The automotive aftermarket industry, a $275 billion giant in the US, presents itself as a very strong category for franchise opportunities.
The body shops provide repair and customization work to the interior and body of passenger cars, trucks, vans and trailers. Some industry operators specialize in specific auto repairs; for example, paint shops specialize in post-collision paint jobs, while automotive glass shops replace, repair and tint windows. Restoration shops, which typically represent a niche market, restore classic and antique cars. 95% of body and paint shops are independent – and very fragmented, presenting a big opportunity for franchising.
Auto mechanics, on the other hand, provide mechanical and electrical repair and maintenance for cars, trucks, vans and trailers. Operators include self-employed mechanics, auto repair shops, garages and car care centers.
There are both macro and micro reasons for the growth in these sectors…especially for the franchises. I’d like to share a couple of macro trends first.
- The total number of vehicles and the average age of vehicles on our roads have steadily increased on our roads to over 250 million. The average age is currently at an all-time high of 11.3 years, and older vehicles require much more frequent and expensive work.
- Second, the sheer number of models of conventional, hybrid and electric vehicles, and the rapid globalization of Original Equipment Manufacturers (OEMs) present a wide variety (and complexity) of channel partnerships, specializations and bundling opportunities to retail automotive shops. Large franchises have significantly higher purchasing power than small, independently owned shops. At the same time, parts complexity encourages consumers to visit trusted brands for their service needs. Relationship-based buying while consumers wait in family-friendly coffee-lounges, has largely replaced transactional selling to drivers through special offers while they wait on grease-lined floors.
At a micro-level, the case for franchising is more intuitive. Think about it.
When a customer walks into a mechanic shop she doesn’t usually know what is wrong with her car. So, she doesn’t know what repair is needed. For her to take a leap of faith, trust is paramount. And once trust is established, through good work and customer service, she is not going to change her service provider for a really long time. Strong franchise brands get new owners a trusting buyer base, that takes years to build, in a highly fragmented marketplace.
When consumers travel by road or migrate, they are also more likely to stick to a franchise brand. This is partly driven by brand loyalty and partly by Direct Repair Programs (DRPs) of their insurers. The industry itself is very resilient to economic cycles. While economic downturns encourage consumers to keep their vehicles longer, rising disposable incomes encourages consumers to visit auto professionals for specialized labor and equipment versus opting for internet (or do-it-yourself) solutions and release their pent-up demand for non-essential repairs, unsightly dents and scrapes, etc. from the recessionary period.
I will be happy to share more of my research and specific opportunities with those who are considering getting involved in this sector in the state of Washington. Please connect with me here.