Shop Profile: Kadel’s poised for expansion

In an era when some large MSOs have been expanding so rapidly it's hard to keep up with their growth—sometimes swallowing up dozens of new stores in a matter of months—Kadel's Auto Body has grown slowly and steadily, with a regional focus. The Portland-based company is poised to accelerate that growth, however.

Founded in 1954 by Omar Kadel, the shop remained a family owned operation until 1997 when Kadel's son sold the business. Ten years later, a group of employees and a private equity firm bought the majority ownership in the business. For the past several years the company has expanded by one or two stores per year (there are now 18 locations in Oregon, Idaho, and Washington), and there are plans underway to open more locations at a faster pace this year.

Although the company's footprint will change, its leadership will not. Braden cites the stability of the management team as a key part of the company's continued success even as it grows. Most of the key executives have been with company for more than 15 years. "With that stability, people know and trust each other," Braden says. "It's been a real benefit."

When looking for acquisition targets, Braden says the company looks at geography and demographics, and then identifies well performing shops in those markets. "We call them up and offer to buy them lunch, sit down and talk with them," Braden says. "Sometimes you're surprised and someone has an interest in selling. Even if they aren't interested then, we often get a call back several months later."

Kadel's also looks for shop owners who also own the real estate as well as the business. "If you can find someone who owns the building and real estate, and is close to having that property paid off, we can buy the business and rent the building, and then owner gets income from the lease," Braden says. "We're a pretty good tenant. The owner gets to go off and retire while he collets the rent. It's an attractive exit strategy. In a lot of cases, the owner gets more income from leasing the property than from operating the business."

Because Kadel's has focused its growth primarily around the greater Portland area (with shops in the Salem and Eugene/Springfield areas as well), the company has been able to leverage its coverage for load-shifting during times of peak demand. For example, during one of the area's rare snow events recently, the company's stores in Eugene and Springfield were slammed because of the weather. "For the cost of a tow, we could load a car up and move it from Eugene to Portland, and we had capacity in those shops so we could get those repairs done quickly," Braden says. "We picked up more of the benefit of that weather event because we could move cars around."

That capability is also beneficial during seasonal demand swings in the various sub-markets that Kadel's serves. "To give you an example, Eugene is a college town, and activity slows down there in May," Braden says. "It picks back up in August. We can move work down there during the summer from the other shops because they've got capacity."

The biggest change for the new shops is usually the implementation of the Nexsyis NEXconnex shop software. The solution is a single-database shop management and estimatics system that was designed specifically for MSOs, and Kadel's is one of the few companies in the region using it.

"We have fairly well-defined procedures, and most of them stem from insurance company requirements, so it's not that different than what most of the shops are already doing," Braden says.

Once the new locations are integrated into the company, some management functions are handled centrally through the corporate office. Shops handle all purchasing themselves, although they use an approved vendor list. Kadel's has centralized accounting, human resources, maintenance, and help desk functions.

Kadel's also has a centralized insurance department, so when there is a DRP change or an issue with a claim, it is handled by a single point of contact. "When the first DRP programs were introduced, Mr. Kadel decided that he would be DRP and insurance friendly, and we've continued that," Braden says. "As we've grown and insurance companies have grown as far as their utilization of body shops to provide support, we've embraced that and made investments in technology and training to be successful at it."

Insurance company KPIs have helped drive performance improvements. "Cycle time is a big one, and when you look at those numbers now and compare them to a few years ago, we've improved significantly," Braden says. "We focus on customer service, and how fast you get the car fixed is a huge contributor to that."

Braden says the company is doing more for the insurance companies than they did several years ago, thanks in part to technology that has made the shops more efficient. "That's the biggest challenge for our industry is staying on top of the technology, both the technology or writing estimates and providing service on the front end, and also the technology on the cars," Braden says.

Shop performance data is shared regionally. "All of this data from the shop management systems and the insurance companies gets cascaded down to the store manager and even down to the estimator in some cases," Braden says. "We discuss those issues in regional meetings to review performance."

That connection with the other shops can help individual managers improve performance. "If you're gross profit isn't quite where it should be, you can look at two or three other shops and quickly figure out where the problems are, and talk to a manager who is doing better than you are and get some insight as to where you might be dropping the ball," Braden says.

Training the next generation
All of Kadel's shops are I-CAR Gold certified. "We also run an apprenticeship program with two of the local community colleges," Braden says. "We take kids who either have a one year two-year associates degree in autobody, and work with them through this program that turns them into journeymen technicians."

Braden says that program was established to help build a bench of technicians at a time when not too many young people are entering the industry. "It's perplexing, because there are so many opportunities in this industry," Braden says. "If you get your I-CAR requirements and welding certifications, you can load your tools in the back of your truck and go anywhere in the U.S. and get a job."

Kadel's has established its own estimator and customer service training programs. "We also have started a manager training program where we take people who are not store managers, but we think have the right skills to become a store manager," Braden says. "We work with them on an individual basis to ensure they can fulfill their potential."

Going forward, Braden sees new vehicle technology as the industry's biggest challenge and opportunity. "They are building cars differently with aluminum, carbon fiber and high strength steels, and just keeping up with that is a challenge," Braden says. "You have to make an investment in the shops to do those repairs."

With that investment comes the opportunity to gain market share. "There are an awful lot of shops in Portland, and I suspect that not all of them are going to make the investment in training and equipment to stay current with the technology," Braden says. "That's an opportunity for us."

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