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Automotive Franchise Industry Report 2013 (Part 2)


Environmental Concerns

Due to industry operations heavily impacted by environmental regulations, auto franchise systems respect numerous voluntary and mandatory procedures to limit negative environmental impact, including:

    Going green
  • Abiding by strict guidelines set forth by agencies such as the Environmental Protection Agency (EPA) and organizations such as the American Society for Testing and Materials (ASTM)
  • Engaging in on-site and local treatment facility water recycling efforts, in compliance with local requirements to reduce total water usage
  • Reusing used motor vehicle parts when safe, including scrap metal and plastics
  • Recycling scrap tires to produce products such as playground material, rubberized asphalt, mulch, and athletic field material
  • Recycling engine oil to become combustible fuel for heating and power plants
  • Phasing out certain refrigerants, lubricants, and substances in favor of less environmentally toxic versions


Attention to environmental impact also offers a unique sales proposition for franchises. For example, Honest-1 Auto Care offers customers environmentally-sensitive maintenance services and improved gas mileage by implementing procedures that minimize harmful emissions as much as possible. “It’s one added value that we’re doing differently than our competitors,” says Chip Baranowski of Honest-1. “As I explain to our prospects, we’re not the highest priced, we’re not the lowest priced. But when we’re going up against our competitors, we want to give [consumers] more value for their dollar.”


The Impacts of Technological Advancement

The attributes of current-day automobiles have come a long way since their predecessors. Cars today have essentially become a rolling computer network with features such as navigation systems, airbags, multimedia functions, and computerized engine components—all of this before even mentioning the changes in hybrid or electric platform vehicles.


While some aspects of auto care can still be performed from home (e.g. oil changes), complex technology used in newer model automobiles often necessitates specialized knowledge. Even the title of those who work on cars has slowly changed over the years from auto mechanic to auto technician, a reflection of the ongoing evolution of motor vehicles.


Consumers today, more than ever before, trust professionals to handle vehicle maintenance instead of doing it themselves. The need for specialized equipment and skills for auto maintenance and repair has created a boon for auto franchises. As illustrated in the graph below, the number of auto franchises has remained steadily increasing over the past few years despite periods of recession.


US automotive establishments


“There are fewer and fewer consumers that have the ‘do-it-myself, do-it-yourself’ mentality,” says Ralph Yarusso of Grease Monkey. “It’s really a ‘do-it-for-me’-type mentality. They really are dependent on finding good, quality care facilities and maintenance providers to take care of their vehicles.”


Technological advancement has also impacted auto manufacturing, with an increase in consumer maintenance support needs during the increased lifespan of newer vehicles. The numbers don’t lie. “In 2011, the average car owner was keeping their car about 10.8 years. The reason being is cars are being made much, much better than they had in the past, as well as the cost of new cars has increased quite significantly,” says Baranowski. “So our consumers that we’re dealing with on a daily basis in our facilities are people who are treating their cars as more of an investment.”


Adds Thomas Wolfe of Ziebart, “What is interesting [about] what’s happened to the automotive industry is that the average car now on the road is ten years [old]. People are keeping their cars longer and all of our products or the majority of our products we warranty for the ten years, so that we see a very positive outlook in the franchising automobile business.


Lingering Recession Effects

There is little doubt that auto manufacturing quality is better than ever before, though a prominent factor influencing vehicle lifespan is the recent recession and its impact on consumer behavior.


Car Mechanics“Prior to the recession we were a disposable society, if something broke we bought a new one rather than fix it,” says David Portalatin, an aftermarket industry analyst for market research company NPD. “The current consumer mindset is to maintain and repair and keep it working for a long time. We want to keep our cars maintained and on-the-road for a longer period of time than we did a decade ago. Value in terms of quality and long-lasting is what’s key to today’s consumers.”


Results from the 2012 Aftermarket Consumer Outlook Study, done by NPD, support Portalatin’s assertion. The study showed that only nine percent of consumers surveyed purchased the least expensive aftermarket products for their vehicle—a two percent drop from year before. Furthermore, 40 percent of those surveyed said that they purchase the highest quality auto product regardless of price.


Additionally, quality was the only attribute among the ten measured within the survey that registered an increase in importance over the previous year’s survey, with 45 percent of respondents rating it as “very important” on a five point scale from very to not at all important.


How long will consumers aim to maximize vehicle lifespan? Findings from the 2013 version of the above study are somewhat inconclusive. NPD predicts that new car sales should edge up slowly for the year, which would have an effect on sales growth, particularly in the auto repair sector. A rise in new car sales is nevertheless highly dependent on consumer confidence, which, while on the rise overall, is tenuous at best.


What does this phase in consumer behavior mean for franchises? Consumers are willing to spend their hard-earned money to keep their investment running smoothly—a distinct advantage for franchises that build on consumer trust. For example, according to Yarusso, “[Grease Monkey lives] by the credence: ‘Only what you need, guaranteed.’ It really parlays into great customer service and retaining good customers throughout a franchisee’s career. ”


Keys to Future Success

During the 2013 IFA Convention, three auto franchisors gave their impressions on future industry trends and plans for capitalizing on those trends. Here is a summary of their main impressions with links to their full interviews:


Ralph Yarusso, Grease Monkey: “There’s a lot of shuffling going on. There’s been some migration towards co-branding. The industry is strong. Obviously, it’s a multi-billion dollar industry and consumers are always going to need to have their cars taken care of... [Consumers keeping their cars longer] puts [Grease Monkey] on the forefront. Generally speaking, the general automotive brands out there, their first time visit with a consumer is in that 7-10 year range. That’s how old the vehicle is. Ours is right out of the gate. We have brand new vehicles coming in everyday. We have the ability to service those vehicles right out of the gate and develop a customer relationship, and provide a nice, convenient, affordable mechanism for those consumers to get their vehicles taken care of.”


Chip Baranowski, Honest-1 Auto Care: “I think the biggest challenge in the automotive industry is getting more focused on customers and taking care of them, and that’s one of the things that Honest-1 does very well. We’re not just a transaction based company but we’re really working on building long-term relationships with our customers and educating them. About 66 percent of the customers that are walking into the shops today are female and [are] really demanding that they have a place to go that they can feel comfortable with the whole transaction.”


Thomas Wolfe, Ziebart: “The auto industry changes every year and we have to offer products and services to meet those changes... [Ziebart is] coming out with a couple new products. We have a paint protection film that has been introduced overseas and we’re going to introduce it here in the United States, and we’re also coming out with an anti-bacteria product that you can put on automobiles.”

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