With today's larger equipment, new technology and more-demanding customers, ag equipment dealers are modernizing their facilities to remain competitive.

John Dobberstein, Associate Editor

Whether it's a major renovation or a completely new building, ag equipment dealers are continuing to invest in their facilities. Despite the downturn in the U.S. economy, dealer development managers say the pace of modernization is accelerating.

In Farm Equipment's 2009 Business Outlook & Trends report, 58.8% of North American dealerships said they expected to increase their capital spending in 2009. Nearly 52% planned to invest in improvements to shop and service areas, 42% expected to modernize and improve their retail operations, and 45.2% planned to upgrade their business information systems.

Along with the obvious cosmetic effects, many dealers say that modernizing their facilities is worth it, because it rejuvenated their employees and customer base. Among the reasons dealers cite for modernizing is to attract a more-sophisticated customer base, finding and keeping high-performing employees, providing more indoor showroom space, keeping up with improvements by neighboring dealers and demonstrating personal pride in the dealership they've built.

Tom Owen, director of network development for Case IH, says he's seeing a lot more "expo center-type add-ons" that can accommodate clinics, seminars or sales training. Historically, dealers cleaned out shop space for those events.

Dealers are also taking a hard look at their service operations, he says, because of the size of the equipment and the need to improve throughput and keep service technicians working at peak levels. "They're trying to build a better integration between the technical side of the equation and the parts side," Owen says.

Wash bays are getting bigger, more and more shop floors are being fitted with electric or geothermal heat, and more money is being spent on sophisticated collection systems for water and waste oil, he adds. There's also more focus at dealerships on advances in communications, with flat-screen TV's being used in the showroom for merchandising, or in the conference room for sales, technical or management training. Business information systems are also getting more sophisticated, he says.

Owen says more dealers are coming to Case IH before they embark on modernization projects to get a better understanding what showroom designs and building layouts are successful.

Otherwise, says Owen, "They'll say, 'Aw man, I wish I'd thought of that before I poured the concrete there, or before I put a wall there. It would have saved me some change orders.' "

He notes that customers are changing, too, and their demands are changing. They need dealerships that can service their large farm machines in a timely manner and understand the technical aspects of their operations. "What might have been OK for the grandpa-and-dad kind of dealership doesn't work any more," Owen says. "These kids (coming into farming) are well-educated, they're classically trained in ag production and, with the more-advanced systems they're using, they're expecting more from a dealership. A picture says a thousand words when you drive past a dealer."

New Holland is in the midst of re-imaging their brand, unveiling new logos and signs throughout the U.S. Along with that, the company is recommending that dealerships upgrade their facilities so farmers buying $150,000 tractors or $300,000 combines will seek out their business.

"One of the first things that comes to mind is that today's larger farmer is looking for parts and service that adds value to their business," says Dennis Hann, sales director for New Holland's mid-state area, which includes Michigan, Ohio, Kentucky, Indiana and Illinois. "A dealer in a lesser facility may not be able to service big equipment in their own facility. That doesn't add value, in the customer's mind, on why he should do business with that dealer."

Farm Equipment interviewed three dealerships in the Midwest about their modernization efforts. The size and scope of their projects varied, but dealers cited a number of reasons for making the investment.

Baxla Tractor: Slat Walls Make an Impression

Baxla Tractor Sales Inc., a New Holland dealer founded in 1946 in Seaman, Ohio, had a challenge in 2007 when it added a second store about an hour away in Washington Court House.

In addition to New Holland, the store services and sells Stihl, Kuhn, Bush Hog, BEFCO, Cub Cadet, Great Plains, AGCO, Demco, Kubota and Kawasaki products.

The new store caters mostly to row-crop farmers who work hundreds or thousands of acres. But employees say more and more business professionals are coming in to buy compact tractors or powered hand tools.

Baxla purchased a closed John Deere dealership for its new location. There was nothing about the building that was dysfunctional for employees or customers, company president Chris Baxla says. But the more employees talked about how the store was laid out, the more they discovered it didn't flow right.

"We kept the same basic format that they had in place, but we felt like it needed some improvement on how the operation was going to work," says Baxla, who's been with the company the past 30 years and managed it the past 13.

There wasn't much drywall hanging or painting to do. But during a $50,000, 3-month renovation project, employees added windows and doorways, dropped new tile in part of the showroom, and moved the parts counter to the rear of the store instead of the front.

"As you come through the showroom, you see the whole dealership before you get to the parts area," Baxla says.

Before the renovation, employees had to make a complete circle inside the building to get from the sales and service departments to the parts department. Corridors were added to connect the departments, cutting down on the time employees needed to complete a task and move on to something else.

Windows were installed in some key areas of the building to make it easier for customers and employees to see what was happening around them and improve communication. One sidewall used to store parts was fitted with windows so customers at the parts counter have some daylight and could see the showroom floor. "Internally, there were few windows," Baxla says.

"One of the offices in the sales department was right next to the parts department, but you couldn't see into the parts area. We put a window in there so employees could see the customers standing there."

They also set up a cashier's office in the front of the store with a counter and work area "so when someone comes in the store, they are greeted. The cashier can also see the parts, sales and service areas."

An added touch was displaying the company's web site in prominent places inside the building. For example, a white border on a wall behind the service desk carries big, blue letters spelling out www.baxlatractor.com.

Perhaps the biggest key to making the dealership more flexible and modern, Baxla says, was adding slat walls to the showroom. The panels have special "channels," or openings, that are used to hang product displays. "We had good, solid walls to do it, so we put the kickboard down and screwed the slat walls in, and it was good to go," he says.

The slat walls also allow the company to keep Stihl products and other smaller items in front of customers no matter where they are in the store. It also allows Baxla to keep products like paint, that aren't on the slat-wall displays, grouped together on the showroom floor for the convenience of customers.

"These give us all kinds of flexibility," Baxla says. "They give the dealership a classy look, and allow us to merchandise throughout the dealership."

Other displays in the center of the showroom aisles are on wheels so they can be moved around, he says.

Baxla says it's hard to quantify the renovation's impact on the company's bottom line, but employees are having a lot easier time getting around the store and getting day-to-day business done. "It certainly makes the store more inviting for customers to shop," he says.

"We use the slat walls for so many things," he adds, "I wouldn't do any showroom without them, period."

Johnson Tractor: 'That's Where I Work'

Sometimes transforming a drab-looking dealership takes a lot more work, as was the case with Johnson Tractor — a Case IH dealership with locations in Janesville, Wis., and Rochelle, Ill.

Along with Case IH and Kubota, Johnson Tractor sells and services shortline brands like Stihl, Grasshopper, Simplicity, Hiniker, Land Pride, Woods, Great Plains and Kinze.

When the company's co-owners and partners, Leo and Eric Johnson, bought the Illinois store in 2007 they inherited a great location — just north of the I-88 and I-39 interchange in northern Illinois. But most of the structure itself was decades old and worn out.

The front third of the building, which held the showroom, retail sales and parts counter, was made of concrete blocks and 60 years old. The middle of the building, which housed the offices and parts department, was 70 years old. That section of the building also had a leaking roof that damaged the ceiling tiles.

By contrast, the shop area in the back had been built only 14 years earlier after a windstorm damaged the original structure. It has an EPA-approved indoor wash area and radiant heat in the floor. "It's really a nice, big building that gives the techs lots of room," Leo says.

The spacious shop and tired-looking showroom stood in stark contrast, and the Johnson brothers decided it was time to give the dealership a facelift. They spent $400,000 on a variety of improvements, both inside and out.

The front 8,000 square feet of the building was gutted almost to the bare walls and re-done. Some offices were enlarged and more room was made for lawn-and-garden items that the rural lifestylers were shopping for. The accounting department was revamped, and some walls were knocked out to enlarge the service department's office.

The building's middle section got a new service bathroom and locker room, and some fresh paint. The leaking roof was mostly a cosmetic issue and could have been overlooked, the Johnsons say, but they chose to replace it anyway with a vinyl membrane roof. Cultured rock was added to the outside walls, along with new asphalt on most of the parking lot. Big, white letters on the building's south side say, "Johnson Tractor" and are visible to motorists exiting onto Highway 251 from I-88. "From the outside, it looks like a brand-new building," Leo says.

The showroom was a major issue. There were three doors leading into the building, and what was considered the front door faced the highway — "which made no sense because you couldn't get there from the parking lot," Leo says. It was confusing for some customers.

"The suspended ceiling was low, dark and dingy and it felt kind of claustrophobic. We raised the ceiling by 2 feet, put the mechanicals underneath and painted it. We also had to bring the bathrooms up to code." The showroom got a new tile floor and a new service counter.

When customers walk in, they see items neatly grouped in front of them, with the service counter immediately to their left. The dealership's featured equipment is displayed prominently on the showroom floor, with sales and employee offices ringing the perimeter of the showroom within easy view of customers.

Another issue awaited outdoors - fencing. When Johnson Tractors bought the building, there was no fencing, but it was added to provide extra security for the expensive equipment displayed outside.

The project was planned after spring planting and completed in 2007, with construction lasting from mid-May until Labor Day. It cost about $40 a square foot to renovate the building, a figure Leo was happy with.

"In a selfish way, it was important to me to have a nice place to work," Leo says. "Our employees can drive by the place with their families and say, 'That's where I work,' and be proud of it."

Customer perception was equally as important. "Some farmers might be turned off and think, 'It might cost more for my product.' But I don't think so. They see we're committed to this location and we put our money where our mouth is. Almost everybody who comes in was there before the remodel and we're getting a lot of nice comments.

"We used a common-sense approach in having something nice, but not ostentatious. I don't have enough money to build a shrine to myself. I want a place that is functional, that looks nice, is attractive, and is an easy place to do business. The bottom line is our employees just love it there," he says.

Vetter Equipment: 'No Waste, No loss'

Vetter Equipment Co., a 34-year-old business that has 9 dealerships in Iowa, is finishing up construction of a new 56,000-square-foot dealership in Denison that has its owners, Glen and Julie Vetter, and employees excited about the possibilities when they move in this summer.

Located about 90 minutes northeast of Omaha, the Denison store serves an area that encompasses small to large row-crop and livestock operations.

Glen says their current building, at 14,000 square feet on 4.5 acres of land, served its purpose until the early 1990's, when the size of farm equipment became too large. The service shop has only 14-foot sidewalls which makes it difficult to stand and work on top of the combines.

And narrow shop doors present a challenge when bringing in large 4WD tractors with duals. Once inside, there is little room to maneuver around. Glen says, "Not only have we outgrown our service shop, we have also exceeded capacity in our parts storage, sales, and accounting offices."

Rather than renovate or build an addition, Glen and Julie opted for a new building on 18 acres of land, 2 miles away from the original site. They've devoted 20,000 square feet to the showroom, offices and parts storage. The service shop will total 22,000 square feet with 20-foot sidewalls and 36-foot doors that can handle today's larger equipment. A cold-storage area will take another 14,000 square feet, and next to the shop is a 40-by-50 foot heated wash bay.

When it was time to design the new store, Glen and Julie traveled to numerous newly constructed dealerships to gather ideas for their project. They also incorporated designs for the parts and shop areas from the new Vetter Equipment store they built in Onawa, Iowa, in the late 1990's.

The Vetters also wanted a showroom floor that was unique and maintenance-free. A top-coat mixture of Portland Cement and granite chips was poured onto a 5-inch sub-floor, rolled in, and then polished with a diamond-tip grinder, giving the look of a terrazzo finish. During the grinding process, a densifier product was added to seal and harden the floor. "All of the office floors have been treated in the same manner - eliminating the need for carpeting, which can soil so easily in this type of business," Glen says.

"Using new technology for our heating and cooling system was very important as well," he adds. "In our showroom and parts storage area, we are using a geothermal system which incorporates 32 wells that are 150 feet deep. The service shop is heated with in-floor coils that are powered by gas-fired boilers."

Service techs will not only benefit from more space, but from upgraded technology as well. The new dealership will have an enhanced service library with access to computerized service information, as well as safe storage for the diagnostic computer laptops.

A computerized delivery system for bulk engine oil and hydraulic fluid will also bring precision to the shop. "If a customer wants 10 gallons of engine oil, it's programmed by the parts person, and the shop technician pumps it," Glen says. "No waste and no loss is what we're after and it's recorded on the shop ticket right away." A system for disposing waste oil has been installed as well.

Julie Vetter says the shop improvements are also a strategy for recruiting and retaining good mechanics. "Good mechanics are a scarcity in our industry. Having a new facility will not only allow us to accommodate more mechanics, but hopefully attract qualified individuals," she says.

Since the Denison store is the main hub for all of their dealerships, the Vetters also envision hiring additional parts and administrative help. "Right now we're sitting on top of each other, tripping over each other," she says. "We can't wait to have the space. It will help tremendously with our efficiency."