The article I wrote that appeared in the February 2007 issue of BodyShop Business (“Busy But Broke”) created quite the buzz in our industry. I talked about the need for a standardized DRP profile to be created (which still needs to be done). At the end of the article, I also mentioned that a standard for collision repair facilities should be established.
I also think the industry needs a shop classification system, which is the subject of this article and one I feel will cause a stir as well. But first let me explain how my idea came to be.
Five-Stars and Fleabags
I’m an avid surfer and recently booked a trip to Bali for my next surfing excursion. When I go on these trips, my main concern is the surf and, because of this, I’ve spent many nights in fleabag hotels just for the sake of being close to some great waves. I can safely say that these dives carry no stars on the one-to-five star rating scale.
On this particular trip, I talked my wife into going with me. Her only requirement was that she got to pick the hotel. She pointed out that being able to pick a “five-star” hotel was a minor concession given that she was willing to travel halfway around the world just to be abandoned while I surfed. I wholeheartedly agreed.
The point I’m trying to make is that even in another country, and a Third World country at that, a five-star hotel is recognized as a valid measurement by which all other hotels can be judged. Hotels were able to develop a rating system that’s consistent and recognized worldwide. I wondered how they were able to come up with a rating system in an industry that’s constantly competing for one another’s business.
I called up several five-star hotels and found that they all had the same or equal amenities. Then I called some four-star ones and asked them what separated them from their five-star competitors. Everyone gave me the same answer: They assured me that they were equal in service and their rooms were just as nice, and they also said that although they might lack some of the amenities of the five-star hotels, they were sure they could meet my needs.
What were my needs? If I were traveling across the country, I might need just a bed for the night. If I were bringing some business clients together for an important conference, I might need a meeting room, so my needs would be much different than the weary traveler’s. What if I were looking for a weekend away with my wife? I might want something so special that the cost became secondary.
Like hotel customers, collision repair customers have a broad spectrum of needs. One person may have an early model vehicle and just needs safe transportation. In this case, the consumer wouldn’t care what kind of parts went on the vehicle. Another person who has worked his whole life to finally purchase his dream car, his “baby,” would be concerned about the quality of the repair and would be much more difficult to please. But our industry to this day still remains undefined; we have no measurement established to discern the good from the mediocre to the bad.
As my research of hotel ratings continued, I found that the five-star guidelines were so strict that many hotels just couldn’t manage to attain that high rating. The rating system was intolerant of any hotel pretending to be something it was not. The company that sets the ratings is an independent company and doesn’t waiver; either you meet its criteria or you don’t. Although every hotel could apply for the five-star rating, only those that qualified were granted the privilege of being classified as five-star.
This was all part of my research to find criteria that could be used to establish a five-star rating for collision repair facilities. If the hotel industry could do this, I reasoned, we could also create a rating system recognized nationwide.
Another thing to note is that the rooms at a five-star resort cost a lot more, but the quality of everything is much higher. I expect to pay more because there’s a measurable difference between those and my fleabag surf trip hotels. A standard needs to be established for our industry to give consumers something to measure us by.
If the fleabag hotel wanted to charge me the same rate as a five-star resort, there would be a big problem. Or what if the fleabag hotel advertised that it was a five-star resort when it wasn’t? Could you imagine if we arrived in Bali and the hotel I picked that represented itself as five-star turned out to be a one-star and then demanded five-star rates? Not only would we be disappointed, we would feel deceived and ripped off. It would also probably be the last time my wife ever came along with me!
Does any of this sound familiar? Think about the body shop that has just enough equipment to be classified as a body shop but is getting paid the exact same rate as a shop that has spent hundreds of thousands of dollars on equipment and training. Or worse yet, allowing that underrated shop’s lower labor rate to dictate the labor rate of the five-star collision repair facility.
When I go to El Salvador and stay in a fleabag hotel, I expect to pay fleabag hotel rates. When I go to Bali and stay at a five-star resort, I expect to pay five-star rates. Everything is fair and I’m getting exactly what I paid for, but more importantly, I know exactly what to expect because of the hotel industry’s rating system. Because I know what to expect, my needs are being met. Likewise, consumers need a measuring stick that they can trust so they’ll be able to align themselves with body shops that will meet their needs.
A Plan in Place
I believe an independent third party entity like I-CAR could establish a collision repair facility rating system easily. It has already established criteria for a Gold Class rating for shops and a Platinum rating for body technicians. All that needs to be established is criteria for a collision repair facility to determine how many stars each one gets. Similar to the hotel industry, the five-star rating should only be given to the highest-level facilities in terms of training, equipment, Customer Satisfaction Index (CSI) and the condition of the facility itself. The standard needs to be at the highest level obtainable within our industry.
This would exclude a lot of the collision shops within our industry. But if a shop wanted this five-star rating, it would have to step up and invest the time, money and education to reap the benefits of being a five-star collision center. Exactly like the five-star hotels, the five-star facilities would be able to request the highest industry labor rate while others wouldn’t. This would help stop the battle within our industry over labor rate surveys. I don’t know about you, but I’m offended that shops with little or no equipment and training demand and get paid the same labor rate as those shops that have invested millions. The labor rate surveys aren’t working because they’re not comparing apples to apples.
I don’t think it matters if we use letters or stars, so I’ve started out by defining what I think is an “A”-rated or five-star facility (see pg. 86). This doesn’t mean that the four-star facilities aren’t capable of doing good work, it just means that they’re unable to accomplish the same repair on an equal number of different types of vehicles due to a lack of equipment or training or even the OEM certifications required by the manufacturers – like the hotel without a conference room when you need to have a business meeting.
Once we establish the criteria for a five-star facility, we can then establish what a four-star or three-star facility is (pgs. 88, 90). The five-star facility must become the collision repair facility all others are judged by.
Try to remember that service is a “given” – the consumer expects it. A fleabag hotel may have great service, but that will never make it a five-star resort. Service is how “A” facilities will compete with other “A”-rated facilities and how “B” facilities will compete with other “B”-rated facilities and so on.
These are just guidelines that can be tweaked and adjusted. Just like the hotel industry, there are all sorts of hotels that aren’t five-star yet are still making a good living. In fact, most four-star hotels are probably making more money than many five-star ones, benefitting from the higher rate charged by the five-star hotel. This becomes a win-win situation and helps to align consumers with the shops that are better suited to meet their needs.
It’s necessary to establish a consistent scale within our industry, a measuring stick for both consumers and insurance companies. Why should the insurers have to pay a fleabag body shop the same as the four- or five-star facilities? This isn’t fair to anyone except the fleabag shop that’s making a larger profit margin because it has a much smaller investment.
Out of My Head?
You all may think I’m out of my mind, but I know many “A” shop owners who can meet the requirements I’ve laid out without changing anything. These are the shops that have invested heavily in being the best at what they do and are trying to stay at the leading edge in the collision industry. These shops are the Four Seasons Hotels of the collision repair industry. Any shop that wants to step up to the next level should invest in what it takes to get there.
Just like in the hotel industry, if you want a higher rating than you must meet the requirements. When you have more invested, more is required for you to get a return on your money. So, just like hotel rates, collision industry rates should be adjusted to match a shop’s classification. It would be unfair to pay the three-star facilities the same as the five-star facilities, so the labor rates would be adjusted according to the classification of five-star, four-star or three-star. If you want to be a four-star or “B” shop and are comfortable where you are, that’s fine. Just don’t expect to get paid on the same scale as the five-star shops.
I think the easiest way for the pay scale to work is by using percentages. For example, if the average labor rate is $45 per hour for a four-star shop, then a five-star shop’s labor rate would be up to 25 percent higher at $56 per hour, and a three-star shop would be 25 percent less than a four-star’s at $34 per hour.
This formula can and should be perfected because the insurance companies then would have to only pay the higher labor rate to the shops that are rated for it, without getting stuck paying everyone the same rate. They would save millions and millions of dollars and be able to direct their customers to the shops that are rated to meet their needs. They could sell five-star policies to those who want them and four-star policies to meet the needs of that level of consumer. They could even offer a discounted three-star policy to the customer who doesn’t require anything more. It’s at that point that the consumer is getting what he or she paid for, everybody is getting an honest repair and everybody wins.
Writer Lee Amaradio Jr. is the president and founder of Faith Quality Auto Body Inc. in Murrieta, Calif. His 32,000-square-foot state-of-the-art facility employs 65 full-time employees and does $7 million in gross sales. In business since 1979, Lee attributes his success to having a great team of quality people supporting him. Lee says that he “sees the handwriting on the wall” and believes that “now is the time for us to reclaim our industry, before it’s too late.” He can be reached at [email protected].