Expansion Through the Eyes of a Georgia MSO

Second Thoughts for a Second Location There are many things that can go wrong with opening a second location, but the biggest mistakes are underplanning, lack of

management support at your existing shop and undercapitalization, says Barry Rinehart, a sales manager for Akzo Nobel Coatings, Inc. Rinehart, a CPA, was a services consultant at Akzo Nobel for seven years and has helped scores of store owners across the country multiply their locations. According to Rinehart, there are four major steps every owner should take before making the leap of opening a second location: • Market Research • Project Analysis • Finance Options • Project Management “With market research you’re looking at an area and figuring out the market potential for that area. You need to know who are the major players in the market and what’s a realistic market share you can expect,” says Rinehart. “You don’t want to just drive by a building, think it would be a great spot for a shop and then, once you’re open, realize that the area only has market potential for $100,000 a month and you have five competitors.” Project analysis, meanwhile, means figuring out what kind of expansion project yours will be—greenfield (from the ground up), brownfield (renovate and retrofit) or acquisition (turnkey). “That’s another reason to look at the market; you might find a competitor that’s ready to get out,” Rinehart says. Finance options involve deciding what type of company your expanded operation should be and/or what it’s corporate structure will be, what types of loans you can or should go after, and how you’ll finance the facility. Project management means building the timelines and milestones that mark any major project. “You should build ‘go/no-go’ scenarios into every aspect of the project,” Rinehart adds. “As you move forward, there should be decisions along the way that will tell you if you should continue.” Standard operating procedures are an important tool in every business, but they become even more important for multiple locations, says Rinehart. “A lot of times, when people think about adding a second location, they say, ‘This time, I have a chance to get it right from the beginning,’” Rinehart notes. “But if you don’t have effective standard procedures in place at your first location, it’s going to be really difficult to do that in your second location.” Ray Kroc, the man who created standard operating procedures for McDonald’s, made a process out of everything. He thrived on efficiency and organization, and it meant that you could expect the same burger in Peoria, Ill., as you could in Salem, Ore. While that might be the extreme end of the spectrum, your procedures should be orderly and repeatable at all your locations, Rinehart advises. Systems organization and efficiency will also help you hand the day-to-day operations over to key employees someday if and when you choose. “If you are the main driving force in your existing business, and you don’t have a strong general manager or strong employees, it’s not going to work,” adds Rinehart. “You’ll be spending 85 percent of your time getting the second location running. You have to know who you have watching the store.” Another common mistake is that people always seem to underestimate their costs, Rinehart notes. They tend to get the hard costs like land, buildings and equipment right, but they forget about soft costs such as permits, legal fees, Phase I Environmental Impact Statement costs, bank fees and the like. “People also underestimate how much operating capital they’re going to need. Just because you open the doors doesn’t mean it’s going to be operating at maximum sales the first month,” Rinehart points out. “Until the business becomes solvent, you need to pay your bills and make payroll.” He recommends that when estimating capital needs, owners also figure in a full year’s worth of operating expenses. The final piece of advice Rinehart has for owners thinking of adding another location is to plan thoroughly. “You don’t want analysis paralysis, but you don’t want to short-change the planning process either,” he says. “If you’re thinking about opening another location and you’ve gone through the four steps and you think you’re finished planning, do it again.”

At 10,000 square feet with nine bays, Ward’s first shop is his smallest location. Built in Richmond Hill at the southwestern outskirts of Savannah, it is also the farthest away from the city’s core, but it’s strategically located right off Interstate 95. Ward’s other three shops, all in Savannah proper, geographically cover the city. His largest store, on Abercorn Street, is 20,000 square feet and has 15 bays. His Skidaway Road store is 15,000 square feet with 10 bays, and the newest, on Chatham Parkway, is 15,000 square feet with 16 bays. Each of Ward’s stores grosses more than $2 million, and his largest store has annual sales in excess of $4 million.

ORGANIZATION AND APPEARANCE COUNT

The key to running so many locations is organization, he says.

“If you’re not organized from the front office to the shop, it’s dysfunctional. It has to be organized,” Ward explains. As a self-described neat freak, Ward not only believes that there’s a place for everything, but that the place better look good, too.

Ward has designed the appearance of each of his shops down to the last detail. He’s the color coordinator, picking out everything from the tile grout to the furniture. He lives by the credo that first impressions are important and that people feel more comfortable leaving their cars in a nice, clean, comfortable shop. Ward has remodeled every shop so they all have a similar look, and he insists that if you take care of your own space, customers will get the idea—either consciously or subconsciously—that you’re going to take great care of their vehicles.

“You have to come off with a clean-cut image. The landscaping, the interior of the office, everything,” says Ward. “I take it to the next level, but it pays off.”

His employees, meanwhile, share in Ward’s pride over his shops’ high-end aesthetic appeal, which is matched by his standards of repair excellence.

“He has established the finest facilities in the Southeast,” says Material Manager Floyd Hilliard. “With state-of-the-art equipment and highly trained employees, his quality is unsurpassed. We continually have customers pass our shops and not even know that they’re auto repair facilities.”

TRUSTWORTHY PEOPLE EASE THE BURDEN

No one can run an empire alone, and Ward has 85 employees, including 13 managers to keep things running smoothly.

“I don’t run my business like a dictator,” says Ward. “I’m employee-friendly, customer-friendly and insurance-friendly. And I don’t hold cars hostage on special charges.”

While Ward has to deal with some issues himself, he says that he trusts his managers to take care of the day-to-day operations.

“I’m the firefighter,” Ward says. “I look to solve a problem, not throw gas on the fire.”

While Ward acknowledges that because the collision repair business is almost 100 percent people-driven, there are times when everything does not go perfectly. He does guarantee one thing, though: If there are any problems, they’ll be fixed promptly.

“We’re humans. I don’t argue with customers. I fix it. If it means it comes out of my pocket, then it comes out of my pocket,” says Ward.

With four locations in a city of just over 300,000, Ward believes that he’s already attracted most of the top talent in the local area. So one of his challenges is recruiting.

“I run ads in surrounding states to attract the best talent. But people who come to work for me usually stay,” says Ward. “People have to enjoy coming to work; it has to be fun for them and fun for me.”

PICK THE RIGHT PROGRAMS

Ward’s shops are what he calls “insurance friendly.” He’s a big believer in DRPs and participates in at least 10 of them. His biggest DRP customer is Geico—in fact, one of his stores, the one on Chatham Parkway, does 90 percent Geico work, provides office space for a full-time Geico adjustor and has Enterprise car rentals on hand full time.

He participates in Geico’s “Repair Xpress” program, which offers a four-day turnaround. The customer drives up, receives an estimate and a rental car, and returns four days later to a fixed vehicle.

KNOW WHEN TO TAKE A BREATHER

Since Ward feels like he has the Savannah area covered, he has no immediate plans for further expansion. However, he has not ruled out Hilton Head, which is about 30 miles northeast; Hinesville, about 30 miles southwest; and Brunswick, about 40 miles south, as possible annexes to the existing Ward’s Auto Painting and Bodyworks territory. The population growths in those three areas are promising, and the distance between his existing locations and those three areas would be reasonable, says Ward.

He adds that he learned his lesson on running a business that is too far away after that first expansion into Statesboro 90 minutes away; the commute was just too far to run effectively. So, for right now at least, he’s content spending more time with his wife Shellie and two girls, Hallie and Emilie.

“I was really going hard for a long time, but you can’t forget about your family,” he notes.

Still, Ward is waiting for the right time for more expansion. He’s not in any hurry, though, and he plans on keeping all of his stores in good shape in case a can’t-miss opportunity presents itself.

“Some people get money and put it into toys—boats and houses,” says Ward. “I put my money back into my stores.”