Cadillac dealers, whose store values were below average in the late 1990s, are enjoying a lucrative comeback.
As Cadillac introduced a wave of popular new products over the past five years, the value of a successful metro store has quadrupled.
As a result, many dealers are renovating or building stores. Some dealers want to buy more Cadillac dealerships, but few stores in major metro areas are for sale.
"Volume is up about 35 percent from five years ago," says dealer William Bradshaw of Bradshaw Chevrolet-Buick-Cadillac, a dealership in Greer, S.C., that sells 150 new Cadillacs annually. "With the CTS and Escalade, we're seeing younger customers."
Store values have skyrocketed because sales and profits have increased. Also, Cadillac is perceived as an up-and-coming franchise, so dealership buyers will pay more for "blue sky," the value of a dealership's intangible assets. Blue sky is expressed as a multiple of pre-tax earnings.
In 1999, a typical 400 unit-per-year store posted pre-tax profits of about $500,000 and sold for about two times pre-tax earnings or about $1 million, say store brokers. Today, the same store is posting pre-tax profits of about $1 million and is worth four times pre-tax earnings or $4 million. The figures do not include real estate and other hard assets.
Although the value of Cadillac stores is up, their blue sky can't match that of Lexus dealerships. A solid Lexus dealership can sell for six times pretax earnings, says Sheldon Sandler, founder of Bel Air Partners in Princeton, N.J., an investment banking firm specializing in car dealerships. Most dealerships typically sell for three to five times pretax earnings.
Good times
"Business is good and getting better," says dealer Gary Stanford, of Les Stanford Cadillac in Dearborn, Mich. He just renovated his dealership's exterior and has begun an interior upgrade. He sells about 540 Cadillacs annually.
Dealer Val Ward Jr. of Val Ward Cadillac Inc. in Fort Myers, Fla., just renovated much of his store's interior, including the body shop and offices. He sells about 800 new Cadillacs a year.
"These are the best times I can remember," Ward says. "We're seeing a world of difference in the clientele."
Cadillac is attracting younger buyers - an indication that the brand has a hipper image. This year, the average age of Cadillac buyers is 59, down from 63 in 1999. And the average Escalade ESV buyer is 48.
Bob Goodman this year sold his dealership, Goodman Cadillac-Saab-Kia in Ann Arbor, Mich. He acquired the Cadillac franchise in 1999.
"It seemed like a good time," Goodman says. "The brand was hot, the product was hot. It just made sense."
He declined to reveal the dealership's sales price. Cadillac had a four-car lineup in 1999. Today, it has four cars; a light truck, the Escalade; and a sport wagon, the SRX. Cadillac sold 178,507 vehicles in 1999 and 216,090 in 2003.
Cadillac sticker prices are higher, too. The most expensive Cadillac in 1999, the Seville, started at $44,025. The division has four nameplates that start above $45,000: the Escalade, Seville, DeVille and XLR.
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As Cadillac introduced a wave of popular new products over the past five years, the value of a successful metro store has quadrupled.
As a result, many dealers are renovating or building stores. Some dealers want to buy more Cadillac dealerships, but few stores in major metro areas are for sale.
"Volume is up about 35 percent from five years ago," says dealer William Bradshaw of Bradshaw Chevrolet-Buick-Cadillac, a dealership in Greer, S.C., that sells 150 new Cadillacs annually. "With the CTS and Escalade, we're seeing younger customers."
Store values have skyrocketed because sales and profits have increased. Also, Cadillac is perceived as an up-and-coming franchise, so dealership buyers will pay more for "blue sky," the value of a dealership's intangible assets. Blue sky is expressed as a multiple of pre-tax earnings.
In 1999, a typical 400 unit-per-year store posted pre-tax profits of about $500,000 and sold for about two times pre-tax earnings or about $1 million, say store brokers. Today, the same store is posting pre-tax profits of about $1 million and is worth four times pre-tax earnings or $4 million. The figures do not include real estate and other hard assets.
Although the value of Cadillac stores is up, their blue sky can't match that of Lexus dealerships. A solid Lexus dealership can sell for six times pretax earnings, says Sheldon Sandler, founder of Bel Air Partners in Princeton, N.J., an investment banking firm specializing in car dealerships. Most dealerships typically sell for three to five times pretax earnings.
Good times
"Business is good and getting better," says dealer Gary Stanford, of Les Stanford Cadillac in Dearborn, Mich. He just renovated his dealership's exterior and has begun an interior upgrade. He sells about 540 Cadillacs annually.
Dealer Val Ward Jr. of Val Ward Cadillac Inc. in Fort Myers, Fla., just renovated much of his store's interior, including the body shop and offices. He sells about 800 new Cadillacs a year.
"These are the best times I can remember," Ward says. "We're seeing a world of difference in the clientele."
Cadillac is attracting younger buyers - an indication that the brand has a hipper image. This year, the average age of Cadillac buyers is 59, down from 63 in 1999. And the average Escalade ESV buyer is 48.
Bob Goodman this year sold his dealership, Goodman Cadillac-Saab-Kia in Ann Arbor, Mich. He acquired the Cadillac franchise in 1999.
"It seemed like a good time," Goodman says. "The brand was hot, the product was hot. It just made sense."
He declined to reveal the dealership's sales price. Cadillac had a four-car lineup in 1999. Today, it has four cars; a light truck, the Escalade; and a sport wagon, the SRX. Cadillac sold 178,507 vehicles in 1999 and 216,090 in 2003.
Cadillac sticker prices are higher, too. The most expensive Cadillac in 1999, the Seville, started at $44,025. The division has four nameplates that start above $45,000: the Escalade, Seville, DeVille and XLR.
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