Expansion may seem an almost counterintuitive strategy in today’s economic climate, but for those dealerships able to stay in the black, it can be a sensible one. For Brent McMahon and the West Coast chain of stores that bear his name, it’s a familiar approach, but it hasn’t always ended well, until recently.
“Prior to opening our Palm Desert location, I had actually opened a facility in San Diego and one on Beach Boulevard in Orange County,” says McMahon, a 24-year industry veteran. “At that point, around 2005 or 2006, the economy was just rocking and rolling, as everybody knows, and I really had a mentality of invincibility. I felt like I could open up anywhere and be successful, which was the stupidity of a young entrepreneur.”
As the economy began its nosedive, McMahon recalls quickly realizing there were two rules to expanding the Southern California market: A store must be on a thoroughfare with a high car count and it should preferably be built on a freeway.
“If you’re not, you’re just dead in the water,” says McMahon, who opened his first store in 2000. “Those two facilities were both non-freeway. One was on a highway, but not a freeway, and the other wasn’t on a freeway or a highway.”
McMahon quickly backpedaled and closed the stores, reducing his reach to just his original location at Traveland USA in Irvine, Calif., and a second store at the American RV Expo in Colton, Calif.
Brent McMahon is pictured next to a Class A motorhome on his sales lot in Irvine, Calif. Starting with one location, McMahon’s has grown to three California stores as well as four locations in Arizona, making the dealership a West Coast powerhouse. Photos courtesy of McMahon’s RV
He had a chance to redeem himself in 2007 when an opportunity from fellow dealer and friend Steve Banas of Southwest Coaches presented itself: Banas had hoped to expand his towable dealership in Traveland by building a site in Palm Desert, but couldn’t afford to occupy it. Instead, he leased it to other dealerships; first, La Mesa RV, then Giant RV.
“Steve had mentioned that Giant was going to be vacating the property and that there was going to be an opportunity for the facility,” McMahon says. “Well, it was a gamble because times were tough; we’d just shut two dealerships, but we felt like Palm Desert was an area that was growing with a great retirement community out there.”
Big Gamble Pays Off
It was a very tempting offer that just happened to coincide with McMahon’s new marketing mindset. McMahon figured his motorhomes and towables would be best offered in a location where people had already made a commitment to the RV lifestyle.
“That place was Palm Desert,” McMahon says. “So we took the gamble and we went out there. It’s one of the best decisions we ever made. The store’s been a tremendous success.”
It also served as a springboard for McMahon’s RV into Arizona, a popular place for snowbirds and out-of-state dealers alike.
“In that same year, 2007, we were able to lease a small lot in Quartzite, Ariz. We then expanded into Yuma and have a satellite location in Parker,” he says. “They’re kind of up and down that I-95 freeway where, again, we felt like these people who had already committed to the RV business were going in droves despite the economy.”
Still, the dealership’s Grand Canyon State expansion wasn’t easy. Due to an employee error, McMahon and Paul Lewis, director of operations, had to spend New Year’s Eve in Arizona to ensure government paperwork for the Quartzite store was properly completed before McMahon RV could sell a single unit there.
McMahon and several managers also got to experience the joy of driving weekly from Southern California via I-10 to check on the Arizona stores, but the trips, he says, were worth it.
What truly cemented the company’s presence in Arizona wasn’t those first three stores; their seasonality prevents them from selling as much as a year-round location. Instead, McMahon was fortunate enough to snag the former Beaudry RV facility in Mesa, a 10-acre site with a lot capacity of more than 300 units, a modern shop and a restaurant. Mesa is McMahon RV’s seventh store.
As McMahon’s number of stores has risen, so to have its revenues. The dealership did more than $175 million in sales last year.
Mega-dealers Battle for Market Share
Beaudry’s demise also brought another new name to Arizona: Lazydays RV. As McMahon was completing his deal for the Mesa site, the Florida megadealer was finalizing its purchase of an 86-acre facility in Tucson. The site is Lazydays’ second and puts perhaps the RV industry’s best-known dealership just a little more than 100 miles away.
McMahon’s RV carries a wide range of RVs as part of its strategy for reaching nearly every potential RV customer. Some of the brands McMahon’s RV carries include Coachmen, Forest River, Holiday Rambler, MVP RV, Monaco RV, Pleasure-Way, Sportscoach and Thor Industries. The dealership is engaged in an ongoing battle with Mike Thompson’s RV for the title of California’s top-selling RV dealership.
So how does McMahon feel about his new neighbor?
“I have a lot of respect for their operation,” he says. “I grew up in the shadows of Mike Thompson and Giant RV, so I don’t have fear when it comes to competing with dealers that are successful.”
McMahon notes that Arizona accounts for a surprisingly large percentage of RV sales considering the population is less than California or Florida, typically the country’s strongest sales leaders.
“It is a good state to do business in, so I’m not surprised, with the void left behind by many of the larger dealers that went out of business there, like Beaudry, that Lazydays would come in,” he says.
That stands in stark contrast to California, where McMahon says business is heavily regulated and taxed.
“We’re actually looking forward to business in Arizona because for us, California was really the only state we knew, and now that we’ve had a chance to do business somewhere else, it becomes more evident to us the level of bureaucracy that’s involved in doing business in California,” he says. “With the deficit they’re currently running, I don’t see that changing. I think they’re going to continue to be challenged here in terms of taxing their businesses to a point where being successful is going to be a difficult thing.”
While he respects Gov. Jerry Brown, he hopes the governor and the California Legislature can work together to improve the Golden State’s business climate. If the climate doesn’t get better, would McMahon ever leave California entirely?
“I’m rooted here,” he says. “Like the whole country right now, you’ve got to sit down and figure out what you can do and what you can’t do.”
More Focus on Parts & Service
One thing that is in the works is a greater emphasis on parts and service.
Toy haulers are very popular in the Southern California market served by McMahon’s RV.
“We think the service side of the business has got some growth potential, especially with some of these big box retailers (such as Beaudry) going away,” he said. “The Mesa facility we’re very excited about because there’s a number of service bays there. We just leased a new service facility in Colton at the American RV Expo which I think has 10 service bays, so this is actually an area we will invest first as we go forward.”
Parts and service accounts for 20 percent of the dealership’s gross profit, but McMahon would like to get that number up to 30. It may seem like a lofty goal, but he believes those RV owners who’ve kept their units rather than replacing will need his services sooner or later.
McMahon’s RV is not a member of Redex or Route 66, nor has a Camping World co-located on any of his sites. Joining such entities hasn’t been ruled out, McMahon says, but his staff is considering an independent solution that may be announced soon. McMahon, who started his career selling RVs for now-defunct Altmans Winnebago, admits the devastated economy is partly a motivator for creating such relationships.
“Everybody is forced to try to find profit and revenue in places that they may not have thought about in years past,” he says. “It’s a struggle and it’s tough to manage multiple layers of personnel. I know from my organization, due to my background being on the sales side, I think a lot of times dealerships reflect the strengths of the owners, so I guess if I was a service representative, then that may be more an area of comfort to me.”
End of National Dealership Chains?
One thing he is sure of is the era of dealerships, large and small, dotting the nation, is probably over.
“The economy, as it changes, creates a different environment in terms of how many dealers should represent that economy. I think when things were booming, you probably had too many, and today you probably don’t have enough, or you don’t really know where the bottom is here,” McMahon says. “I know it’s a lot more difficult to start as a dealer and there’s probably going to be more attrition going forward.”
He won’t call Mom-and-Pop stores extinct quite yet, but he does see them headed that way.
“I don’t think you’ve seen this completely play out yet, but I do believe that eventually there’s going to be a tremendous amount of consolidation,” he says. “If you’re a smaller operator, it will become more difficult as time goes on.
“I think that the manufacturers are going to be forced to build and develop relationships with dealers that they feel can help retail their way through this very difficult time period,” he adds. “I think you’re going to see those partnerships enhanced because they’re going to have to figure out who they’re going to the dance with. It’s got to be a very difficult time for a manufacturer right now.”
Difficulties aren’t new to the outgoing McMahon; after all, he’s the dealer Hollywood heartthrob Taylor Lautner sued over the delivery of a motorhome. McMahon turned the negative publicity around by challenging the Twilight actor to a push-up contest (the case was eventually settled and McMahon refunded $40,000, which Lautner then donated to a charity).
A sales rep takes time to discuss purchase options with a customer.
“I just try to take an aggressive stance. I tell people I love sports, but I’m not going to go play quarterback for the 49ers next week. This is what we do,” he says. “My staff is excited about the business that we’re in and I just try to lead with the fact that I’ve got a lot of belief in the industry.”
Engaging in ‘Spirited’ Competition
He’s also got a competitive spirit that’s reflected in the give-and-take battle for California’s top-selling store with Mike Thompson’s RV.
“It’s a bloodbath. There’s no love lost between these two operations. It’s really like the Hatfields and McCoys,” he says. “It’s been a very spirited, competitive environment down here that I think serves to motivate you. When you get up every day and you know somebody’s going to get that deal if you don’t, you’ve got to get out there and hustle.”
Now that McMahon has found the path to successful growth, he’s made even bigger plans, but he isn’t going to conquer more states just yet.
“We’ve hired Rockaway Management and we’re negotiating with Imperial Capital in Los Angeles to represent us in a private equity memorandum that would allow us to further capitalize the company for further expansion purposes,” he says. “We do have targeted areas that we’re looking at potentially for growth down the road, but I think as long as the economy is in the state that is, we’ll look for opportunities right now that are sort of in our own territories and areas until we see a pickup in things down the road.”