The Rise of Mechanical and Collision Industry Partnerships
In May, Fix Auto Canada acquired Prime CarCare Group, which includes the brands Speedy Auto Service, 5 Gears Auto Care, Minute Muffler and Brake, and Novus Glass. A few months prior, in December, Driven Brands, the owner of Maaco, Meineke, Drive N Style, Pro Oil Change and Take 5 Oil Change, purchased CARSTAR Auto Body Repair Experts and, in doing so, added one of the largest brands in the collision industry to its paint and collision business segment. Both Driven Brands and Fix Auto Canada saw an opportunity for horizontal integration in the automotive repair industry and took advantage of strategic partnerships and acquisitions.
Steve Leal, president and CEO of Fix Auto Canada, and Jose Costa, group president of paint and collision for Driven Brands, are both leveraging their companies’ established presence in the industry to promote the new partnerships. Leal says that Fix Auto is focused on the Canadian market right now, but he says that it’s inevitable that the company will begin looking to other countries, including the U.S., to do the same.
Costa points out that these new partnerships are creating opportunities for brands to save money when it comes to parts procurement. However, MSOs are not the only ones reaping the benefits of this trend. Ben Steinman, owner of Ben’s Auto Body in Mexico, Mo., added a mechanical segment to his collision shop 14 years and says that by doing so, he is able to attract more customers and increase the amount of work his shop sees on a daily basis. With powerful partnerships forming on both sides of the industry, it begs the question: Should all collision shops add or partner with a mechanical segment?
‘Owning’ the Aftermarket
According to both Leal and Costa, the partnership between the two worlds is all about dominating the automotive aftermarket. Leal says that Fix Auto Canada is always looking for strategic buys and this acquisition made sense long-term for the company.
“One of our goals was to make sure that we had many brands within all of the segments of the automotive aftermarket. In Canada, we’re the No. 1 brand on the collision side,” Leal says. “It made sense to take our strengths and build into the mechanical side.”
For Driven Brands, it was about finding gaps in the company and filling them.
“Driven Brands had a strong position in the paint market, but we didn’t have that in collision,” Costa says. “It made sense to acquire CARSTAR because Driven Brands wants to own the automotive aftermarket.”
Steinman says he was surprised that it took MSOs so long to begin partnering with the mechanical side. Vehicles are more complex than ever, creating more mechanical work for the collision segment. Steinman says it didn’t make financial sense for him to continue to send that work elsewhere.
The Benefits of Partnerships
Costa says partnerships between the mechanical and collision side makes sense because of the cost savings. He says that Driven Brands will use referral programs to bring more business to its brands on both the mechanical and collision side. Driven Brands companies are now incentivized to refer customers to other Driven Brands locations through discounts. If a car that was in an accident still needs mechanical work, a CARSTAR owner will receive a discounted price on the work if it refers that customer to a nearby Meineke shop rather than an independent shop.
“In the past, the work was being subleased to independents,” Costa says. “Now, we have the opportunity to keep work within the company.”
Steinman had the same reason for adding a mechanical segment to his collision shop. He says that customers that come in for a mechanical service will remember the shop if they ever need collision work, and vice versa. In addition, the mechanical segment helps his collision shop’s cycle time because vehicles with mechanical work needed no longer need to be transported. Mechanical work doesn’t generate as much revenue as collision jobs, he says, but the amount of mechanical work that comes in outnumbers the collision work. At Ben’s Auto Body, the team has a goal of doing $1,000 of mechanical work daily, which it almost always hits. Steinman estimates that his shop performs four collision jobs and between 15 and 18 mechanical jobs per day.
How to Compete
Steinman points out that independent shops that add mechanical segments may actually have an advantage over MSOs.
“When it comes to turning out quality work, smaller shops are able to monitor work better,” Steinman says.
For shops that do not want to add a mechanical segment, Leal and Costa say it competing will be an uphill battle. Steinman points out that adding a mechanical segment may not be a viable option for all shops, but there are other options. Shop owners that don’t have the space or the resources may not be able to add a segment within his or her own facility, but partnerships can still be created with local mechanical shops.
If a mechanical partnership is simply not an option, Leal says that independent shops should find a niche.
“General repair will result in pricing wars, which the MSOs will win,” Leal says. “Find a niche market, a niche vehicle. Find something to specialize in.”