Joining Hands

Small businesses are at the heart of the Canadian entrepreneurial spirit. Going it alone and the self-made man (and increasingly, woman) have been the core of Canadian economic growth in every sector since Confederation, and as the saying goes, no two are alike. The drive and courage to start and operate an independent service business, however, doesn’t necessarily mean operating in a vacuum. For many independents, banner programs offer an attractive mix of big-league presence with the independence that small business founders enjoy.

Why join a banner program?

According to Carquest’s Michel Rondeau, “It’s a sure way of doing business in the future. Banner programs are there not just for dealer identification, but as something that will help them. Some need more help on the technical side, some need it on the management side, selling and “soft” skills. I don’t think that an independent by himself can be as good as someone in a banner who is using the tools. Some dealers are not as open to new tools and new ways of doing business. Some independents will survive, but for what banner programs cost, it’s a good tool.”

Good tools are essential, and in a consumer-driven industry like ours, getting the message out about new capability is just as important. “My main message is that it allows them to compete with the national franchises like Goodyear and Firestone. It gives them a national identity”, declares Bob Bobert, general manger for Auto Value Certified Service Center/Professional Repair. The identity issue is key, but many independents still express concern about interference in their day-to-day operations. “That can make it a tough sell”, adds Bobert, “until you explain that joining a banner program doesn’t necessarily mean giving up their identity. We feel it’s important for them to keep their own identities.”

Control is always a major make-or-break factor in the banner decision for independents. Branding is everything in the retail service sector, and smart marketers develop and protect their brands carefully. Those that don’t, need to, and if your operation is under imaged in its local market, banners can provide a level of visibility and implied quality that might take years to develop as an independent. On the other hand, shops with a prominent brand and a loyal customer base will want to preserve the equity built up in the business name, and may opt for signage that places less emphasis on the new business relationship. Signage requirements vary by program, so it’s a good idea to check it out before signing, if you have a preference.

What kind of shop takes the banner route anyway? “I think it’s more the progressive shops that get involved, through the progressive jobber”, says Kevin Patterson, marketing manager for Auto Sense Auto Parts / Auto Logic Service Expert, adding, “someone who’s managing and keeping their eye on their own business can see a need for them to go to their customers and become more than just what Bob Greenwood calls “Service Providers”. What they really need to do is form a business partnership rather than just a business relationship (with their jobber). For example they can save money in insurance and other aspects of the business over and above discounts on parts.” Patterson notes that pressures on the receivables side is a notable driver to some banner programs: “Everyone’s tired of receivables; here’s something that can help cut down receivables with private label credit cards, cheque guarantee services and others. It’s a big problem with the industry as a whole. You’re not a bank.”

As with signage, receivables options vary, and are worth discussing if 60, 90, 120 or more days are a common issue with your business.

Getting aboard a banner program can start with a phone call, but many service businesses are approached by their jobbers. Depending on the program, the process can be almost exclusive.

“It’s up to the shareholders to select the customer that they want to target with the banner program. It’s a selective process; it’s not offered to everybody”, declares Marc Alary, marketing and product manager for Bestbuy / Best Auto, who notes that it isn’t easy for many independents to take the plunge: “I think that the banner idea is a tough choice for the service center’s point of view. It’s like Subway: You have a bunch of subs, and breads, so you have to know what you want. It’s a simple way to link installers and jobbers. Some service centres are very happy to identify themselves.”

Alary notes that different banner programs have unique structures, with differing fees and contractual requirements. Most offer a menu-like array of features to allow an amount of customization by the business owner. In every case, they’re there to help the business move forward. Would this automatically require a radical change in a garage’s business model? “Absolutely not”, states Alary. “The program doesn’t change his way of business. It should be a seamless integration. They don’t want to be swamped with paperwork. At first it’s intimidating, so we try to show them the scope of the program, but at the end of the day it’s pretty simple.”

Simplicity is a real virtue when going through the process of joining a program, but the key fundamentals of running a successful business won’t change, so a keen eye on operating costs, overhead, payables and receivables is still crucial to your business plan. It can be a good idea to check whether your program allows la carte upgrading to new aspects of the program at a later date. Slowing the rate at which a new program in integrated into your operation not only gives you and your staff time to acclimatize, but prevents the fundamentals from slipping while you’re preoccupied with the transition. It’s a good idea to assume that the process will require more time (and probably more money) than anyone anticipates, so planning ahead will let normal management of day to day operations continue even if problems crop up.

While there’s not necessarily a need to change your business model to join a banner program, it’s also a great opportunity to do just that where more profitable opportunities emerge.

For Autopro’s Paul Germain, that opportunity is in the move to more maintenance, and the need to deal with the dealer threat. “Surveys show that consumers perceive that the dealer channel is the only one capable of doing certain services. The percentage of retention by dealers, especially imports, is growing massively,” declares Germain. “The latest JD Power survey shows that Nissan is capable of retaining 40 percent plus of eight-year-old vehicles. It’s a shocker. What’s your excuse? Why in the world is an eight-year-old Sentra with probably 150,000 kilometers on it still in the dealer channel? Because the customer’s perception is that some of the stuff under the hood cannot be addressed otherwise. Let’s break that perception. That’s the message.”

The undercurrent to Germain’s message is that the dominance of dealers in some markets and market segments means that independents need new techniques if independents are going to counterattack successfully. Says Germain: “They’re squeezing us into a current abundance of older vehicles, but when you look at the demographics and take today’s fleet and just age it, some fall off the cliff, but we have a big dip in the four to ten year old segment and it will move over. If our core business remains what it is today, that is eight to fifteen year old cars, it’s going to shrink drastically in two or three years. There is big trouble coming unless we find ways to capture some of the newer cars out there, and more females as well.”

According to Germain, maintenance is a key driver to aftermarket profitability: “We will focus on recruiting maintenance shops, and we will focus on making the current breakdown shops, maintenance shops to beat seasonality and get to the nirvana of predictable business and profitability. The dealer channel is not content of peaks and valleys of two to one, and two to one is common in the aftermarket shop.”

There are many programs out there and independents have many o
ptions form which to choose. Choosing well takes time and a little effort to find the match for your business, and your business goals.

Contact as many as you can and don’t be afraid to ask tough questions. Do you absolutely need a banner to be successful? No. Are banners a good way to improve an existing enterprise and add features not available to a lone entrepreneur? Absolutely.