Choosing a sector for franchising or master franchising? Jeff Todd makes a strong case for automotive aftercare
Entrepreneurs looking to own their own businesses may not consider the automotive industry as an obvious first choice. However, through franchising, a broader pool of candidates than ever before has the ability to take advantage of an industry that offers ROI and growth potential – the automotive aftermarket.
You don’t need to be a former mechanic in order to open a car care center or body shop. With the right franchise concept, your skills or background as a sophisticated investor and savvy operations professional are far more important than your ability to diagnose an engine problem.
Your skill set allows you to take advantage of a largely recession-resistant segment of the economy.
What are the main reasons a prospective franchisee should look into the aftermarket, in place of other concepts?
Aftermarket franchising benefits when auto sales are up – or down
When car sales dip because Americans are keeping their cars for longer, this is often good news for aftermarket brands that provide maintenance and repair services.
Inversely, when the economy booms and consumers treat themselves to new cars, additional vehicles on the road means increased demand for car services, and the aftermarket industry continues to thrive.
Today, U.S. auto sales remain near record levels, and the auto aftermarket is predicted to reach $316.4 billion as an industry by 2020. This is an increase of nearly $39.3 billion over a four-year period, according to the Automotive Aftermarket Supplier Association and Auto Care Association’s 2017 Joint Channel Forecast Model.
Additionally, in 2008, when the economy was much weaker and more Americans were keeping older cars on the road, the aftermarket industry was also in the enviable position of providing maintenance and services to keep those cars running smoother for longer.
In both cases, a key descriptor of the aftermarket is evident – its stable potential for profitability. For aftermarket brands that provide maintenance and repair services, there remains a consistent opportunity for growth and ROI.
Active market consolidation favors large franchisors
The aftermarket auto industry has historically been extremely fragmented and the vast majority of service providers are independently owned. There are growing numbers of market consolidators who provide services in multiple verticals – paint & collision, repair & maintenance, quick lube, and distribution.
Market consolidators actively benefit their franchisees by being able to utilize their economies of scale to create value.
Aftermarket chains are able to purchase oil, paint, and general supplies at reduced prices, and have established relationships with fleet accounts and insurance companies allowing the franchisors to drive revenue for the franchise locations.
Superior buying power and market relationship, along with brand name recognition provide a competitive advantage that independents are struggling to compete against.
Aftermarket franchises meet the needs of older cars
The average length of ownership of both new and used vehicles in the U.S. increased nearly two full years between 2007 to 2017, increasing to 12.1 years. Older cars tend to require more maintenance to prolong drivability, while miles driven allows older vehicles to stay on the roads for longer.
The result has been an increase in revenue for the auto repair industry, totaling $67 billion so far in 2018.
As the quality and technology built into newer vehicles increases their lifespan, the age of cars that are serviced in auto shops will continue to increase over time.
While independent owners might be playing catch-up on these types of forecasts, aftermarket franchises are uniquely capable of tracking and meeting these developments in the industry; access to big data and macro trend analysis allows franchisors to pass tools, tactics and insight on to franchisees.
Franchisees harness incredible aftermarket brand recognition and trust
American consumers regularly report distrust and apprehension around the car repair process. Offering a trusted name and brand behind services is the key method to break through the concerns and grow an existing base of return customers.
Drivers take their cars to the shops they trust, and a nationally recognized brand can engender loyalty and confidence for potential customers in your community.
Rather than working to build name recognition from the ground up, you’ll already be starting with a brand that is readily associated with quality car care.
Training and support to access latest auto technology and innovations
As a franchisee, you don’t need to be a car expert to establish a successful repair or aftermarket business. From the start, you’ll have access to industry-leading training and ongoing support from the franchisor and fellow franchisees.
From site selection, initial build-out, grand opening marketing and outreach, consumer marketing, IT tools, and operational support, you won’t be on your own. In fact, you’ll be able to rely on a national team to help you effectively launch your business, and to maintain that momentum and growth through the years.
Aftermarket franchising also gives you access to a franchise system filled with owners just like you who are familiar with both the business model and the industry, and will be able to provide their own recommendations and tips on how to best leverage the strengths of the franchise to grow your business.
Many franchise concepts offer the opportunity of purchasing existing locations
As you’re investigating available franchise opportunities in the aftermarket, a location available for resale can be an excellent opportunity to take advantage of an existing profitable operation and customer base.
With a resale, it may be easier to predict revenue, as there is already a history of sales for that location. For sophisticated investors, especially those looking to take over more than one existing location in a territory or market, a resale can be a clear pathway to growth, especially in a stable and expanding automotive industry like the aftermarket.
Top reasons to franchise in the automotive aftermarket:
* Robust industry growing year-over-year
* Leveraging brand recognition to overcome consumer anxieties about car repair
* Enjoy easier access to financing than starting your own shop from scratch
* Top-tier training and support
* Benefit from a proven business model
* Offer more competitive pricing on services and parts to customers
* Growth – opportunity to become a multi-unit owner
ABOUT THE AUTHOR
Jeff Todd is the director of franchise resales for Meineke, a division of Driven Brands, the nation’s largest aftermarket automotive franchisor. An experienced transactions expert, Jeff has been the engine behind Meineke’s proactive resale initiative, closing more than 100 deals since 2015.