Consolidation.
It's happening. You hear about it more and more. At first it was the grocery stores, then banks, drug stores, hardware stores, department stores and, more recently, even auto dealerships that were merging and uniting. Now, it's collision repair shops. It's a phenomenon that was introduced to the collision repair industry several years ago, but it's becoming more and more commonplace. In fact, according to USA Today, analysts predict that consolidators will have about 30 percent of the market in five years, up from about 8 percent today.

What is consolidation? For a long time, the closest thing to it was the multiple shop owner, some entrepreneur who owned two or more shops. A consolidator may own many times that number, but that's not the only difference.

There are a few multiple shop owners, but their stores may differ a little in appearance, character, atmosphere and even in their way of doing business. But the consolidator most likely is pushing for operational consistency.

Clark Plucinski, a founding partner and the vice president of sales and marketing at True2Form Collision Repair Centers, said his firm is working diligently to incorporate standard operating procedures.

Plucinski said, "We have a highly fragmented industry where there are huge inconsistencies in the operations of shops. When we purchase an existing store, we work to ensure consistency. Even if all the shops are doing something great but different, you want to change them so that all of them operate and feel the same."

So what does this all mean to the independent shop owner who some day may be faced with deciding whether to become part of a consolidation or remain an independent shop? What are the pros of consolidation? What are the pros of being an independent shop owner?

To answer these questions, we talked to both consolidators and independent shop owners. Following is what they had to say.

Plucinski sees many advantages in consolidation. "I speak from experience," said Plucinski, who was an independent collision shop owner for 25 years. "Consolidation has enabled me to grow at a far greater pace than I ever could have on my own. Just as importantly, it has given my employees more opportunity to grow too."

He said it's becoming increasingly more difficult for a smaller shop to run its business the way it should to really compete. "For example, it's difficult for an independent shop to have an effective marketing budget, and marketing and business plan," said Plucinski, "and the HR (human resources) is getting more and more complex. It's harder than ever to handle HR issues from a legal standpoint and compliance level, much less be able to offer the benefit packages, training and other facets you should to compete today."

Plucinski said it also is increasingly more difficult for a collision repair firm to stay positioned in the market. He said more than 2 percent of True2Form Collision Repair Centers' overall budget is spent on marketing and that its gross income could be in the $200 to $300 million range in the next couple of years.

Having more resources to spend on marketing enables a consolidator to do a superior job of "branding" with insurance companies and customers, he pointed out. "Branding," he said, "refers to instilling your trademark and company philosophy."

He also believes that with a proven track record, a larger firm has more ability to influence legislative bodies and insurance companies. In addition, consolidation enables a firm to leverage its purchasing power. This allows a company to lower its cost of doing business and ultimately, its charges to the customer.

"Consolidation also gives a shop more access to capital to expand," said Plucinski. Moreover, it enhances a shop's ability to attract - and keep - good employees. "There's more security in being aligned with a larger firm," he said, "plus salaries and benefits are usually better." In addition, he pointed out, employees have more opportunity to grow.

Joe Sanders, AAM, a former chairman of ASA's Collision Division Operations Committee and the former co-owner of two independent collision repair shops, also is a firm believer in consolidation.

The two shops owned by Sanders and his partner were acquired a little over two years ago by Caliber Collision Centers, a consolidator that now has 31 centers in California and Texas.

"My partner and I had a successful business; a good operation that was making money," said Sanders. "And my family was involved too. Our two shops were in Fort Worth and Colleyville, Texas. My son, Mark, was managing our newest shop, in Colleyville. So believe me, I gave it a lot of thought before deciding to sell. So did my partner, Craig Stephens. We believe time has proven us correct in our decision."

He said the "toughest" part about selling is depending on others to make high-level decisions. "That was the biggest adjustment for me," he admitted.

Sanders is now senior vice president, corporate development, for Caliber Collision Centers. His son manages a larger Caliber shop in Fort Worth. And his partner is vice president, regional manager of Caliber's North Texas region.

"My partner and I believed that we ran good operations," said Sanders. "Our shops were well-run and profitable. But I have to admit that since joining forces with Caliber, our shops have increased sales and profits, as well as kept morale high."

Sanders said he and his partner had combined annual revenues of $6 million in their two stores. Today, the 17 Caliber centers in Texas alone reach more than $50 million in annual sales. When combined with the revenue of 14 California centers, the company has an annual revenue of almost $100 million.

"There are real gains from applying the best practices and making good, strong business decisions," said Sanders. "Independents too often make decisions based on emotion."

As for the argument that consolidators' shops just don't have the personal touch that independently owned businesses offer, Sanders said Caliber is constantly measuring performance in many areas, including customer satisfaction. "Some independents really do a good job working on customer satisfaction, but they can't assume that consolidators don't. The truth is, that's one of the key aspects we focus on."

Sanders said he was as concerned about consolidation as anyone when he first heard about it several years ago. As chairman of ASA's Collision Division Operations Committee at the time, he felt it was his duty to research this phenomenon that was happening in the industry. "The more I researched it, the more curious I became," he said. "And finally, I was convinced that consolidation could be a good thing. I was also convinced that in the long run the consolidation effort would not go away and would have an impact in major metropolitan markets."

Sanders said that without a doubt, selling to a consolidator was the right decision for him. "It may not be the right decision for everyone," he said, "but it was for me."

He calls his job with Caliber - acquiring other shops - the greatest job in the world. "We can provide an excellent exit strategy for someone looking for a way to retire or capitalize on the value they have built over the years." He added that Caliber looks for well-run, profitable shops.

Sanders believes the next several years will be more competitive than ever for the collision repair industry. And consolidated shops will be a large part of that stronger competition. "There will always be a spot for the well-run independent shop, but those struggling now will find it much tougher in the next several years."

Duane Rouse, chief financial officer for ABRA Auto Body and Glass, agrees that consolidation can offer advantages, including providing better pricing and better service.

"The more shops and the more sales you have, the better you can leverage your overhead," said Rouse. "For example, you can make a larger investment in internal training programs. It would be difficult for an independent shop to set up a formal in-house training program."

Rouse said ABRA also brings centralization of accounting and other functions to the business. "We want our shops to be able to do a better job of servicing the customer, and repair vehicles to satisfy the vehicle owner and insurance companies," he said. "We don't want to burden them with accounting, human resources management and training - those are things that we can do with a central service operation so that it will free them up for their main job, fixing cars. We have developed standards and procedures that take a lot of the administrative burden off the shop."

ABRA's chief financial officer said the home office in Minneapolis sees itself as a service organization. "Our philosophy is that we won't have jobs if our shops aren't successful, so the better job we do at supporting our people in the field, the better job they can do in servicing the customer," said Rouse.

Randy McPherson, chief operating officer of CARA Collision and Glass, also believes there are advantages to consolidation.

"You can buy better, market yourself better, and do a better job of developing recruiting programs and training than if you were an independent facility with a single location," said McPherson.

He said a consolidated business also was far more attractive to insurance companies. "They'd much rather sign up one company in an area rather than make, say, 12 individual deals," he said.

Among other advantages, he listed the fact that consolidation facilitated a "faster environment - almost an assembly line process." And McPherson said it was a lot easier to build a brand name with multiple locations rather than a single facility.

The Independent
Among those who strongly believe in the merits of independent collision repair shops are Dallas Wade, and sons Robert "Bob" and Richard Wade of State Auto Body Inc. in Hammond, Ind.

Dallas and his father started the business 55 years ago. Today, State Auto Body continues as a family owned and operated business.

His son, Bob, said independently owned collision repair businesses should not be perceived as simply "mom and pop" operations that are just barely hanging on and working with outdated equipment. "We put a lot of the money we make back into the business. We're constantly updating our equipment so that we are state of the art," he said. "And I think we have a better thumb on the situation. Our facility is as modern as anyone's."

"I think our customers much prefer to deal with someone like us rather than some big consolidator," said Dallas. "The other type of shops in our area have a big turnover in help; and they have a tough time getting and keeping managers."

Moreover, Dallas believes that dealing with other operations lacks the "personal touch" of independents. In contrast, his customers know that if they have a problem, one of the Wades will be there to make it right when they come back. "But few cars come back," said Dallas, "because me or one of my sons checks every car before it goes out."

Customers also know that when someone at State Auto Body tells them something, they can count on it. Customers have told the Wades: "No one will ever touch our car except your shop."

The Wades have also noted that "a big percentage" of insurance adjusters bring their personal cars to State Auto Body because, they say, "we know you're going to fix it right." This is really a source of satisfaction to the Wades because, "these guys are in and out of a lot of shops and for them to bring their own cars to us is really a compliment."

"Maybe I'm a rarity," said Dallas, "and maybe I'm from the old school, but I won't even buy parts over the phone. I want to talk in person with the man selling me the parts so that if there is a problem, I'll know who to talk to." His sons have the same business philosophy, he said.

Obviously, their business philosophy is good for their customers. And one more reason to "chalk one up" for independent collision repair businesses. It's hard to beat the personal touch that an independent shop can provide its customers.

Paul Leonard of Paul's Body Shop in Yakima, Wash., is another strong advocate for independent shops. In fact, he likes the very word "independent." That's exactly what it is, he will tell you. "It makes me independent," said Leonard. "That's why I went into business, because I like the freedom."

That's a real plus for the owner, said Leonard. But a small, independent shop like his offers a lot of pluses for customers too. "When a customer comes in, they find themselves shaking hands with the owner," said Leonard. "They're talking to me or my son, Christopher, who is the co-owner of the business. It's not like dealing with a big operation where they can get lost in the shuffle." Leonard said they can make decisions immediately and customers like that.

Leonard believes that when you run your own business, it makes for a better relationship with insurance companies, too. "The insurance adjusters like the fact that my son and I can make decisions right on the spot," said Leonard. "They don't have to go through a series of people to get a decision. It just makes for better communications all the way around."

He also believes that the better communications aspect pays off for everyone concerned. "It means the car is going to get done quicker," said Leonard. "And that's good for the customer, for the shop, and for the insurer."

The personalized service they offer customers pays off for his shop in many ways, said Leonard, especially when it comes to marketing. His shop runs television commercials in which he is talking to potential customers.

"When those customers come in, they feel like they know us even if they haven't met us before," said Leonard. "And they like the fact they're talking directly with the guy in charge."

Leonard is not against consolidation, but said: "For us right now, in this market, being an independent is the best way for us to go."

Apparently it is. Gross sales for Paul's Body Shop have increased 30 percent a year for the past five years.

Another staunch supporter of independent collision repair shops is Tonya Fisher Giles of Fisher's Body Shop Inc., in Norman, Okla.

Fisher's Body Shop has been family owned and operated for 30 years. "Having been in business for so long has built a trust with our customers," she said. "As an independent shop we are able to spend more time with individual customers, offering a more personal, concerned approach than the high-volume shops."

She said that as an independent shop, Fisher's offers only collision repair services, as opposed to some consolidated shops that offer a wide variety of services such as auto sales, mechanical, etc. "Therefore," she said, "ours is a 'specialized' service, adhering to a higher standard and better quality service."

She also believes that having fewer employees makes for a more family-oriented workplace, where names go with faces and shop techs are people, not numbers. In addition, decision-making is streamlined, due to fewer management personnel. But best of all about being the owner of an independent shop is "you're your own boss," she concluded.

Insurance Companies Like Consolidation
Insurance companies are backing the consolidation trend.

"Consolidation could be a great deal for insurance companies," Jayna Neagle, a spokeswoman for the Insurance Information Institute, was recently quoted as saying in USA Today. "Insurance compani'es want to deal with one repair entity in the majority of states where they do business. They can get consistent quality, and it makes it a lot easier than dealing with thousands of independent shops."

Insurance companies like the idea of discount deals with the consolidators, which have multi-stores.

RATE THIS ARTICLE What do you think of this article? Your input will help AutoInc. develop additional articles on this subject. Share your thoughts! Your name Your e-mail address

MOST ACCESSED ARTICLES Fuel Injection Service, Not Just Cleaning The Art of Extraction EGR Systems: Operation and Diagnosis Proactive Target Marketing:_Rethinking Your Business Strategy Engine Performance: HO2S Diagnostics MOST E-MAILED ARTICLES Developing Employee Potential How Critical Thinking Can Help Your Business How to Diagnose the Ford Glow Plug What to Look for When Shopping for the Right Shop Management Software Putting a Price Tag on Complaints

AutoInc. Web Site | ASA Web Site | Air Quality Standards Deterred Again | Fuel Systems Testing: Going with the "Flow" | Pros of Consolidation, Pros of Independents | How's Your Business? | Guest Editorial | Tech to Tech | Tech Tips | Shop Profile | Net Worth | Stat Corner | Chairman's Message