Lennox may buy 75 dealerships
Mishler believes Lennox can close on more than 50 of the purchases this year. Lennox wants to buy the dealers before somebody else does.
"Over the last three years, in excess of 250 Lennox independent dealers have been purchased by a consolidator, a utility or somebody else. As they lose their ability to independently determine from whom they purchase products, that is a threat to Lennox," Mishler said.
He noted that some consolidators are marketing who they are rather than what they sell. They'll talk about good, better or best equipment and never mention a brand name.
After Lennox purchases as many of its biggest dealers as it can, it will move to a second phase of buying dealers geographically to protect and shore up markets.
Mishler said he doesn't know if the firm will buy 200 dealers or 500 dealers in the next few years because "it depends on how the industry evolves over the next couple of years." He said he would not be surprised if the firm eventually acquires dealers representing 25% of its business, but that number could be 10 points higher or lower.
Lennox has presented the offers to buy its dealers in a nonthreatening way. Dealers can sell to Lennox, become an associate dealer or remain independent. An associate dealership brings some additional benefits to the contracting firm.
"One is a type of deferred annuity for the business owner, a retirement annuity for the principal based on his level of purchases, and Lennox also gets the right of first refusal to buy the company if the owner decides to sell down the road," Mishler explained.
The level of services available to a dealer will not change regardless of its status, Mishler said.
"We will try to promote those dealers as model Lennox HVAC dealers in terms of the service they provide, the amount of training they have and the value they deliver to the consumer," he said. "All of those services will also be available to associate and independent dealers. We want to create a marketing umbrella to allow all contractors to grow and profit through their association with the Lennox brand.
”We will continue Lennox's national advertising and Lennox dealer advertising.
"Everything we do with the acquired dealers, the associates and independents will be able to do as well, especially with what the consumer sees in the marketplace. The consumer won't know they're dealing with a Lennox-owned dealership or an independent. It's like if you walk into a McDonald's; you don't know if it's a company-owned store or a franchised store."
Lennox-owned dealerships will continue to run under their own name and with the same management.