Franchises Finding a Good Fit

Independent garages are under a lot of pressure. Faced with dealerships and nationwide chains, many local shops are asking themselves if they can survive. Some of those independents will turn to franchises to renew their prospects, but not all chains are created equal. Understanding the different formats is the first step in choosing the right business. Finding a franchise means finding a good fit.

The advantages of a franchise are obvious–you’re buying into a system with deep pockets. The organization has put you on the map before you’ve made your first repair just by being a recognized name. And they will continue to bolster your image with media promotion and a large presence wherever people go. They’ll also have the industry contacts for purchasing materials, developing products and getting financing. A lot of the business aspects of running a garage that owner/operators tend to neglect are taken care of for you in a franchise. Sometimes it’s good to have a formula to follow. But is a formula what you really want?

If you have a successful business infrastructure already in place– a good facility, a solid clientele– you might not want to completely change your business. There are options available to independents who wish to buy into the security of an organization, yet maintain some autonomy. Take, for instance, Premium Muffler, Inc.

“We’re not actually a franchise, we’re a dealership,” says Premium Muffler president, Bill Jess. “We don’t tell these guys what they have to do. We feel they already have a successful business, and what we’re doing is adding a profit center to it.”

With the right facilities, $24,995 gets you into a Premium Muffler business with a minimum of worries. If they like what you have to offer, Premium will negotiate different terms with you. You can purchase your muffler business, purchase part of it and lease the balance, or lease the whole thing. The turnkey operation includes a state of the art automatic bender, a start-up inventory package, hats, signs, banners and local advertising support. Onsite training is available whenever it’s needed.

There are no ongoing fees or royalties to be paid with the Premium Muffler concept, only an obligation to buy parts from the organization and follow their muffler guidelines. “When they want to do brake jobs, oil changes or tune-ups etc., we don’t say anything to them about that,” says Jess, who stresses the flexibility of the Premium format.

Premium Muffler offers an add-on business to enhance the profitability of an existing garage. For the technician without a property who wants to start a business, a full franchise concept may be the answer.

For the experienced technician mechanic who wants to become an owner/operator, he or she can count on facing off with dealerships and Canadian Tire stores. Rather than opening a small, independent shop, a higher percentage option might be a smaller chain like The Master Mechanic Inc. A turnkey operation in the master Mechanic system goes for approximately $125–$135,000 dollars. Master Mechanic has 34 locations across Ontario and more on the way.

The Master Mechanic organization is large enough to supply the infrastructure needed to go head to head with the biggies, yet still small enough to have a neighborhood feel to their business culture.

Says Andrew Wanie, president, The Master Mechanic: “It’s very important not to overload these guys with overhead. It is really in our interest to get things started with as much money in your pocket as possible, so that you can weather that first three to six months. Usually you break even by the sixth month, and then you’ve bought yourself time because you are no longer ‘bleeding’.”

According to Wanie, the Master Mechanic formula aims at earning the franchisee twice their market value as an employee somewhere else, by the end of the second year. In other words, if a former service manager making fifty thousand dollars acquires a Master Mechanic franchise, by year two his personal income should be about $100,000 per year at that point. The thinking is that once the hard work pays off in better wages, the franchisee is happy, his family is happy, and he exudes confidence and success to his customers.

Such positive assertions sound great. However, it must be remembered that there are difficulties in making any business work, even well supported ones like Master Mechanic and Premium Muffler.

Franchises-

not a no-brainer

If you think that having the start up money and the stamina is all you need to get into the franchise game, think again. There is considerable research to be done before you even get to the introductions.

“The due diligence that a potential franchisee does up-front is absolutely crucial to the success of their business down the line,” says Chris McLean, public and government relations manager, Canadian Franchise Association. “In Ontario, there’s a new franchise law, which is about pre-sale disclosure. If you’re doing business only in Ontario and Alberta, the franchisor has to give out specific information to back-up their claims about any bankruptcies in the business, about how many of the franchisees have gone under in the last five years, that sort of thing. If you’re doing business outside of Alberta and Ontario, it might be a good idea to take a look at Ontario laws and regulations and try to get the same information.”

McLean also points out that the Canadian Franchise Association has their own due diligence process before they grant a franchise membership. If you are interested in an organization that is part of the association, you know they’ve been investigated from their bankers to their franchisees, and they deliver. The Canadian Franchise Association website, at www.cfa.ca, goes into more detail about their membership process, and provides contacts that can help the potential franchisee.

Assuming you’ve done the research and you’re ready to meet the franchise brass, you have to be prepared to be researched yourself. Some organizations, like Premium Muffler, have specific real estate requirements that are non-negotiable. Says Bill Jess, “If a guy’s just got a garage with a bay, we’re not interested in that. We’re looking for a minimum of two to three bays with a waiting area. And we need to have some sort of room where we can put stock.”

Your personality must also have the right profile to make a franchise concept work. Avoiding misconceptions about what’s expected of you will save a lot of grief down the road. Says McLean, “A lot of people think franchisees have an entrepreneurial spirit. In fact, people who are very entrepreneurial and independent often don’t fit within the franchise format. When you buy a franchise, you’re going to be told how to run your business. They are looking more for team players than entrepreneurs.”

They are also looking for people who will work hard on the image of the business as much as the cars. It’s usually not good enough to be a dedicated technician, you must also be a dedicated promoter. That can make the difference between success and failure in a franchise.

Bill Jess describes his experience visiting one struggling business that had no banners, signs or promotional material evident, “I said to him, ‘I really wouldn’t mind buying a basket of apples from you.’ And he said, ‘what are you talking about, we’re a garage, we don’t sell apples.’ And I said, ‘this is the point I’m trying to make to you-what do you sell?’”

FRANCHISING-REAL ESTATE WOES

Andrew Wanie says the only thing stalling expansion of The Master Mechanic is finding suitable real estate for new locations. Here he runs headlong into landlord and zoning issues. Explains Wanie: “If you want to open a barber shop, zoning isn’t much of an issue. But with us (the automotive service aftermarket), we’re kind of the “lepers” of tenants. It’s the image perception that all of us in the automotive business run a junkyard. I consider us a household support service, like the bank or the dry cleaners. Municipalities are making a terrible strategic error by designating an automotive area where every automo
tive business has to locate. It’s inconvenient for the customer, and it’s inconvenient for us, because we have to compete with the chap who is next door. It’s different for a dealer-if you don’t buy the Volvo you buy the Audi or the Chevy. Automotive villages are fine. But in brake jobs-my brake job is the same as any other person’s brake job. Service level is the only place where you can differentiate your product. Nobody ever creates a barbershop ghetto; can you imagine if you had fifteen hairdressers side by side? It’s very unfair treatment we’re getting from land use planners.”