Interview with RRR Automotive Group

RRR Automotive Group, founded by Dick Patterson and Robert Hisaoka in the 1990s, is one of the most valuable import groups in the mid-Atlantic region. Based in Maryland, the group included Toyota of Bowie, Kia of Bowie, Honda of Owings Mills, Honda of Greenbelt, College Park Hyundai, Toyota Certified at Capital Plaza (one of the nation’s few stand-alone Toyota certified centers) and three collision centers. In 2024, Kerrigan Advisors represented RRR Automotive Group in its sale to Group 1 Automotive. Here Patterson, President and Chief Executive Officer of RRR, talks about the guidance Kerrigan Advisors provided and also offers perspectives on issues facing auto retailers.

When did you first get into the automotive industry and how did you become a dealer principal?

Dick Patterson: After leaving the Navy, I worked in a Lincoln-Mercury dealership’s accounting department in Washington, D.C. and went to school in the evenings to obtain an accounting degree. When I completed school, the dealer promoted me to office manager, where I got a clear view of how salespeople are compensated. I asked him for the opportunity to sell cars. After going into sales, I became awestruck by the possibilities in the car business. I was promoted to sales manager, general sales manager and general manager with a few organizations around town over the next 10 years. I went to work for a large dealer group in the Washington, D.C. metropolitan area, where I learned that the owner had a reputation for helping people own their own dealerships. He asked me to take over one of his dealerships in northern Virginia and within a couple of years, he asked me to form a management company for him. He knew I had a strong desire to become a dealer and he told me to work hard, save my money and he would help me achieve that goal. And he did!

How do you believe your franchise mix contributed to the success of your dealership group?

Patterson: The Washington, D.C.-Baltimore metro market is very heavily weighted toward imports. I think staying disciplined with that focus has been very important. In addition, there is no substitute for location, location, location.

Why did you choose reliable, responsible and respectful as the principles for your group?

Patterson: I believe well-run organizations, large or small, need a common understanding of who they are and what they do. A mission statement is always good. A very important associate of mine and I sat down one day and created what we believed RRR Automotive Group stood for and these were the three guiding principles:

• Reliable: Be reliable with our customers. Promise what you will do and do what you promise.

• Responsible: Be responsible with our customers. Be responsible for creating a customer advocate.

• Respectful: Be respectful of our customers. Treat each person the same way you would treat your family member. “THEY ARE FAMILY.”

This philosophy has been a pillar of our organization from the start.

"It’s always been about the commitment the organization makes to their people which will determine how well the company performs." — Dick Patterson

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How do you feel the industry has changed in recent years compared to when you entered the business?

Patterson: Our business has always been people dealing with people. That’s what it was 51 years ago and that’s what it is today. The differences are the requirements of the manufacturers and government agencies. These requirements, in my opinion, can either be viewed as major obstacles or road maps to doing business effectively and many times more efficiently. Either way, these processes have to be well managed and organized. Most importantly, you have to make sure these requirements don’t get in the customer’s way of doing business with you.

What are the biggest challenges and opportunities for private, regional dealership groups during the next decade?

Patterson: Recruiting, hiring, training, developing and managing people. It’s always been about the commitment an organization makes to their people that determines how well the company performs. In addition, having a well-organized operating structure is absolutely imperative. In other words, the individual dealerships have been designed to operate autonomously as individual businesses with their own management structures. The management companies that oversee/manage the dealerships should be designed and structured to support the stores, not run them. Dealership groups that are properly organized to expand will do very well. Those who don’t set the stage will not.

There has been considerable consolidation in the Washington, D.C.-Baltimore metro market in the last couple of years. What do you believe is driving this consolidation?

Patterson: This market has a heavy government employment base in addition to the private contractors that support the government. The population is very dense and average household incomes are strong. This area has long been described as a recession-proof market. With the exception of a few short market slowdowns, I’ve always experienced a robust car market here. I also believe the dealers in this market are very good operators, which makes their dealerships great acquisition targets.

What surprised you about the sale process for your dealership group?

Patterson: Nothing really surprised me or us. We’ve done buy-sells before. However, the professionalism of Kerrigan Advisors and Gabe Robleto (Senior Vice President at Kerrigan Advisors) was exceptional. They know what they’re doing and they are very transparent and provide great communication during every step of the transaction.

What are your thoughts on how electric vehicles (EVs) will impact the auto retail business?

Patterson: The government’s push for EVs has dramatically changed our industry. The very nature of EVs brings tremendous change. I’ve always stressed the importance of how critical it is for our people to know how a car actually works, including sales, service, parts and collision personnel. So we will need to educate our employees about EVs to be prepared to communicate effectively with customers.

EVs are creating change – rapid change. We shouldn’t take for granted that this evolution will find its way into our operations. We need to be intentional about how it impacts our operations in areas such as inventory management, sales training, service training and so forth – it’s here to stay in a big way.

What is your outlook for auto retail in 2024 and beyond?

Patterson: With inventories increasing and some remaining pent-up demand, 2024 will be a good year, headed back to 2017 to 2019 levels of sales volume. I believe service and parts also will be very strong and the collision business will stay at its current level. Overall financial performance will tighten up because there’s more pressure on gross margins and uncertainties in finance. Regardless, 2024 should be a great performance year. Beyond 2024, business will remain strong, but will face increasing pressures on performance as we move back towards pre-pandemic margins. Well-developed and prepared organizations are going to do great.

Why did you choose Kerrigan Advisors to advise you on your sale?

Patterson: Gabe Robleto called me and asked if we were interested in selling our dealerships. I told him we were not considering it. Nonetheless, we met with with Kerrigan Advisors and as a result, changed our mind after having a very direct conversation about value, processes and timelines. Kerrigan Advisors’ expertise in selling the most valuable dealership groups and their impeccable track record of success, particularly in the mid-Atlantic region, made them the perfect partner for this transaction. We hired Kerrigan Advisors with a mutual understanding of our goals, process and timelines. Everything they committed to doing for us was delivered and we were in lock-step at each stage of the process. I couldn’t have been more satisfied with the final result and would recommend Kerrigan Advisors to any dealer considering a sale.