said this in the magazine, several years ago actually one of the reasons why dealerships work is you get ambitious, aggressive people in there. Either they are dealers or they want to be dealers and they make it happen. What is Auto Nation going to do when those people are gone and they are not able to attract that high level of motivated, ambitious managers?
I think the biggest thing that public companies have already experienced, and they will experience even more so in the future, is that, to my knowledge, most of them have had the ex-dealers sign a contract to work and run the business for them for three, four or five years. Some of these dealers have talked to us and stated that it's awfully hard for a guy who has had his own dealership and made it a success, to answer to somebody else. It's a big change for a dealer, an entrepreneur, who built up his own dealerships. Especially when he can afford to take more time off because he sold out for a goodly amount.
Is it logical to expect that these dealers are going to work as hard for somebody else as they did for themselves?
No. They probably won't. Eventually, as those contracts go, they will probably get out of the business. But I know a couple of cases where dealers have left their positions or they are waiting for their contracts to expire and they will take whatever money they have been able to save from their initial sale and they are trying to buy other dealerships to get back into business for themselves.
I know dealers who are presently doing that too. Lloyd, my question has always been, when this generation of dealers is out, where is the next high-level, entrepreneurial, ambitious dealer/manager going to come from? How are the AutoNations going to be able to attract those kinds of people?
You have to grow them from within. You have to treat them well, you have to pay them well, you have to be pretty much on even terms with them. Even if they don't have ownership, treat them like they were a full partner. You let them learn and you give them an opportunity if not buy out a whole dealership, maybe they can own a part of more than one dealership. That is the way to grow people.
What do you see around the corner? What do you see on the horizon for dealers, Lloyd?
To the dealers who are willing to keep growing, not just in size, but growing in vision and backbone and willingness to take risks, the future looks bright. A true entrepreneur isn't an entrepreneur unless he is willing to take risks. You have to take some chances. Hopefully, most of them will work out. Some may fall by the wayside. That's part of being an entrepreneur.
I think there will be larger groups in the future. They don't necessarily have to be public. If you are a good group that can really take care of your customers in your own territory and you can make good decisions and have some luck in the process, get the right lines and get some additional points that are located in the right places, then that, to me, is going to help cement your future. You have to bring good people up into the business. If your family doesn't fit the mold, you have to get good people who aren't members of your family and bring them in. We are blessed because we have a combination of both. We have a great solid base of associates who have been with us many, many years. Plus, we have members of the family who are committed to the business who are taking us into the 21st century. If we operate and grow our own businesses and know the local territory better than the groups that are run from out of state, then we will do quite well.
Any final thoughts you would like to share with America's dealers, Lloyd?
First of all, recognize that you do have strong competition. As good as you might think you are in your capabilities and your ability to compete, you have to be better than what you were\yesterday and tomorrow you have to be better than today. You have to keep getting better. You have got to stay up with the latest technology and trends. You don't have to dip into every single idea that comes across, you can pick and choose, but investigate all that you can. If you have all of your people working towards satisfying the customer, then you have your future secure. You take care of your employees and they will take care of your customers. That is simplistic and not original, but if you are not doing those things, you may not make it.
