Dealer Jim Gramm puts managers on path to ownership

Gramm: “I learned that if I could make people owners in a store, they’ll work a lot harder.”

Jim Gramm

  • Title: Owner, Safford Automotive Group
  • Big break: Bought his first store, Safford Dodge in Fredericksburg, Va., April 1, 2002
  • How: Paid $3 million, had a $1 million line of credit and agreed to donate $1 million to a homeless charity over 10 years
  • Now: Safford Automotive Group has ?8 dealerships; ranks No. 133 on Automotive News’ list of the top 150 dealerships based in the U.S.; retailed 6,602 new units in 2016
  • Future: Gramm wants to own up to 15 dealerships with the general manager at each store as an equity partner

Dealer Jim Gramm knocked around the car business for nearly 20 years, mostly in sales. But as he approached age 40, a hard reality hit him.

“If you’re not an owner by 40, you’re going to be a salesman at the age of 60,” said Gramm, 57, owner of Safford Automotive Group in Springfield, Va. “I watched guys turning 50 or 60 get weaned out and very few of them walked away fat and happy. I decided I was not going to let that happen to me. I was going to become an owner.”

But the cost of a dealership, even in 2000 when he started looking, was multiple millions of dollars. His dealer boss had said she’d help him buy a store, but later changed her mind. Rather than give up, Gramm got creative and with hard work, scrimping money and finding a good partner, he did it. Last April Fools’ Day marked 15 years for Gramm as a dealer.

In that time, Gramm grew one dealership into a group of eight in northeast Virginia. He is shopping for “a few more potential deals,” hoping for up to 15 stores. His drive for growth isn’t greed, he says; it’s giving. He remembers his struggle for ownership and he wants to help others.

“Because of the difficulty I had in becoming a dealer, and very few people can start up to become a dealer, I learned that if I could make people owners in a store, they’ll work a lot harder,” said Gramm. “I could also give them the same opportunity I have.”

Early days

Safford Automotive Group sells about 10,000 new and used vehicles a year, representing 10 brands. It ranks No. 133 on Automotive News’ list of the top 150 dealership groups based in the U.S., with 6,602 new-vehicle retail sales in 2016.

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It’s a far cry from Gramm’s humble beginnings. On an autumn day in 1983, the 23-year-old Gramm was refueling his car in a small Virginia town after a lackluster job interview. He noticed a sign for a Chevrolet dealership down the road and thought, “I’m dressed up, so I might as well go apply for a job there, too.”

The Chevy store declined to hire him. But he went next door to JKJ Chrysler and was hired on the spot. When he started the next day, the manager gave him a desk and a warning: “Be careful if it rains because the roof leaks and any papers on your desk will be ruined,” Gramm recalled. “They told me, ‘The keys are behind the door, the cars are out there and if you have any questions, ask.’ That was my training.”

But Gramm sold a car to each of his first two customers that day, earning a $1,800 commission. Soon, the car business was “in my blood,” he said.

By 1987, Gramm was a sales manager at a Nissan store in Marlow Heights, Md., a rough area near the District of Columbia where drug dealers sent their girlfriends in to buy their cars, he said. Often those cars were returned to the dealership within days, riddled with bullet holes, he said. He lasted 45 days, but the job gave him the management experience to keep advancing. In the spring of 1991, he became a general sales manager at Maryland Motors Chrysler-Plymouth in Rockville, Md.

He worked there 10 years, rising to general manager. But that was as high as he could go because the dealer owned 51 percent of the store, and each of her seven children held a stake as well.

In 2001, he suggested to the dealer that she buy another store that he would run. The idea was that he would get an ownership stake in it. She agreed and they started putting a deal together to buy Safford Dodge in Fredericksburg, Va. But as he drove her to the airport one day, she broke the bad news. “She said, ‘I just can’t do it. I’m retired, I’m comfortable and I don’t want the risk,'” Gramm said.

He was “devastated,” but undeterred. He asked for her blessing to pursue the deal on his own. She agreed, but he said, “We both knew there was no way on earth I could do it.”

Doing the deal

The dealership cost $5 million, which Gramm did not have. But through some savvy real-estate investments earlier in his life, Gramm scraped together $1 million and secured an equity line of credit for $1 million.

He talked the seller into a special deal: $3 million in cash, $1 million in payments to be made from a line of credit and payments of $100,000 a year for 10 years from Gramm to a homeless charity.

“Of course the problem still was coming up with $3 million,” Gramm said.

Blum: Longtime business partner

That’s when he had some luck. Through mutual friends, he met David Blum. The two had worked together briefly in the past and got on well. Blum agreed to be a 30 percent partner and contribute enough money to make a down payment. Gramm got two banks to loan him money for his floorplanning and the land purchase, which tacked on another $2.7 million to the cost. The loans carried a 10 percent interest rate.

“Everyone else was borrowing at 4 percent, but it was my only option,” Gramm said. “I had left my job and I had two kids at home.”

He worked in the seller’s office for three months, Gramm said, and the seller “wasn’t convinced we’d actually do this deal, but I wasn’t leaving.”

On April 1, 2002, Gramm owned the store and “a bunch of debt,” he said.

But Gramm also got an RV dealership next to Safford Dodge in the deal. That business contributed a lot of revenue to Gramm’s business over the years, especially after he moved it to a larger location more suitable for RV sales. He sold it in May to Camping World.

Growing partners

Gramm’s franchised dealership growth spurt started in 2005 when he bought a second Dodge store in Springfield, Va. Today, he sells Alfa Romeo, Chrysler, Dodge, Fiat, Genesis, Hyundai, Jeep, Kia, Maserati and Ram vehicles. He started with 40 employees and now has 550, he said.

Gramm considers himself “very, very fortunate,” and wants to share that. So he takes on a partner at every store he adds. If general managers prove themselves, he rewards them with an ownership stake that they purchase over time. He has nine partners, each owning a 5 to 30 percent stake in their stores. Blum, 83, is still his partner and works every day.

“We have a reputation that if you work at Safford and do well, we’ll bring you in and make you an owner,” Gramm said. “We have a couple guys lined up waiting to come work for my stores. They are currently GMs at other stores making really good money, but they want to come here so they can get ownership.”

Now he needs more stores to recruit more talent and diversify his franchise mix.

“I’m in an NADA 20 Group. In that group, most of the guys think I’m crazy because of the philosophy of promoting these guys and giving them true partnerships,” Gramm said. “But I make more money because they’re running those stores like they’re their own. Everyone wins. In most cases, owners aren’t willing to let everybody win, but it’s helped me.”

Jim Gramm

  • Title: Owner, Safford Automotive Group
  • Big break: Bought his first store, Safford Dodge in Fredericksburg, Va., April 1, 2002
  • How: Paid $3 million, had a $1 million line of credit and agreed to donate $1 million to a homeless charity over 10 years
  • Now: Safford Automotive Group has ?8 dealerships; ranks No. 133 on Automotive News’ list of the top 150 dealerships based in the U.S.; retailed 6,602 new units in 2016
  • Future: Gramm wants to own up to 15 dealerships with the general manager at each store as an equity partner