ASA members voice their opinions on this phenomenon happening in the collision repair industry.
Is consolidation of collision repair shops taking over the industry? Is it doing away with independent shops? How is it impacting ASA members?
To find out the answers to those questions, AutoInc. talked to ASA members who represent several different business models. Some have joined consolidators, franchise networks or large multi-shop operators (MSOs), and some remain independent. At least one member joined an MSO, then got out.
One of the ASA members AutoInc. talked to is Dan Stander, AAM, ASA’s Collision Division director, president of ASA-Colorado’s Collision Division, and third-generation operator of Fix Auto Highlands Ranch/Jerry Stander’s Collision Works.
“There’s much to be gained by joining an MSO-type organization,” says Stander. “Consolidation will increase your market coverage, visibility and presence. It may also provide you with greater supplier leverage and centralized operating efficiencies and economies. It will help you run your business like a business. Overhead costs can be spread over a larger organization.”
All those advantages make it harder and harder today for independents to compete, says Stander. That’s why his family’s shop became a Fix Auto franchise after 26 years of being an independent. “It aligned us with a large, international organization, says Stander. “We gained customers, not only because of insurance and fleet referrals, but better business practices.”
Their affiliation with Fix Auto has definitely helped, says Stander.
“Insurance companies prefer working with a single point of contact within direct repair programs (DRPs),” he says. “It cuts down on the amount of administrative tasks a DRP coordinator must complete during his day-to-day tasks. It allows that person to oversee more shops with less hassle.”
Stander says it’s hard for the little guy to compete against a big MSO. “It’s kind of like David against Goliath,” he says. “It can be done, but it is not easy. Much of it depends on your adaptability and acceptance to change.
“It’s a matter of survival, really.”
He also points out that consolidation is not unique to the collision repair industry. “As you know,” says Stander, “Home Depot and Lowes put a lot of little hardware stores out of business. Walmart did the same for smaller businesses that couldn’t compete.
“I see consolidation as a phenomenon that’s happening in the collision repair industry and I assure you it’s uppermost on the minds of all shop owners. Times are changing. Consolidation is a natural evolution, part of a changing economy.”
Stander points out all multi-shop operators are not part of a large corporate consolidator or franchise network. “For example,” he says, “ASA’s chairman, Darrell Amberson, AAM, is vice president of operations for LaMettry’s Auto Body, which has seven locations in the Minnesota area and is not part of any of the large consolidators. And Ron Nagy, AAM, immediate-past chairman of ASA, and his brother, Dan, AAM, own Nagy’s Collision Specialists, which has seven repair locations and an express/call center in Ohio and is not affiliated with a consolidator. Neither Amberson nor Nagy see their business becoming part of a larger MSO in the foreseeable future.
“I think whether a shop will be competing against one or more MSOs depends a lot on the shop’s market. The large MSOs like metropolitan areas where many shops are concentrated. Those shops are more attractive to consolidators – because economies of scale can be realized quickly – than individual operations scattered about in less-populated areas.”
What’s behind consolidation?
There are a lot of factors driving consolidation, says Stander, including an apparent oversupply of collision repair facilities, the influence of insurance companies, growth of direct repair programs and insurers’ need to control costs, and ever-more-efficient computerization and electronic interchange between shops and insurers.
“The experienced management teams of big firms such as ABRA, Boyd, Caliber, CARSTAR and Service King can often help independents – and the insurers with whom they work,” says Stander. “They usually offer greatly improved efficiency and a brand name instantly recognizable to consumers.”
Stander says consolidation can also offer an opportunity to those thinking about getting out of the industry. “Signing on with one of the big MSOs may represent an exit strategy for independent shop owners who want to cash in, move on or simply retire,” he points out.
“In short,” says Stander, “there are many advantages afforded by consolidation. I would challenge you to research what is going on in your market. Get involved with your local or national association, speak with other shop owners, and reach out to those organizations/franchises that help independent shops compete in today’s marketplace.”
Don’t discount independents
“Whoa! Not so fast. There are also some disadvantages,” says Johnny Mock, AAM, a past chairman of ASA and the owner of Johnny Mock’s Auto Body Shop in Pittsburg, Pa. Among disadvantages, says Mock, you have to pay to be a part of a big consolidator or network and you have to abide by their rules and regulations. “You lose control,” he says.
Mock, for many years, was part of a large franchise network. He got out because he wanted to run his own show. He says he likes running his own business and controlling his destiny. He’s determined to remain independent.
A lot of other independent shop owners feel just like Mock.
April Hernandez, AAM, of Hernandez Collision Center in Savannah, Ga., is among shop owners who proudly proclaim their independence. Hernandez Collision Center has two locations.
Hernandez, who is a member of ASA’s Collision Division Operations Committee, says other body shops are pressured by some insurance companies to cut corners and deliver an inferior quality repair. “We think that’s wrong,” she says. “To us, nothing is more important than doing a collision repair job right, ensuring that our customers’ families are in good hands.”
“Every market is different,” she says, “but I think that in our market, independent shops will be able to compete with MSOs.”
David Byers, CEO of CARSTAR, an ASA corporate member, says: “CARSTAR is the largest MSO in North America, with 440 stores in 32 states and all Canadian provinces. We believe consolidation will ultimately transform our industry similar to the hardware industry – from ‘mom and pops’ on every corner to Lowes, Home Depot, ACE and True Value – a mix of corporate consolidators and franchise networks.”
Hernandez and Mock agree that if any independent shop owners think their shop will one day be extinct, they should quit worrying. Independents are not going away, they say. Both believe there will always be a place for independent shops, even with increasing industry consolidation.
In fact, their “independence” can be a selling point to consumers, says Hernandez. An independent shop may offer more to its customers than what those customers could expect from a shop that’s part of a big consolidator.
They know times are changing, say Hernandez and Mock, but both believe well-run independent shops will always be able to compete with consolidated operations.
“Don’t forget,” says Mock, “how David came out against Goliath.”
Johnny Mock Shares His Advice
Johnny Mock, a longtime member of ASA, has some words of wisdom and advice for fellow independent collision repair shop owners:
• There’s no doubt that the big multi-shop operations can offer insurers more than any small shop because of the number of people they have on staff and the systems they have in place. MSOs can also negotiate deeper discounts with vendors because of the volume of work they turn out.
• Consolidators and franchisers are often looking for high-volume areas that can supply them with a lot of work. If your shop is in a rural area, it probably won’t be affected by MSO groups. But a small shop in a highly populated area might be put out of business if it doesn’t stay on top of things and offer its customers not just a good experience, but a great experience.
• I believe MSOs like to take over a market and dominate it to a point that the competition cannot survive on the work that is left.
• Independents can compete, but they must run their business in a professional manner. They must streamline their processes and know their financial numbers so they can pinpoint where they are making money and where they are losing money. They have to run their shop like a business, not like a hobby that happens to make them a little money.
• Learn what MSOs are doing to make themselves successful and figure out how to do it better than they can.
• Maybe the biggest advantage independent shops have is that most are family-owned and have built their business on their reputation for doing high-quality work and serving customers with a family-friendly, neighborly feeling. This is what sets independent shops apart from the MSOs.
• Corporate consolidators and franchise networks have a lot of processes in place to try to match independents’ quality, but they can’t give their customers that same hometown, family feeling offered by independent shops.
• A word of caution, though: The collision industry is changing fast and if you don’t change with it, you will soon be out of business. – J.M.