By Gideon Scanlon
Toronto, Ontario — While the debate may still rage in other areas of human achievement, in business, bigger is almost always better.
With a higher volume of capital available, a business’s leverage increases. By providing for cross-business costs in a unified manner, a large company or franchise with many individual outlets benefits does not need to spend as much as individual operators–at least on a per-location basis.
To some extent, exploiting the advantages of size has always been the practice of big networks in the collision sector. Over the past fifteen years, franchised repair facilities have either absorbed or out-performed the majority of mid-tier facilities in Canada.
High-performing independent facilities that had heavily invested in training and technology were, if not unaffected by, less prone to losing out on market share to banner facilities.
In the suburbs and smaller cities within commuting distance from major metropolitan areas, these businesses have thrived—with or without banner membership.
As one owner of a top-tier independent put it in 2018, “I have joined a couple of different groups over the years, but the supposed advantages didn’t pan out.”
In the past two years, however, North America’s largest collision repair networks have made striking efforts to use size to move into the niches of these top-tier facilities with a previously unseen vigour.
In Canada, Driven Brands and the Fix Auto Network, the market leaders, have pursued strategies that have made it easier for their network members to secure access to cutting-edge training, decrease parts costs and to become more appealing to both OEMs and auto insurers.
Both networks have invested in providing access to training opportunities to network members.
Just after acquiring the Carrossier ProColor network, Fix Auto Network officially opened a training centre in Milton, Ontario–one that will serve the FixAuto, NOVUS Glass and SpeedyAutoService brands. Later in 2019, it opened a second training facility in Quebec. A third location will open in Western Canada this year.
By that point, Carstar’s own cross-network training procedures were already a year old. In November 2018, the banner announced the creation of the then-revolutionary Carstar University Learning Platform. Its mandate was to enable North American franchise partners to stay up-to-date on the latest vehicle repair technologies and procedures.
Now, the program provides 700 role-based learning modules. Currently, the program boasts 2,000 staff members who have enrolled in the courses—more than half of its total staff.
At the same time, Carstar also added a training and education team at the corporate level, with the express purpose of identifying which areas of training would prepare network members to thrive in the collision repair sector. In fact, the platform focuses on providing training to help partners reach the requirements set by specific OEMs and DRPs.
When Carstar University launched, its chief operations officer Dean Fisher said, “We are certifying our CARSTAR operations and insurance sales teams to deliver I-CAR training to our stores and also have made it mandatory for them to maintain a platinum-level certification.”
In both cases, the breadth of training these two enormous networks can provide to partners put them in an enviable position.
At this point in the collision sector’s history, where OEMs and auto insurers are becoming increasingly involved in how repairs are performed, the big franchises’ investments in training appear to be designed to allow their franchise partners to walk a fine middle-ground.
According to the Romans Group’s Profile of the Evolving U.S. and Canadian Collision Repair Marketplace in 2019, bigger players are certainly doing something right. The report found that MLO independents, dealer-owned shops, and franchise network segment now constitute 30 percent of the number of locations, and absorbs 77.7 percent of the industry’s revenue.
“We do see the combined ≥$10M MLO independent, dealer, banner, franchise network segment revenue increasing at the expense of smaller operators,” the paper’s abstract states.
It also seems to suggest that larger facilities to increase their ability to leverage their size advantages.
“The average revenue per location is considerably lower than the U.S., and severity for both repairable and total loss continues to hold steady with an upward trend bias for the immediate future.”
As the big players find new ways to flex their size to their advantage—finding a niche suited to the smaller scale becomes a more and more difficult proposition.
While the advantages offered to the largest players in the collision industry are significant, all is not lost for smaller-scale competitors heavily invested in cutting-edge services.
Many of the advantages smaller scale businesses have over larger competitors relate to flexibility.
When it comes to training investments, small scale businesses are more likely to be able to manage sudden, unexpected shifts in what is expected of the marketplace.
Currently, both the Fix Network and Carstar have training programs reliant on I-CAR’s curriculum. While the industry’s general faith in I-CAR is solid, should it ever be found to be lacking in some area or other, both banners could have to overhaul their training systems entirely.
A more likely scenario that might spell more trouble for large scale competitors rather than small-scale ones would be a sudden drop in the overall number of vehicles in need of repair. As accident avoidance technologies become more and more ubiquitous, conceiving of a future where there are year-over-year drops of ten percent in the total number of vehicle accidents is not inconceivable. In such a situation, major players would be vulnerable to becoming over-producers. Scaling back operations in larger businesses is much more difficult than scaling them up.
Owners of top-tier independent outfits will find this to be cold comfort. The danger posed by banners moving into their niches is a clear and present danger. Perhaps it is best summed up by a recent job posting placed by staff at the Fix Auto Allen Expressway.
The posting asks for “experienced auto body repair tech” to apply for work in the north of the GTA, arguably Canada’s most densely packed region for top-tier auto repair facilities.
The clincher?
“125,000-$150,000 a year.”
