Tag Archive | "EFG"

An Interview with John Pappanastos

When he joined EFG Companies’ board of directors in 2006, John Pappanastos found a willing partner in his quest to drive innovation in an industry that rewards hard work and creative thinking. Today, as the company’s chief executive, he continues that mission with the help of his coworkers and partners — including a dedicated group of agents.

Tell me a little bit about your company and its place in the industry.

EFG is a 40-year-old national innovator and administrator of F&I products. Our portfolio ranges from repair and maintenance to debt protection, aftermarket, security and traffic-driving programs, with more than 2,200 accounts selling our products last month.

Our most powerful asset is EFG’s engagement model that requires uniquely qualified and motivated professionals. I truly believe it is unmatched in terms of sales and servicing support in the field, agile product innovation and customization, and a suite of technology capabilities that improve agents’ productivity and ability to service their clients.

Our professionals literally operate as an extension of our agents’ teams to target, profile and win new business, and we offer a highly collaborative contract administration model that places our agents in a position of control and importance with their clients.

We thrive on measurement, and we compete to win.

Are there any recent or future developments within your company that you would like to tell us about?

I’m especially proud of the fact that EFG has received nine national awards in 12 months, including being named to the Dallas Top 100 most recently. It is one thing for a company to talk about itself. It is entirely another when an industry recognizes them for excellence and vision. The Top 100 recognition, in particular, is meaningful because it indicates that our people understand their individual roles in creating a customer engagement model that is incredibly difficult to replicate. We operate in a “culture of initiative” that focuses entirely on the interests of our partners and their customers in a values-driven manner.

I’m also very proud of our product innovation, which is actually led by a council of our top agents who meet twice a year to discuss industry trends, dealer challenges, and building profitable businesses while keeping an eye on the horizon.

In terms of products, we offer some of the most effective powertrain contracts in the market. We recently launched the market’s first mileage-only (i.e., no monthly term) vehicle service contract. In terms of technological innovation, we’ve built highly dynamic client portals that provide our partners with access to contract production by account and allow them to review, reconcile and pay bills, to cancel contracts or simply receive a cancelation quote, to review underwriting results and reinsurance cession statements, and to review claims status 24 hours a day, 365 days a year.

How did you (personally) get started? What caused you to choose this career path?

I worked for two and a half decades in the telecom industry prior to joining EFG’s board of directors in 2006. I was asked to join the board to provide strategic and financial planning based on the changing dynamic of the retail automotive industry — and the need for dealers to increase focus and investment in business planning and analytics. After working closely with EFG’s executive team, clients and business partners for a year, I accepted the position of president and CEO.

In EFG, I found a values-driven company bringing expertise to a function within the dealership that generates about 40% of the average dealership’s gross profit. It was a company with a proven operating platform and a rich heritage of customer service. All we had to do to create something very special was invest in our people and instill process execution discipline.

What are your outside interests / what do you like to do on your days off? What activities / sports are you passionate about?

Although all of my five children are grown and out of the house, my kids remain the highest priority in my personal life. I also enjoy weightlifting and cardio workouts, personal investing, skiing and traveling. And I love football, especially Crimson Tide football.

What are the biggest issues you see facing the industry today and in the future?

Most people are concerned about continued dealership consolidation, about the potential demise of the franchise model, about increasing regulatory oversight that is disconnected from market demand, and about the challenges associated with employing and selling to Millennials.

While all of these issues are very real, I believe that the biggest challenge facing today’s auto dealer relates to building customer loyalty. While this is not a new problem, it has clearly been exacerbated by the proliferation of the Internet and the growth of the Millennial segment.

The fact is that customers do business with companies that they trust, with companies that share similar values, with companies that transact business the way they want to transact. At a minimum, the industry’s employee and customer engagement models must become more flexible and more transparent (or at least more respectful and direct). We have to learn to engage with employees and customers in the way they want to be engaged with. And the key will lie in building the right team and managing a disciplined model to build relationships with customers over the life of their vehicle ownership.

The industry is in serious need of new employee talent. The best dealers spend an inordinate amount of time identifying, hiring, developing and retaining personnel. They avoid industry “retreads” and instead focus their energy on bringing in young talent that they can develop organically into future leadership. By doing so, they create a team with shared values, especially with respect to integrity, work ethic and a customer-first mindset.

What advice would you give to someone new to this industry?

I think the auto industry provides a great place to make a living and build personal wealth. Few industries reward entrepreneurial initiative and hard work as well as our industry, and the career path to grow in terms of personal responsibility and compensation is almost codified. As employees grow and mature, they learn to manage all elements of a P&L, from employees to suppliers to inventory to customers. Few industries offer such an opportunity so quickly.

So, my advice would be fourfold: Believe in yourself, be willing to pay your dues, embrace technology and develop a thirst for learning.

Is there anything else you would like to add?

I think few business people actually take the time to calculate what an underperforming partner is costing them. While they may be able to quantify the amount of money they are literally paying their partner for service, they fail to quantify the true costs associated with the partner’s underperformance in terms of market share and margin per retail unit sold, and also in terms of employee development and morale.

Long-term relationships with people you like are wonderful things and often merit a premium price. However, I would encourage business leaders to fully understand the premium being paid as a result of long-term relationships. Strategic partners are those that engage as if they have an ownership interest in your business to help you grow your business and execute at your highest level.


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EFG Companies Hosts 5th Bi-Annual Agent Council

DALLAS, Texas – EFG Companies, the innovator behind the award-winning Hyundai Assurance program, held its 5th Bi-Annual Agent Council at the Rancho De los Caballeros outside of Phoenix, AZ. EFG’s premier agents from across the United States attended this three-day conference from Wednesday, April 22nd to Friday, April 24th to discuss current industry trends and challenges, share best practices and discuss new product innovation.

Hosted in the spring and fall of each year, this conference is to provide a collaborative environment where agents can formalize their strategies to better serve their dealer clients, improve F&I performance, and increase dealer profit.

“Our agent council underscores our core support of our agents’ long-term strategies,” said Eric Fifield, Senior Vice President, Agency Services, EFG Companies. “By stepping back to dissect market trends and map agent progress on hitting their goals, we can effectively evaluate how to better contribute to their success and build their business.”

In EFG’s efforts to provide productive solutions in building agent profitability, the company created the EFG Top Agent Award. This award is determined by overall performance, effective training, and comprehensive achievements throughout the year. This year’s award was given to Empire Dealer Services out of Boston, MA during the Agent Council.

“This award underscores the collaborative relationship between EFG and Empire Dealer Services,” said John Kane, Cofounder of Empire Dealer Services. “By working with EFG to implement effective dealer solutions, and proactively train our people and the dealerships we work with, we’ve been able to generate a PRU increase of $200 to $250 with a VSC production increase of 10 percent and an appearance protection production increase of 25 percent.”

“One of the main objectives with EFG’s Agent Council is to guide and direct our own efforts in the evolution of product development and process improvement,” said John Pappanastos, President and CEO, EFG Companies. “At each conference, we identify key products and processes that need to be developed to support our agent’s initiatives.”

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Minn. AG’s Lawsuit Against EFG Dismissed

PAUL, Minn. — Minnesota Attorney General Lori Swanson’s lawsuit against EFG Companies regarding its direct-to-consumer sales of vehicle service contracts was dismissed on Dec. 24, 2014, 90 days after it was filed in the Fourth Judicial District Court.

On Sept. 24, 2014, the attorney general charged the F&I product provider with violating three consumer-protection laws for the way it handled cancellations and refunds on service contracts sold through third-party sellers. But an internal audit conducted by EFG showed that its distributors paid 96% of all consumer refunds within the 45-day period required by Minnesota law.

“As part of the dismissal, there was no finding of fault, no finding that EFG did anything wrong, and no civil penalty or fines were imposed,” John Pappanastos, president and CEO of EFG Companies, said in a statement issued to F&I and Showroom magazine. “The resolution of the Minnesota case within 90 days is evidence of the AG’s understanding that EFG is a consumer-centric company that acts with high integrity to ensure that consumers are treated respectfully and fairly.”

The executive noted that the company “moved quickly in accordance with its normal operating procedures” to pay the remaining refunds that fell outside of the 45-day period.

Swanson’s office did not return calls seeking comment. The attorney general, who was reelected to her third term this past November, had charged EFG with violating the state’s Service Contract Law, the Consumer Fraud Act and the Uniform Deceptive Trade Practices Act for not delivering on its promise of issuing full refunds to consumers in a timely manner if they canceled their service contract within 30 days.

“Minnesotans are bombarded with postcard mailers claiming that their auto warranties are about to expire, and people need to know that not all of these companies play fair,” Swanson warned in a press release her office issued at the time of the lawsuit’s filing. The release and a bulletin that warned consumers about service-contract sales no longer appear on the attorney general’s website.

Speaking to F&I and Showroom this past September, Pappanastos said EFG was first contacted by Swanson’s office in December 2013. The attorney general gave no indication that EFG was at the center of what her office described as a “broad-reaching” investigation. The executive added that Swanson indicated at the time that multiple providers were being investigated. That last communication EFG had with the attorney general before the lawsuit was filed was in June 2014.

“Up until the lawsuit, they never said what the nature of the investigation was,” Pappanastos told F&I and Showroom in September. “And somehow, the press was privy to the lawsuit before us.”

Customers who cancel their EFG contract within 30 days of purchase are instructed to contact the seller for a refund. Typically, that refund consists of the purchaser’s down payment, which is collected solely by the seller. EFG, Pappanastos noted back in September, does not transmit funds on contracts until after the first 30 days, which means it would not have an enforceable contract in its system until after that period. That means EFG would have no record of the sold contracts if that was the case with the consumers involved in the complaint. But the company could not confirm if that was the case because Swanson’s office refused to release the names of the affected consumers.

Since 2009, according to the attorney general’s lawsuit, EFG has sold 3,700 service contracts to Minnesota residents. Its complaint rate, Pappanastos touted in September, was less than 1%.

“The audit confirmed there was no systemic or methodical intent to delay refunds, and the amount of money in question proved nominal,” read Pappanastos statement, in part. “We want to thank all of our stakeholders for your support of EFG during this situation, and for your steadfast confidence in the fact that EFG operates with the highest level of integrity.

“EFG applauds the efforts of attorneys general across the nation for ensuring that consumers are treated fairly in accordance with their state laws,” he added. “As you know, EFG holds itself to a very high standard and we would like to see the entire industry held to such a standard.”

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EFG Launches Certified Motorcycle Program Enabling Dealers to Capture Greater Share of Wallet

DALLAS, TX – EFG Companies, the innovator behind the award-winning Hyundai Assurance program, announced the launch of Certified Hide™, a motorcycle certified pre-owned (CPO) program that increases motorcycle unit sales by enhancing dealership pre-owned offerings.

Certified Hide gives dealerships a purchase-motivating tool to increase pre-owned motorcycle sales with a 106-point inspection, complimentary 30-day, 60-day, or 90-day unlimited mile options for limited powertrain coverage.

“Certified limited powertrain protection programs are common in the automotive realm, but are rare in the motorsports industry, said Chris Clovis, Vice-President of Sales for EagleRider. “The key is value — offering consumers pre-owned motorcycles for thousands less than new, while still providing the protection and financing of a new bike. Our CPO program from EFG Companies eliminates the ‘Buyer Beware’ from a used bike purchase, replacing it with confidence and excitement.”

With the combined effect of American consumers still being wary of the economy, and motorcycle sales dependency on discretionary income, dealerships competing for increased unit sales need a significant value-add to incentivize consumers to make a motorcycle purchase with them. According to the latest report from the Motorcycle Industry Council, motorcycle sales rebounded in the second quarter of 2014, experiencing a 2.6 percent year-over-year increase. After a fairly stagnant first quarter, with sales down 0.2 percent, the industry welcomed the increased business and expects sales volumes to continue to rise.

“As recession-worn consumers return to motorcycle dealerships, we can expect pre-owned sales to increase as consumers look for less expensive options that they can maintain even in another economic downturn,” said Glenice Wilder, Vice President of EFG Motorsports. “For example, EagleRider, the world’s largest motorcycle travel company, used our motorcycle CPO program to demonstrate their commitment to their consumers and providing quality service, and have already seen a 19 percent increase in unit sales in the first 30 days since the program launched.”

According to EagleRider’s Finance Director, Gary Gullien, consumers find the program impressive and see the product as a reason to buy from EagleRider. “One of the customers I spoke with said the only reason he purchased from us was because the bike received a 106-point inspection and 30-day limited powertrain coverage.”

According to “FORBES”, while consumers are spending as their incomes rise, they are unwilling to borrow more money than absolutely necessary. When weighing the pros and cons of purchasing a used motorcycle, consumers are not only concerned with price, but also what other value the dealership can offer them.

This new offering from EFG will enable motorcycle dealerships to better provide consumers with valuable options while at the same time maximizing profit and customer loyalty by providing quality pre-owned inventory.

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EFG Launches New Vehicle Service Contract

DALLAS — EFG Companies announced the launch of Power x2, a vehicle service contract that doubles the benefit of the manufacturer’s powertrain warranty. In a survey, the company found that 90% of consumer respondents said the product would cause them to seek out a dealer that offered it.

According to the survey, conducted by a third-party research firm, 62% of consumers said the manufacturer warranty significantly affects what make and model of vehicle they consider purchasing. And with little differentiation between new vehicles offered for sale on dealership lots, operators need to provide consumers with a value-driven reason to come to their retail location vs. their competitors.

The new offering also represents the company’s response to consumers keeping their vehicles longer than historical norms. According to EFG’s study, 48% of respondents expect to replace their cars every four to seven years, which could extend their ownership beyond 100,000 miles. By doubling the benefits of the manufacturer’s warranty, dealerships have the opportunity to use this trend to their advantage.

Seventy-two percent of survey respondents stated that they would go out of their way to purchase a vehicle from a dealership that is less convenient to them if that dealership doubled the benefits of their manufacturer’s powertrain warranty as a complimentary offering.

“In this highly competitive market, we know that dealerships need showroom traffic now, whether online or at their physical location, not six months to a year from now,” said John Pappanastos, president and CEO of EFG Companies. “Power x2 provides dealerships with an immediate means of capturing market share based on current consumer wants and needs by moving past the price game to a more value-based conversation that motivates car shoppers to a transaction.”

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The Sub-Prime Cinderella Story: Who Has The Glass Slipper?

After five years of consistent increases, used car prices are expected to collapse in 2014. According to NADA, the average price of a used car rose by 18 percent from 2007 to 2013, and is now roughly 10 percent higher than the average price of the past two decades. That bubble is expected to pop as NADA predicts 42 million units to hit showroom floors nationwide. Of that 42 million, 16 million units will be a result of lease-end models being returned to franchise dealers.

For an independent dealer selling used cars, this poses a significant obstacle. Beyond the drop in price per retail unit sold, other kinds of dealers will lay claim to 38 percent of the available used car inventory. However, there is an upside. According to a 2014 Equifax study, there is pent up demand for more than 26 million vehicles. With the labor force participation rate declining and moderate wage and employment growth, it’s a good assumption that consumers will continue the trend of preferring to buy used over new.

These recession-wary consumers are more willing to shop for the best price and financing available. This partly explains why used vehicles accounted for 62 percent of all vehicles financed for the fourth quarter of 2013, according to Experian.

While we ended the year with an almost even split between independent and franchise dealer market share in used car financing, independent dealers are well positioned to tap further into the current consumer market. For example, picture what you think a typical independent dealer customer looks like:

  • What’s their credit score?
  • Do they rent or own their home?
  • Are they employed?
  • If they have gainful employment, in what industry segment are they employed?

The reality of today might surprise you. With the impact of the recession weighing on bank accounts, even prime consumers are now browsing independent dealership lots. Once you lower your eyebrows, try this number on for size: 11.4 percent of buy-here-pay-here customers fell into the prime and super-prime category in the fourth quarter of 2013.

But what’s even more interesting is the subprime category. This category has become the consumer segment that holds significant value to all dealers: franchise, independent and buy-here-pay-here alike. Of all buy-here-pay-here customers, 88 percent fall within the nonprime, subprime and deep subprime categories. 1 These same customers make up 37.3 percent of franchise dealership customers. 1 While franchise dealers are new to woo this category, they are aggressive, and in some cases offering more than what independents have in their quiver.

When it comes to providing value and creating lasting customer relationships, franchise dealerships have service departments and a deep bench of F&I products to protect and repair the customer’s vehicle. Providing benefits such as these, which have significant impact in preserving the customer’s bank account, has been an uphill battle for independent dealers, specifically in the F&I department.

With an inventory ranging from zero to 70,000 miles, franchise dealerships have significant options in providing consumer protection products. Beyond the manufacturer’s warranty, F&I product providers underwrite extensive vehicle service contracts, maintenance plans, appearance protection products and some forms of insurance, like GAP.

The benefit of this deep bench is they have a better opportunity to increase their value proposition with the customer. By providing extensive coverage on various aspects of their vehicles, they can give their customers significant protection for their bank accounts, while increasing dealership profit per retail unit with upgrades or extended coverage.

Independent dealers paint a different picture. Vehicles on an independent dealership lot have been through approximately three ownership cycles and typically range in mileage from between 30,000 and 150,000 miles. With this in mind, their F&I bench is significantly limited in comparison.

The majority of consumer protection products tailored for independent dealers limit coverage to mainly the powertrain of these older-model vehicles. The reasoning behind this is pretty straight-forward. Older model vehicles are expected to break down more and therefore F&I product providers are more hesitant to create extensive protection products for them as they would expect a higher number of claims submitted.

However, in this value versus cost environment, nonprime and subprime consumers have a new level of expectation in the terms of the products available to them from both franchise and independent dealerships. The recession has forced companies across all industries to re-evaluate the customer service experience, as well as their value proposition. There is no difference in the auto industry. Now, it’s not only prime and super-prime customers that demand the highest level of service, but rather all customers expect to have the same level of respect for their business. While some customers may not be able to afford a traditional vehicle service contract, they are still very interested in purchasing mechanical breakdown protection for their vehicle.

For this reason, F&I product providers are re-evaluating the products they develop for independent dealerships. For example, EFG Companies, a consumer protection product provider based in Irving, Texas, developed a vehicle service contract called Best ReGuards that extends past the powertrain specifically for independent dealerships. This product focuses on several extended coverages while maintaining a low cost price-point:

  • Engine
  • Turbocharger/Supercharger
  • Transmission
  • Transfer Case
  • Air Conditioning
  • Electrical
  • Fuel
  • Seals & Gaskets

Another trend in consumer demands goes beyond mechanical breakdown to include benefits around personal safety, such as roadside assistance. Again, the majority of roadside assistance plans available for independent dealers only provide limited services, if any. However, no matter their credit score, people from all walks of life need the ability to take care of themselves and their family in the event that they are stranded due to a breakdown. With that in mind, EFG paired the following roadside assistance benefits with the mechanical benefits of their Best ReGuards VSC for independent dealers:

  • Towing
  • Flat Tire Changes
  • Jump Starts
  • Lockout Service
  • Nationwide Coverage

Beyond the product itself, the company also backed it with the same product administration that franchise dealers receive. This further emphasizes and ensures the level of customer service on which independent dealers can rely, and that positively impacts their relationships with their customers.

You can see how growth in options such as this gives independent dealers a more valuable toolkit to address each customer’s specific need when it comes to protecting their vehicle. They also fortify independent dealership’s customer appreciation model, which increases their customer retention. With revamped F&I products that provide more comprehensive coverage and service, independent dealerships are positioned to:

  • Increase their product portfolio to generate greater profits
  • Cultivate customer relationships by providing new market opportunities
  • Match consumer buying trends to the dynamics of their dealerships

As supply is expected to outpace demand in 2014, independent dealerships need to expand their product portfolio to be more competitive in the market. Considering how few independent dealers have access to provide F&I products, you are going to see more providers recognizing this growing opportunity and focusing product development efforts on this fresh dealer segment.

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