Car repair franchises stay steady on rough road
Volvo announced all of its cars will have some electric propulsion starting in 2019.
Technology’s unstoppable march is changing the automotive industry faster than nearly any other business on the planet. As such a vital industry to the U.S. economy, massive advancements in fuel economy, the ongoing move away from internal combustion in favor of hybrids and electric vehicles, and newly widespread autonomous and collision avoidance technology have all extended massive ripples through the industries serving today’s tech-enabled drivers.
These industry mega-trends are combining with a historically tight labor market for auto and collision repair technicians. In response, most national brands have poured significant resources into building and maintaining a labor pool bench, while also spreading the word that a job working on cars can be pleasurable, with upward mobility and, for the cream of the crop, surprisingly lucrative salaries.
Recent dips aside, U.S. auto sales remain near record levels—on pace to hit 16.7 million sales this year alone. In addition, the Automotive Aftermarket Supplier Association and Auto Care Association predict the U.S. auto aftermarket will grow at a compound annual growth rate of 3.6 percent through 2020—not bad for an industry coping with a historic barrage of challenges and change.
Two large players in the franchised auto aftermarket, AAMCO and Christian Brothers Automotive, acknowledge the challenges in the auto repair business, but remain bullish while they add new units and offer predictions they will match or exceed growth projections for the industry.
The electric revolution
Labor struggles aside, getting an auto or collision repair shop up and running is a major undertaking—often in the range of half a million dollars or more. Rather than prioritizing experienced, multi-unit franchisees, Houston-based Christian Brothers Automotive tends to select single-unit owner-operators who will dedicate the time and effort to learn the business and work full-time in the shop.
“We think similar to a Chick-fil-A—they don’t have a lot of multi-unit owner-operators,” said Donnie Carr, vice president of operations at Christian Brothers. “They’re going to do their best to get as much as they can out of that one location—that’s our goal, to increase that owner benefit and make it a very interesting, great opportunity for them.”
As Christian Brothers approaches 170 units, in 26 states and 135 independent franchisees, Carr said the company is expecting a 10 percent spike in revenue this year as its unit growth accelerates.
Even though Christian Brothers is a 35-year-old brand that’s been franchising for more than 20 years, Carr said it’s still a young company that’s looking forward to maturing as a brand. To make sure the network is ready for further growth, Christian Brothers has launched Tech Ambassador classes at the headquarters, along with an annual convention for service managers and technicians to maintain their skill set as the automotive market shifts toward greater numbers of hybrids and pure-electric vehicles like the new Tesla Model 3 and Chevy Bolt—the first two mass-market electric vehicles with ranges beyond 200 miles, a key consumer benchmark.
Christian Brothers sees gains as industry adopts more autonomous safety tech.
Carr likens these recent advancements, including Volvo’s announcement that all future vehicles will be hybrids or full electrics, with the debut of the first computer control systems in cars—worth following, but not as Earth-shattering as some may predict.
“There’s going to be plenty of things on a vehicle that will still need maintaining and repair moving forward,” he said. “I don’t think electricity necessarily does away with that.”
Now that vehicles like the ubiquitous Honda CR-V come loaded with sophisticated collision avoidance systems that can prevent crashes—and lucrative business, especially for collision repair shops—Carr posited that semi- and full-autonomous systems could lead to an increase in total miles driven and, inevitably, a boon to the auto aftermarket business.
“Somebody’s going to be a lot more comfortable with their 70-year-old father who’s not great behind the wheel taking an Uber or Lyft or an autonomous car to go where he needs to go,” he said. “Also, you’re going to see parents more comfortable sending their 16-year-old somewhere if … this very safe vehicle is the one driving them. I believe it’s going to increase mileage driven, which will potentially increase the need for repairs and maintenance.”
At AAMCO Transmissions, a 54-year-old repair chain based in suburban Philadelphia, the company points to a mild winter that slowed first-quarter sales, but still expects to finish the year with a two or three percent bump in revenue for its system of 630 locations.
To build its own bench of technicians, the company started auditorium-style education courses at its AAMCO University in early 2015 to provide initial and ongoing training. By tracking sales throughout the network, Brian O’Donnell, senior vice president of franchise development, said centers training at the highest levels are seeing 15 to 20 percent sales increases, proving the benefits of its approach. The company also offers online training, which includes more than 325 courses aimed at technicians, franchisees and managers.
“It’s not rocket science. If you have better trained technicians, they’re going to perform better services and be more efficient in the store,” he said. “We have double the comps for the centers that are certifying their techs at different levels.” Beyond education, AAMCO has encouraged its franchisees to engage in local networking with parts stores and tool distributors to lure the best technicians to its locations. “If anybody says that’s a piece of cake, they’re fibbing,” O’Donnell said about recruitment. “A really good tech doesn’t have to go onto Monster or CareerBuilder for a position. They’ll put their name out there and get scooped up fairly quickly.”
As the nation’s fleet of cars gets more intricate, AAMCO has continued efforts to inform consumers their shops perform a range of repairs beyond transmission work, which accounts for approximately 65 percent of an average shop’s revenue.
He added the calculated decision to focus on electrical diagnosis years ago, as transmissions became computerized, has positioned the company well as autonomous and collision-avoidance tech has spread to a great share of mainstream cars.
“That was a critical thing we’ve done over the last 10 to 15 years,” he said. “The dividends that it pays today is our shops became really good at electrical diagnosis … we know how to diagnose electrical problems really well.”
While he expects collision brands to suffer as cars get smart enough to avoid crashes regardless of the driver’s attention, he predicted the typical American family will increase the number of cars in the garage, similar to what happened with tablet and laptop computers.
“Everybody’s going to have a car in the household, so I think that’s going to drive the car counts, because people depend on and have to have their vehicles, and you’re going to continue to see that grow,” he said. The trend will benefit parts stores and the auto aftermarket. “That’s our fuel.”
O’Donnell said part of the message to prospective franchisees is the industry’s limited exposure to future recessions. “We’re like Steady Eddie,” he says. “If you’re looking for a good, solid investment...people are still going to fix their cars no matter what’s going on in the economy.”