Driven Brands Adds Carstar to Burgeoning Holdings
Backed by Roark Capital since April, Driven Brands is on an acquisition tear.
Driven Brands continues its acquisition tear with the purchase of Carstar, the second-largest auto body repair franchise, which it’s adding to a new Paint & Collision division behind first-place Maaco. The brands combined have just more than 700 units.
The acquisition follows Roark Capital’s purchase of Driven Brands in April and, in turn, Driven Brands’ purchase of 1-800-Radiator in July. More purchases are to come, says Jose Costa, newly named president of the Paint & Collision division.
“You see a lot of consolidation in company-owned brands” in the auto aftermarket business, “but you don’t see that happening in franchising,” Costa says. “That’s what Roark is good at. We see that continuing in all three verticals.” The other divisions are Repair & Maintenance and Distribution.
His focus will be increasing profitability for franchisees, Costa says, and he expects to be able to augment franchisee margins by 2 percent or so via increased purchasing power.
He will also focus on improving consistency among all Carstar franchises, which is crucial in the brand’s efforts to attract repair business from insurance companies.
More than 90 percent of Carstar’s business comes from insurance companies, and those companies are keen to retain customers when an accident happens—the most dangerous point when customers may become unhappy and start shopping around.
“Our challenge with Driven Brands is around consistency, so insurance companies know the quality of repair is exactly the same” across the country, he says.
Costa was president of Maaco, and will be replaced in that role. David Byers, Carstar CEO, will remain in that position and report to Costa.
“There’s about 33,000 body shops in the U.S., and more than 95 percent are controlled by independents,” Costa says. “There’s so much opportunity to incentivize people to convert to Carstar.”
A challenge for Costa will be convincing all of those formerly independent operators that being part of a giant organization, and funded by private equity, will be good for them in the long run.