Transitioning to a Franchise
Last month, I ended my column with a bit of a cliffhanger: We were on the verge of deciding whether to join CARSTAR. Well, we did it. After months of research, visits, discussions with my board of advisors, prayer and talking it over informally with friends and family, we decided to take the plunge. That puts us squarely in what CARSTAR calls the “immersion phase.” We are starting to interact with all the various departments from branding and marketing, to operations, to fleet sales, to insurance relations. It’s a whole new world learning to navigate a very large company. And, so far, it’s been a lot of fun. Granted, we are in the honeymoon stage, so I’m sure it won’t be all “rainbows and unicorns.” What I wanted to dive into this month was more of the “why” we joined CARSTAR. By way of summary, there were three large reasons: defense, offense and fit.
As I was sitting with a new friend at a CARSTAR Discovery Day, I asked, “After hearing all this, what’s your take on it? Do you think it’s a good idea to join?” This new friend has been an industry consultant for some time but not in any way connected to my shops. So, I figured he would have a unique perspective coming from a different market and only having limited knowledge about me and our situation in Cincinnati. He immediately said, “Yes. And if for no other reason than it’s good defense. This industry is in massive consolidation and from what I can tell, consolidation is going to be the norm for many years to come. We have very large competitors entering city after city. Joining CARSTAR is a good defensive strategy because they have the benefits of scale like the other large MSOs—buying power, insurance relationships, benchmarking between locations.” Now, if I’m reading my new friend correctly, he was clearly implying that without the benefits of scale it would be difficult to compete in the near term.
I have to admit, that feedback really resonated with me and my team and, in the end, became a big part of why we decided to join. However, we are more wired for offense, so there had to be other compelling reasons related to growth to capture our attention. As I started to understand the scale of CARSTAR and get introduced to the various departments, I realized there were whole departments dedicated to helping shops in their network grow. Not only that, but my COO and I were very clear from the first call that we were only interested in this partnership if CARSTAR could help us accelerate our growth plans. Turns out, they could—and in ways that are much faster and larger than we expected.
For example, we learned about their fleet sales division and their many national fleet accounts looking for partners in local markets. Of course, not all fleet partnerships are created equal; many require a steep discount, which can cut into the profit margin. However, I just acquired a large shop that is underutilized with enough space and technicians to handle almost double the volume it was doing at the time of purchase. Getting a fleet account in there means we can maximize our capacity while we ramp up the insurance side of the business, which often takes longer.
We also learned about CARSTAR’s acquisition team. CARSTAR regularly calls on shop owners all over North America to join their network. After gauging interest, that information is passed on to a team that researches that market and then presents opportunities to local CARSTAR owners who may be interested in expanding. If there are no CARSTARs in that market, it will be floated by investors who may be interested in opening a CARSTAR in that area. If an existing CARSTAR expresses interest, they provide help with things like negotiating, finding funding and templates for key documents.
There are also departments dedicated to branding and marketing that have developed brochures, online ads that have been tested and best practices for gaining insurance agent referrals.
“They are an organization that is simultaneously fun, aggresive, caring and focused.” —Kevin Rains, Owner, Center City Collision
The last deciding factor was fit. A more sophisticated way to say that is “cultural alignment.” Throughout the process, we were guide by a single point of contact, Mark, who helped us get all the information we needed to make a very informed decision. Mark and I hit it off from the start and what I loved about Mark ended up being true top to bottom in CARSTAR: They are an organization that is simultaneously fun, aggressive, caring and focused. Those are all hallmarks, as well as aspirations, for my shops and we look forward to growing even deeper into these traits in the months and years ahead with our new partners in the CARSTAR family.