Automotive Franchising is Back
The automotive market within franchising is considering one of the original segments which in a sense brought legitimacy to the franchise model and shed light on the franchise distribution channel’s effectiveness. It started with dealerships selling products and vehicles and transitioned into all automotive services, aftermarket vehicle products and a wide range of ancillary automotive services which turned to franchising for growth. While franchised automotive dealership sales like Ford or BMW seem to have levelled off decades ago and those who hold the franchise rights are in some way compared to NFL Franchise owners who are border-line royalty, the rest of the automotive market that provides services and products to the industry category has returned to growth.
Franchising has a way of being a good indicator of what is happening at the consumer level and the fact is that we are driving a lot. This means that we have lots of cars per home in the U.S. (average 2 cars per household) and need lots of services to support those vehicles.
The automotive franchise market went through it’s crazy growth time period in the 1970’s and 1980’s when brands like Jiffy Lube, Meineke, Midas, Merlin and Tuffy all hit significant growth benchmarks and became national and international brands. The automotive repair market was hot and the franchise business was a key component to the expansion of the industry segment. In the 1990’s, the automotive segment in franchising had slowed and seemed to be less innovative or willing to adapt to modern business practices. These preeminent brands like Jiffy Lube leveled off and over the past decade or so haven’t changed their total unit count for some time now. In the 2000’s, the market seemed to hit a turning point and began to see signs of life again. The transition was evident across the board, many “stale brands” reinvented themselves, invested in branding, look and overall presentation to the customer in order to reinvigorate their relevance.
Part of this return to growth has been due to the autmotive market’s willingness to go mobile and bring the services to the customer. Whether it is oil changes, brake repair, glass fixes or upholstery repair services, many of these market segments have gone mobile and bring the service model directly to the customer. Brands that represent this trend include The Brake Squad, The Restorer or Colors on Parade. These brands have created market positions using the mobile aspect as their differentiator, which has allowed them to scale.
The automotive services market has generally been a good business with a bad reputation. Customers expect to be taken advantage of, bullied or plain lied to in a typical transaction. Today’s consumer is better educated, empowered and generally refuses to accept poor customer experiences. Millennials might be the prototype example of this scenario and present a new set of challenges for any business who has not evolved to meet the expectations of today’s consumer. The automotive market was just behind the times and that overall perception was absolutely an aspect of why the market slowed in growth and franchise investment diminished.
The automotive market has worked diligently to change this perception and the brands that have been able to expand have answered the consumer’s demand for professional and fair treatment. Christian Brothers Automotive is a perfect example of this particular trend. The organization is by it’s namesake based on Christian principals and a strong moral foundation which in turn makes the customer feel comfortable that people are doing the right thing and looking out for the best interests of the customer. Other brands like Jiffy Lube have softened their brand and overall image along with updated customer interaction policies to help make the experience better and more repeatable with today’s customer.
Ultimately, the automotive services market can be a great franchise business. The numbers don’t lie. Jiffy Lube average store sales 1,928; Average Annual Sales per Unit: $714,558 on an initial investment of $200k - $400k and the mobile automotive franchises offer an even greater potential ROI with brands like The Brake Squad with an initial investment range of $30k - $70k and average unit volume of $270k. Services generally offer higher margins and are repeatable for vehicle service work as the one consistent in cars is that they will keep needing to be fixed. With the right business model and a customer-focused approach to providing services, the automotive segment of franchising looks to be a strong market for the foreseeable future. The next wave of automotive franchise growth just might have something to do with the electric vehicle transition. With Tesla and all major manufacturers scurrying to mass produce electric cars, the need for services and products for this category will come quickly.
Christopher Conner is the President of Franchise Marketing Systems and has spent the last decade in the franchise industry working with several hundred different franchise systems in management, franchise sales and franchise development work. His experience ranges across all fields of franchise expertise with a focus in franchise marketing and franchise sales but includes work in franchise strategic planning, franchise research and franchise operations consulting.