Qualities to Look for In an Automotive Franchise

Qualities to Look for In an Automotive Franchise

Since the invention of the first car in 1886, many business opportunities have emerged in the automotive sector including a variety of automotive franchises. According to the International Franchise Association, there are 38,065 automotive franchises in the United States that provide services including automotive repair, oil changes, transmission work, replacement parts, car washes, detailing, dent repair, paint jobs, and car rentals.

With so many automotive franchises to choose from, what qualities should you look for in one prior to investing your precious time and hard-earned money into it?

Support

One of the primary benefits of investing in an automotive franchise instead of starting a business from scratch is the support and guidance you'll receive from the corporate office and fellow franchisees who want you to be successful since your success is tied to theirs. It's important to note that not all franchisors provide the same level of support. To find one that is committed to your long-term success, carefully review their business model and process to see what kind of training and support you will receive and determine if you will be taught what you need to learn and be provided with the tools necessary to service your clients and run your business successfully. Things to find out include what happens if you come across any challenges, what kind of marketing and sales support will you receive, and what back-end office support, if any, is provided. The more detail a franchisor and franchisees, since you should speak to several prior to investing in any franchise, give you with regards to the support you'll receive, the better.

"When we first purchased our franchise, Novus supported us through training and continued technical support," says Wesley Wenger, who owns a Novus Glass franchise, which provides automotive, commercial, and residential glass repair and replacement services, in Atmore, Alabama. "Although our needs have changed after 19 years in the business, Novus helps us stay on top of market trends and provides us with support as needed."

Cost Savings

It's important to find out if the franchisor does anything to help contribute to your bottom line in addition to offering support and guidance. For example, do they leverage their bulk buying power to enable you to get your supplies at a lower cost than independent automotive businesses? If you hire someone in order to grow your business, will they reduce your royalties in order to help you cover the cost of the employee's salary since ultimately your hiring a new employee should lead to your doing more business, which eventually will result in the franchisor benefitting more financially than they would if you remained as a one or few person operation? Speaking of royalties, it is important to understand how your franchisor implements them. Are they a percent or fixed fee? The percent-based approach is a percent of gross sales and is the most common. The idea behind the percentage fee model is that you and your franchisor are both invested in your success. The franchisor receives very little financial reward for all the time and money they invest in your success as you are getting your business off the ground. As your business grows, however, they will start reaping the financial benefit. The fixed-fee approach is not as common. Although it can financially burdensome until your business is up and running successfully, you will eventually make more profit than you would with a percentage-based fee.

"Colors on Parade has established partnerships with suppliers so we get supplies more cost effectively than independent operators do," says Dan Fleischmann, who owns a Colors on Parade franchise, which provides mobile auto body paint and dent repair, and is an area developer for the brand, which means he helps to sell franchises in a designated area and mentors the franchisees who purchases them. "In addition, Colors on Parade encourages the business growth of its franchisees by reducing royalties when we hire someone else since the right new hires help our businesses expand."

Protected Territory

As a prospective franchisee, among the many things you have to consider when looking at investing in a franchise is how your territory will be protected. The last thing you want is another franchisee from the same brand cannibalizing your clients. When you read through the Franchise Disclosure Document (FDD), you may see the term 'exclusive' territory or 'protected' territory. There is a big difference between the two. If the territory is exclusive, your franchise should be the only one in the territory. If your territory is protected, then your franchise agreement may allow for certain forms of competition, such as franchisor sales through alternative channels of distribution like the Internet, which isn't relevant if your automotive franchise is a service vs. product model. Of course, you may be able to remove the issues of needing to protect your franchise business, by purchasing the territory it is within.

"We own and operate 16 Jiffy Lube locations in the Portland, Oregon metro area," says Allan Engelmeyer who has been a part of the Jiffy Lube franchise system for over 20 years. Jiffy Lube provides automotive preventive maintenance and light duty repair services.

As Engelmeyer appreciates, the advantage of owning multiple units of the same franchise brand within a specific territory is that there's virtually no chance that another outlet operating under the same brand or system will "cannibalize" any possible sales your franchise units could achieve.

One of the many reasons entrepreneurs choose to invest in an automotive franchise is that vehicles always need servicing and maintenance throughout the year, whether the economy is good or bad. In addition to having access to many potential customers, you could have many repeat customers depending on the franchise model you select. Although you may be anxious to quickly invest in an automotive franchise, prior to doing so it's essential to do your research and carefully review a franchisor's FDD for more detailed information about its system, procedures, and costs. This will help ensure you are investing in the one that is most likely to help you achieve your life objectives.

Published: May 21st, 2018

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