Just who are all these people who think they can run multiple body shops. As any independent body shop owner knows, it’s a struggle to run just one shop. It appears our industry is undergoing the same kind of cookie-cutter consolidation that’s already swept through grocery stores, funeral homes and pizza parlors.
However, unlike the pizza business where the problems are pretty similar from one pepperoni pie to the next, collision repair is a very complicated business. Though the average collision costs around $2,000 to repair, the type of damage is never uniform. That disparity and the sophistication of the repairs are often quoted as the reasons Sears and K-Mart don’t offer collision repair at their service centers that and the third-party payer who exerts a lot of control over the price charged for collision repair.
Other outsiders, however, have decided to dabble in the repair business. In the 1980s, people tried franchising every type of business imaginable including body repair shops. The benefits: Franchise autobody operations offer on-site consultation, uniform business systems and identity advertising to help their franchisees increase sales and revenue. They have an enviable record of success doing just that.
Today, several franchisers still see an opportunity to sell their expertise to body shops. Some franchisers are even concentrating on recruiting independent shops in smaller markets and new-car dealer body shops in any size market.
What does this mean for you?
For some shop owners, struggling to make ends meet, buying into a franchise could mean happier and more profitable days ahead. For others, the new players are likely to become their competition. Instead of competing against a similarly equipped and financed body shop down the block, you may find an extremely well-equipped competitor with sophisticated management systems, instant identity and elevated insurance relationships.
How do you compete with shops like that? The key is to know exactly what makes them tick. To better understand what you could be up against if the shop down the road buys into a franchise or what you might want to buy into yourself let’s take a closer look at franchises and how they operate.
The Birth of a Franchise
Franchisers offer a package of benefits to their franchisees for a fee. This cost includes an initial enrollment of anywhere from $5,000 to $25,000, plus a monthly fee based on sales. Since the monthly fee is based on shop revenue, the franchiser has a vested interest in increasing the shop’s sales. Percentages will vary, but an ongoing franchise fee typically is about 5 percent of sales per month.
What does the independent shop owner get for his money? Help in growing and operating his business.
According to Mike Fisher, vice president of marketing for CARSTAR, his program includes tactical activities in five areas. The company first concentrates on the shop’s image; second, the vehicle owner/consumer; third, insurance company relationships; fourth, the shop’s public relations; and fifth, advertising to increase name recognition. The actual plan varies based on the condition of a particular body shop when it joins the program. In each case, however, the franchisee would have precise goals, a specific time period to accomplish them and the franchiser’s explicit directions on how to get there. Part of what the shop buys from the franchiser is its past record of success: increased sales and revenue in many shops just like yours.
Let’s take a closer look at the areas franchisers concentrate on including some of those mentioned earlier when a new shop joins the franchise:
Shop image The body shop’s physical image encompasses things that send the consumer a message about the business. Outside, it includes considerations like the condition of the parking lot. Is it paved? Are the parking stalls freshly striped? It also includes the building and landscaping. Does the building look clean and freshly painted? Are the windows clean? Is the paint peeling? Are there weeds growing along the side of the building?
Inside, franchisers want affiliate shops to have a waiting area for children, current magazines for the adults, a very clean restroom and an overall professional aura. Isn’t it interesting that insurance company surveys always identify a clean collision repair facility as the No. 1 criteria consumers use in choosing a shop? All of the successful franchisers also think a clean image is a must to succeed. (Hint, hint.) If your shop doesn’t look clean and professional, you may never get the chance to write an estimate for many customers.
Insurance company relationships Franchisers strive to increase the traffic at the door by improving a shop’s relationship with both consumers and insurance companies. They believe that direct-repair programs are a cornerstone to success. An advantage of joining a franchise is the insurance company contacts the franchise already enjoys in other markets. Several of the franchisers I spoke with consider their direct-repair relationships to be an extremely important part of their businesses and attempt to enroll each new franchisee in the programs as soon as possible. They don’t view the insurance company as the enemy. In fact, as Tim Adelmann, chief operating officer of ABRA Auto Body & Glass, says, "We treat the insurers like it’s an honor and a privilege to have their checkbook."
Training Training plays a big roll in all of these multi-shop operations, and most offer many different training programs for their shop partners. Around one-third of CARSTAR’s programs are directed at the technicians, offering help in performing the actual repair quickly and safely. Caliber Collision Centers has two training centers where employees are sent when they’re assigned new equipment or responsibilities.
We all know that training and finding competent repair technicians is a priority for our entire industry; most franchisers, however, are actively involved in keeping their technician skill level high to enable the shop to complete the work profitably, i.e. quickly and right the first time. They know training for both management and technicians is required for success.
Repair process Beyond training, the chance to re-design the actual repair process in a shop offers an opportunity to save money and increase shop revenue. One competitor has spent a great deal of money to create a streamlined repair process that completes jobs faster. By assigning the work to production lines based on the degree of damage light hit, medium hit, heavy hit the company hopes to ensure only the appropriate technicians perform the repair. Their state-of-the art model takes the already quick repair process of their successful shops to the next level.
Equipment The shop equipment that insurers may require to participate in their direct-repair programs is the same equipment most franchisers feel is necessary as well. From digital imaging to unicoupe repair, you can’t do the work without the tools. For instance, most of the people I spoke with saw the value in having a digital paint-mixing scale tied into their management computer. The franchisers agreed that computer paint scales not only enable shops to mix just enough color to paint the vehicle, but also make tracking material costs to a repair order much simpler. And as we all know, understanding your true costs for a given repair and knowing your cost of overhead is essential to operating a profitable body shop.
You might be thinking that’s a lot to be up against. You’re right. But don’t throw up your hands, hang a closed sign on your front door and start looking for a new job. If your shop is struggling, take a look at what buying into a franchise can do for you. With a new operation model, increased advertising presence and immediate identity, your shop could be the one all the others start to worry about.
If, on the other hand, your shop is doing quite well and buying into a franchise isn’t really a consideration, remember that it may still be a consideration for the shop down the street. Take a closer look at your shop’s appearance, your customer-service record and your technicians skill levels and be sure you’re ready for increased competition. Remember the areas franchisers work on improving. Examine them in your own shop, and you can turn inside knowledge into your shop’s
Writer Mark Clark, owner of Professional PBE Systems in Waterloo, Iowa, is a well-known industry speaker and consultant. He’s been a contributing editor to BodyShop Business since 1988.
Hold the Phone
While your customers wait for someone on your staff to get back on the phone, tell the potential customer about your business. It’s a truly captive audience and the offer of a free loaner car or the professional detail job that you’ll give them may be just the ticket to close the sale. Consolidators and franchisers certainly think their on-hold messages are money well-spent.