When Beth Berger, along with her husband, Tom, and brother, began investigating franchises in 2017, they created a long list of opportunities and began their research. They eventually landed on Maaco, the car paint and repair shop, and when 2020 hit were glad it was deemed essential and could remain open. How they made the decision is a perfect playbook for any prospective franchisee.
"As we went into 2018, we had 20 opportunities. We were working with an attorney, and we did quite a bit of due diligence. We went from 20, to 10, to five to three," Berger recalled. Both she and Tom were in IT and today are hands-on operators; her brother is a silent partner.
"We looked at everything from lash extensions, to healthcare, to dog grooming to convenience stores. We narrowed it down to three: Maaco, AAMCO, and a dog grooming company" called Woof Gang Bakery. "We were market-neutral. Hindsight is 2020, I'm glad we went automotive with COVID," she said, because it was one of many franchises deemed "essential" during the pandemic. The Bergers own a Maaco franchise in New Port Richey, Florida.
"You were just not comparing apples to apples. We had to quantify our analysis with a rating system, which was challenging. The evaluation process was just excruciating," she said. Here's their process:
Examine those FDDs. "At the very core of it we looked at the financial stability of the parent company, and we got quite a few of the franchise disclosure documents," she said. "Obviously they're not the most helpful of documents, even with a lawyer working with you, but it gave you some indication of how your relationship would be with the franchise, depending on how draconian it was." Of course, they had to pay a lawyer to examine each one, but she found it worthwhile. "They were very illuminating."
Beware the cool things. "We did a lot of due diligence, visiting and speaking with opportunity holders. We visited onsite locations" for all the brands. "We looked at the business culture. We tried not to get too excited over the soft and cool things. Like the dog grooming would have been awesome. You get to play with puppies all day!" she said, but "you had to take your heart out of it, put your head into it to a certain extent."
Think long term. "We knocked out things because of either concerns in the FDD, or some of it was just the gut," she said, and a key question they asked themselves was: "Can you see yourselves doing this for 10 years or 20 years?"
Being essential is important. Caroline Peach, a Maaco franchisee in Orlando, found that out when COVID-19 hit last March and tourist attractions like Disney World closed. Business at her shop "fell apart in March and April, then it started picking back up beyond our expectations. People all of a sudden had money, they had stimulus money. We were painting 40 plus cars all of a sudden again," Peach said. "It's been a weird year. And then when Disney closed we were like, oh my god this is bad. But cars came in. People invested in their vehicles. It hasn't been a tragic summer." She used social media to heavily promote a $499 paint job to "make someone's car look nice again."
The total investment for a Maaco Center franchise is between $297,313 and $587,860. The Bergers' franchise was a transfer from another franchisee, which cost $15,000. Operators are required to spend $10,000 in local marketing, "and you have a couple of years to do it," she said.
Reached late last year, Berger said the biggest challenge has been improving social media scores, as well as dealing with the pandemic, of course. "It's been going well with the exception of COVID, the big elephant in the room. We took over a shop that was struggling. It was a modestly priced opportunity for us and it was a reasonable price because it was running negative. We turned it around, we feel pretty quickly. It had an absentee owner, so jumping on board and digging in, it made an impact very quickly."
Most of their spending went toward marketing. "We focused on improving our Google scores right away. The Google scores weren't terrible but they weren't stellar. It really hurt you, because it got you down to 3.7, 3.6, and that's with a 40-year history," she said. "We've actually been able to get it up to 4.4. It's a metric that people use when they're judging a potential shop to use."
"Besides our mandatory spend through Maaco with its ad fund, we separately pay for Google ads because we find them valuable. That is one of our primary sources," Berger said. "Everyone's trying to fight over the limited business out there."