Auto Service World
Feature   July 1, 2006   by J.D. Ney, Assistant Editor

Franchised: Is this the fate of your independent shop?

Some call franchises the way of the future, while others aren't so sure.

Franchises are sometimes considered the odd-ones-out in the independent service community. While franchises stand shoulder-to-shoulder with other independents in terms of battling dealerships for repair rights and other OEM issues, they are part of a larger corporate structure, which does tend to separate them from the entirely independent shop. Separating them even further, is a growing attitude amongst some that franchises may be the inevitable way of the future, an opinion not shared by many in the independent service business.

Joining the franchise team

There is an emerging outlook, especially among those on the corporate side of the divide, that franchises will one day run the show in terms of the service business.

Randy Moore, vice-president of franchise operations with Mister Transmission, was unequivocal in his thoughts on the future of the automotive service business. “In 10 years, there won’t even be anymore independent shops,” he said. “It’s going to be all dealerships and franchises, so you need to go big or go home.”

While Moore certainly put forth a bold opinion, he did not do so without some examples from previous industries to go the way of the big box. Moore likened the coming shifts in the automotive sector to romantic icons like the local hardware store, or the corner pharmacy, both of which, as he aptly noted, have most likely disappeared or sold themselves into a larger chain.

“Look at places like Home Depot and Shoppers Drug Mart; they absolutely decimated the small guys,” he said.

Glenn Root, vice-president of Midas Canada Inc., in Markham Ontario, while being more cautious than Moore, did follow the same logic. “Organizations that prosper the most, will have a strong franchise component,” he said. “Marketing and real-estate are areas Midas really focuses on with the entrepreneur in order to make the operation a success,” he added.

Rick Massey, who handles franchising for Speedy Muffler, Brake and Wheel in Toronto didn’t go so far as to say that independents would be decimated in the years to come. But he did highlight some of the difficulties associated with running a private, unaffiliated shop; difficulties with which a franchise corporation can help.

“The auto-service business is a very difficult one,” he began. “Its complexity requires a group concept to handle things like competition, accounting and training. By aligning yourself with others, you have access to all of these resources.”

By working within the confines of a larger corporate entity, you may even be working within a larger societal trend. As Moore pointed out, it all has to do with consumer impression, in terms of things like quality and guarantees.

“The idea is that bigger is better, so consumers are developing a real big box mentality,” he added.

While Moore, Massey and Root make strong cases for the importance, or — even as Moore has suggested — the inevitability of a franchised future, the outlook is not quite so bleak for the independent, depending, of course, on whom you ask.

The best independents will survive, thrive

While Moore, Massey and Root feel strongly that franchising is the way to go, that’s their business. It’s their job to try and sell people on the Mr. Transmissions, Speedy Mufflers and the Midas shops of the world, and for every individual who sees the independent shop owner as a soon to be relic, there is a staunch individualist running a successful business.

One such individual is Bruce Eccles, of Eccles Auto Service Inc. in Dundas, Ont. A strong voice in the automotive service business, and former winner of the SSGM garage of the year, Eccles was a perfect candidate to stick-up for the independent side of this complex issue.

“I can agree with what some of the franchise guys might say to a certain extent,” said Eccles. “I can see a sort of thinning out of some independents, but the Ma and Pa places that don’t make it, will go because of mismanagement, and not because the consumer doesn’t want them around. But, in the end, it could be good to get rid of some of what I like to call the bottom feeders.”

Eccles went on to discuss some of the new realities in the automotive service industry. “It’s a tough business that is getting more and more costly,” he lamented. “I think that today, you need at least 5-6 bays to turn a real profit, which is of course, directly related to the equipment you can afford to buy. Since we can afford to make those purchases, there are a lot of independent places like mine that are really building momentum.”

Where might that momentum lead? Well, Eccles had a few ideas. “Sales come when you start delivering quality service,” he started. “In that regard, I think independents are going to swing in a new direction. We’re going to be the specialists. And as long as the franchises operate on 100 per cent flat-rate billing, we’ll always have a leg-up on them.”

So, while Eccles is steadfast in his confidence in the independent overall, it is important to at least examine the ups and downs of the franchise system, regardless of whether or not a move to that side of the service game is your final destination.

Advantages of being a franchisee

Some of the reasons why some chose to work within banner programs have to do with advertising, training and support. These are strikingly similar to the stated advantages cited by some of the top franchise organizations, and many large franchise corporations are now going even further.

“Because of our size, we’re now producing some of our own products,” said Massey. “We’ve got some unique oil maintenance products on the way, among many other parts. That’s the kind of Research and Development that our franchisees benefit from, and you can’t have that when you run your own shop, just because the costs are so high.”

Root sited many of the same advantages but took them even further. “You’re joining a franchise to get many skills to allow you to be more profitable. You get supply chain advantages, marketing and national training programs. I know with Midas, we focus on store profits, as opposed to profit from parts sales,” he said.

Actual franchise owners and managers also seem to enjoy the many benefits previously noted when it comes to the operation of their shops. However, some even suggest further consumer and business advantages that may not be as immediately apparent.

Mike Perkins, the manager of an Etobicoke, Ont.-based Mr. Transmission location initially cited some of the basics. “It’s a clean operation with quality products and a trustworthy brand name,” he said.

But Perkins also went on to applaud the operation and execution side of the corporation. “We run our shop as closely to head office policy as possible,” he said. “We try and stick with it regardless. In my opinion, it’s the guys who don’t follow the guidelines that end up in financial trouble.”

In the end, it would appear as though it is this sort of larger corporate vision, being handled and partially funded by others that can be of greatest benefit for individual franchisees.

With that said, however, there are those franchisees for whom the adherence to strict corporate guidelines regardless of individual circumstance or innovation is frustrating.

Where some see advantages, other see problems

While many of the advantages of franchise programs are very appealing, it is important to remember that there is always a flip-side. While Perkins genuinely lauded the various corporate polices of Mr. Transmission, fellow Mr. Transmission franchisee Ray Sanchez, owner of two Willowdale, Ont. locations, expressed some reservations with the system. Noting of course, that Sanchez mentioned all of the benefits of being a solid committed franchisee, such as marketing dollars and name brand recognition, he also commented on some issues he found irksome within the corporate structure.

“I guess the biggest problem I have is that the head office is really reluctant to try new ideas,” he lamented. “If I have a great new idea, I often can’t seem to get that across to anyone. So, when it comes to some of the programs, it’s their way or the highway.”

While he credited the company for the formation of franchisee networks, he felt as though they were under utilized.

“It’s not that there isn’t an effort,” he said. “They have committees set-up to try and hash out some feedback from the franchisees, but the bottom line is, they don’t seem to like new ideas, and so things that come out of the committee meetings aren’t always implemented.”

Although outside of the franchise fold, Bruce Eccles also found some fault with the basic function of the franchise idea. “The reality is, when you’re a franchise operation, you’re business is based on volume,” he said. “You’re basically a mass merchandiser, so it’s upsell, upsell and upsell. Over time, consumers figure that out.”

Despite the positives and negatives, in the end, franchises offer the right shop owners the undeniable opportunity of running a very successful business in the increasingly competitive automotive service industry. And while it’s pretty clear that the big box mentality isn’t going anywhere, it is equally clear that quality independents aren’t either.