Repair Franchises Looking to Grow
As the recession fades and surviving shops look for ways to rebound, one tactic is growing increasingly popular: franchising.
Repairers are recognizing the support network large corporations can provide and are increasingly eager to jump on board rather than compete. They’re signing on with companies such as Fix Auto USA, which has added 39 franchise locations this year, ABRA Auto Body & Glass, which has added two and is aiming for 10 more by the end of the year, and CARSTAR, which is planning to grow by 35 shops in 2011.
“I really think this is a pivotal time because people are coming out of the fog and really looking to turn the corner,” says Paul Gange, president and chief operating officer of Anaheim Hills, Calif.-based Fix Auto U.S.A.
Gange says franchising appeals to shops because it allows them to be part of a large network of repair centers with built-in advertising and insurer relationships. Fix Auto also provides its own performance support groups and training.
Other franchises, such as ABRA, offer similar incentives.
ABRA announced an aggressive growth plan this year. McEleney Collision Center, a family-run shop affiliated with a Chevrolet dealership in Clinton, Iowa, was among the first to join.
“We decided in order to get better processes and procedures and to work with a professional group with good support, that it was worth doing,” says Drew McEleney, the general manager at McEleney Collision.
He says franchising the dealer-affiliated facility, which had run independently since the 1940s, was not taken lightly. He and other managers visited nearby franchise locations, had discussions with shop owners and ABRA representatives, and thought about the transition for a good nine years. The recent decline of dealer shops and growth of big competition finally pushed the center to take the leap.
The only drawback, McEleney says, is the royalty payment the shop has to make to ABRA, which is based on a percentage of sales. But the shop still maintains a profit and the other benefits are worth the dues, he says. The shop gained five DRP relationships after joining the franchise, cycle time is down and customer communication has improved as a result of ABRA’s processes.
But not all franchise experiences are wonderful.
Dick DeLaere, controller at Autobody USA in Kalamazoo, Mich., says his shop was part of a franchise for a decade before parting ways about four years ago. He says his shop has increased its profit margin since dropping royalty payments.
“We never thought there was much extra business realized for being with a franchise,” DeLaere says.
Not every shop is eligible to be franchised, as companies look for specific shop dimensions, revenue and a culture that fits their business model.
Bill Garoutte, senior marketing executive for CARSTAR, says his company has had a high volume of requests to join what he calls “CARSTAR Nation.” But about 70 percent of those shops don’t meet the company’s criteria.
Cecil Johnson, CARSTAR’s executive of franchise development, says the company plans to add 35 shops this year, 25 percent of them organically through the expansion of existing locations. The rest will be new additions in 52 markets the company has identified in its strategic growth plan.
New CARSTAR franchises are signed to five-year agreements and the company has a renewal rate of more than 95 percent.
“We feel good about what’s happening,” Garoutte said. “We feel good about the opportunities and with the environment as it’s shaping out today, it seems that stores want to be part of something bigger, so they’re not left alone.”