Big Shops, Small Shops Either Can Produce Sizable Rewards
By Rachael J. Mercer

Differences in size and ownership often create large contrasts within the automotive repair industry. And of course, no two shops are operated in exactly the same manner.

While both smaller and larger shops must offer good customer service, timely repairs and quality work to remain in business, the management styles and day-to-day operations can be very different.

Huffines Collision Center in Lewisville, Texas, is just one example of a “giant” in the collision business. Last year Huffines did more than $17 million in its two collision shops. With 74 employees in the collision center in Lewisville, Darren Huggins, body shop manager, faces a never-ending search for quality employees as Huffines continues to grow. The shop has direct repair program (DRP) agreements with 16 insurers and has grown from a 16,000-square-foot shop into a new, 45,000-square-foot facility.

As you can imagine, managing a facility as large as Huffines is starkly different than managing a smaller one. Centers like Huffines and other large shops often have many levels of management and responsibilities.

Huggins explained one way that his shop is managed differently in an effort to efficiently serve its customers. He said, “Twice daily our quality control managers, production managers and estimators gather for a production meeting, just to see where we are on each vehicle and what needs to be done to complete the job.”

Some smaller shop owners agree that larger shops are often run more strictly than their smaller competitors. Dale Bright, who has owned a small independent shop for 27 years, said, “The bigger the operation, the more controls are needed. Small shops are usually not managed very tightly.”

Today, consolidators are impacting the $25 billion collision repair business—quickly acquiring once-independent shops and adding them to their family of franchise and affiliate locations, and are becoming a choice for customers and insurers. Many of the leaders in the consolidating business—such as ABRA Auto Body & Glass, Caliber Collision Centers and Collision Team of America—report growth between 1997 and 1999 at anywhere from 123 to 560 percent. Sterling Collision Centers, which is based in Natick, Mass., reported growth during the same time period at 1,800 percent. The consolidated group consists of 36 shops in six states, and accounts for $100 million of the collision industry's business.

“The goal of each type of shop should simply be to perform the best quality repairs it can and offer the best possible service—to satisfy our customers on all levels of their automotive repair experience.”

Although the number of independent collision repair facilities has steadily increased since 1994 - from 34,942 to an estimated 38,935 in 2000 - dealership collision facilities have undergone a steady decrease in number since 1992, going from a range of 14,000 facilities to the current National Automobile Dealers Association (NADA) estimate of 11,000 facilities. Although “independents” have increased and dealership shops have decreased, sales have grown, reaching $24.8 billion in 1998.

Analysts have estimated that consolidators will own about 30 percent of the collision repair shops that make up the industry by 2005. But by that time, analysts say, consolidators will be doing 80 percent of the collision repair work in the nation's major markets.

One reason consolidators are acquiring so much of the repair work is because of their relationships with insurance companies and their direct repair agreements. Leading consolidators maintain direct repair agreements with multiple companies, just as Huffines does. ABRA Auto Body and Glass shops have 45 DRP relationships. Although some insurers only work with a particular shop, many insurers work with each of the company's locations. The Boyd Group, another consolidator, has a relationship with more than 30 insurers, while the CollisionMax Autobody group works with 39 insurers and 150 fleet clients.

For customers, one advantage of some larger shops is the turnaround time for collision repairs. With about 350 cars always in some stage of the repair process, Huffines repairs an average of 900 cars every 30 days, Huggins said. He explained that in many collision repair centers the average cycle time for repairs is 12 to14 days, while Huffines' cycle time averages only 7.3 days. To further consolidate operations, Huffines Auto Glass was developed to fulfill the needs of the collision center for glass parts. With the addition of the Auto Glass division of the company, Huffines has become an all-inclusive collision repair center—a self-contained collision industry “giant.”

An article that appeared in USA Today last year addressed the topic of decreasing turnaround time. In the article, Jonathan McNeil of Sterling Collision Centers talked about strategy for assemblyline production techniques that would allow technicians to repair vehicles around the clock. Because each technician would handle only a portion of the repair, McNeil believes this technique would speed up the repair process while overcoming the barrier of finding qualified technicians. Training people to perform a specific job achieves both those goals.

While some owners of mechanical and collision shops feel as if they are fighting the “Goliath” of the automotive industry when competing with large-volume shops, others have avoided adopting the fighting mentality. Obviously, every collision shop is in competition with others for business, DRP relationships and profit—just as every mechanical shop is in competition with other mechanical shops for a piece of the profit pie.

But in the same way that some grocery shoppers prefer buying groceries at small markets rather than supercenters, many people with mechanical or collision repair needs prefer an independent shop or a smaller shop.

Many small shop owners believe there are commendable qualities about their businesses that endear them to their customers. And many shop owners like the flexibility that comes with being a smaller shop. Chris Dameron has been in the automotive business for 23 years. Two years ago, he sold his shop to a consolidator.

“Everything must be more systematic in a larger shop,” said Dameron. “Many small shops can be run by the 'seat of the pants' method, and they can do this because their overhead and investment levels are lower than in larger shops.”

Large shops need more than just an expanded staff of employees and an abundance of space to house customers' vehicles. Plenty of room is also required to keep complete records about serviced vehicles. These records at Huffines are just from the past four years.

The rewards that come with knowing you are helping others, contributing to the industry and running a business that belongs to you are just some of the benefits that independent shop owners enjoy. And for smaller independent shops, the rewards are even better, some say. Not only do they receive the aforementioned gratification, many smaller shops maintain personal relationships with their customers and their vehicles. Repairing a troublesome vehicle is often easier when you know the history of the vehicle, and knowing a vehicle's history is much easier when the same small shop has been the only one to service it.

Although the general public often associates “small shop” with a hole-in-the-wall, antiquated shop, many small shops have broken that stereotype. On a more positive note, customers seem to associate down-to-earth, friendly and personal service with these smaller repair shops. So for the most part, a small independent shop can have the best of both worlds today—consistent personal service in a professional environment.

In the December 1999 issue of AutoInc., Bob Wade of State Auto Body Inc. in Hammond, Ind., 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're constantly updating our equipment so that we are state of the art.”

Another benefit of owning or operating a smaller shop is the uniqueness of the services you can offer. Smaller shops are sometimes able to offer “specialized” services that larger shops cannot because of the volume of business they see. In a smaller shop where business runs at a pace that may be a little slower, more time can be spent on particular jobs, and specialized services can be offered. Some shop owners and managers argue that in smaller shops with smaller volume, the quality of repairs can often be better than in larger shops.

“I have concerns about quality when volume becomes such a major factor,” said Dameron, “A lot can slip through the cracks when you are in a hurry, and many larger shops rely on DRPs to keep the volume at a level that can keep up with the overhead costs.”

So whether you own or operate a mechanical or collision shop, be it small, large, independent or consolidated, there are benefits to each facet of the automotive repair business. Above providing standard quality repairs and customer service, you have many choices to run your business the way you see fit. If you want to control the decision-making, the planning and the profit-spending, it might be best to remain independent. If you desire to be part of a huge group of shops, perhaps your shop would operate most efficiently as part of a consolidated group.

In the end, automotive repair is not about independent vs. consolidated or small vs. large. The goal of each type of shop should simply be to perform the best quality repairs it can and offer the best possible customer service—to satisfy our customers on all levels of their automotive repair experience.

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AutoInc. Magazine ® Vol.XLVIII, September 2000 E-mail: asainfo@asashop.org, Web Site: http://www.asashop.org
Copyright © 2000 Automotive Service Association (ASA). All rights reserved.