Debt, overhead strangle JoeAuto

Jan. 1, 2020
HOUSTON — When JoeAuto opened its first store four years ago the model was considered by some to be the future of automotive repair. Recently the Texas-based JoeAuto Inc. filed for Chapter 11 bankruptcy protection, citing high debt service cost

HOUSTON — When JoeAuto opened its first store four years ago the model was considered by some to be the future of automotive repair. Recently the Texas-based JoeAuto Inc. filed for Chapter 11 bankruptcy protection, citing high debt service costs and cash-draining development overhead.

JoeAuto, which allows automotive repairs to be monitored through its website and boasts overnight service and loaner cars, reported $11 million in assets and debts of $16 million as of January, according to court documents.

The repair chain filed with the U.S. Bankruptcy Court in Houston. Recently the chain secured more than $1 million in investor financing to stay afloat.

Before its launch in 2000, JoeAuto raised $13.5 million from a group of investors that included Ford Motor Company and CCG Venture Partners, LLC.

Despite its troubles, JoeAuto plans to forge ahead with its unique system of Web-based repair shops and customer-focused operations. None of the chain’s 70 employees are expected to be let go,  President Troy Cooper told Aftermarket Business. Leaders want to renegotiate some leases, restructure debt and focus on key elements of trust and convenience.

“The bottom line is, we need protection from the courts,” said Cooper. “We are continuing to work through the last bit of our leases. We probably have a few more months of work to do.” At press time a hearing was scheduled for June 8.

JoeAuto operates two locations in Dallas and two in Houston, with plans to expand when the company stabilizes its finances, said Cooper.

“We have, for quite a while, been working on reducing overhead and consolidating operations to become more efficient,” he said. For example, the company has determined an 11-bay service center is the proper size for effective operations, a considerable decrease from the first 27-bay shop that opened in Houston four years ago.

“We’ve been across the board with different sizes, [but] that model hits the sweet spot economically,” said Cooper.

The company also has restructured its inventory system since its inception. Rather than operating a mini-warehouse supplied by NAPA at each location, JoeAuto now has parts delivered every hour from core providers like O’Reilly Auto Parts.

“We have access to several million dollars in inventory instead of the $500,000 inventory on site,” added Cooper. “We find it more efficient and more cost-effective.”

Within its restructuring plans, JoeAuto will remain focused on its unique customer services, said Cooper.

“There are a lot of the components of the business we don’t really need, [but] trust and convenience are the components that really drive what customers are looking for.”

An increase in branding and marketing also are planned, according to court filings. When reached for comment, a number of Texas-based auto parts stores and repair shops said they were unfamiliar with the chain.

An economic downturn also influenced the company’s bankruptcy decision, a sentiment echoed by other repair facilities.

A more robust economy would foster a high-tech operation like JoeAuto, said Rick Mireles, manager of Integrity Automotive, which is located near JoeAuto’s Woodlands, Texas, headquarters.

“In a booming industry, it would be fine,” said Mireles. “I’ve been watching a soft market over the last two years. The bigger shops are still getting their normal business, [but] the tighter-run ships with less overhead seem to be surviving.”

Another trend, noted Mireles, is that many owners are going back into the shop to assume the role once occupied by high-dollar managers in order to save money. He said his shop is basically a one-man operation.

Further, many OEMs are luring customers into buying new cars with extended warranties and generous financing options. As a result, dealers also are tapping into the aftermarket, Mireles added. 

Though he would like to have a small warehouse mirroring JoeAuto’s early stores, Integrity Automotive, like many other parts stores, receives its inventory under consignment, which means they only pay for what they sell, he said.

Mireles presumed if JoeAuto holds on another year, it would persevere with the growing economy.

“There’s always going to be a future for a JoeAuto,” he said.

JoeAuto allows customers to arrange service and diagnose automotive problems through the use of its website, joeauto.com. The company also offers same day or overnight service, seven-day-a-week repairs and pick-up and delivery of vehicles from customers’ homes.

Its service centers are furnished with Internet-ready computers, a children’s activity area and satellite TV.

The chain performs light work on vehicles and employs ASE-certified mechanics. Some jobs, like collision repairs, paint jobs and transmission work are typically outsourced, according to the company.

The availability of loaner cars at $20 the first two days and $28 for successive days is another customer-oriented service offered by the company.

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