All Those Cars Mean Business

by Nancy Rathbun Scott

Franchise Industry Close-Up: Automotive Aftercare

American's love affair with automobiles is big business for franchise companies.  The industry ranks fourth in size among all franchise industry categories, proving that people are increasingly turning to car-care franchises for routine maintenance they don't have time to do.  There are more than 40 auto service-related companies among the members of the International Franchise Association (IFA) ranging from quick lube shops to brake sops to painting and damage repair.  For entrepreneurs considering acquiring a franchise in this sector, a recent IFA study sheds light on investment requirements.

  • Average initial franchise fee is $22,284
  • Average initial total investment, excluding real estate costs, is $222,850
  • Most franchisees in this category pay a royalty-fee of 4 percent to 5 percent of monthly revenues

Visit IFA's website, www.franchise.org to search the Franchise Opportunities Mall Online for information and hot links to franchises in 75 industry categories.

When you're bumper-to-bumper in an ocean of metal, you probably see a traffic jam.  But an automotive aftermarket franchise owner may be seeing dollar signs.

Those 201 million vehicles on the road today represent an increase of nearly 15 million over four years ago.  Consumers own their vehicles a little longer, too, with the average age of a car now at nine years.  The increase in number of cars, coupled with the length of ownership is propelling the growth of the automotive aftermarket industry - an industry that provides replacement parts and services to keep the millions of U.S. vehicles driving a collective 2.1 trillion miles per year.  All told, it's a $148 billion market.

Hard Parts Sell Easy
The size of the aftermarket for hard parts was $70.9 billion in 1999.  That includes $54.9 billion of hard parts sold through service repair outlets (known as "do-it-for-me" or DIFM) and $15.9 billion sold directly to consumers at retail (do-it-yourself or DIY).  These figures add up to an 18 percent increase in five years, according to Markintel, a research firm that also forecasts an annual rate of two percent to three percent for aftermarket hard parts over the next five years, climbing to $78.2 billion by the year 2004.

The outlook for automotive parts sales points up.  The same conditions - more vehicles on the road and older vehicles being driven more miles - contribute to the opportunity, industry analysts report.  In addition, U.S. roads are older and more crowded, meaning more stop-and-go traffic and more wear-and-tear on shocks, suspensions, tires, fluids, and cooling systems.

Granted car makers are manufacturing vehicles with more durable parts, which tends to extend the time between automotive maintenance and parts replacement.  On the other hand, the newer, more durable and sophisticated parts also are more costly.  That means larger ticket sales when replaced.

Meanwhile, Service Demands Grow
When it comes to cars, lots of customers want somebody to "do-it-for-me."   For example, the market research firm FIND/SVP projects that the transmission specialist industry grew from $2.9 billion in 1998 to $3.4 billion in 2000.   Transmission services are expected to become the largest automotive service specialist business this year.  Until recent years, there were only a dozen or so different automobile transmissions.  Now cars could have any of about 150 transmissions.  That's good news for AAMCO, which says revenues are up 48 percent in the last five years.  To meet the demand, AAMCO has more than 720 stores open now, but plans to have 1,000 in operation by 2004.

"We see huge growth opportunities going forward in states like Michigan and Ohio, probably the only two areas where we don't have a huge presence already," says Bob Castellani, director of franchise development.   "We're in 48 states and Canada.  We've thought about international, and we're looking at that because there's so much interest in both South America and Europe."

Growth opportunities also abound for the fast lube industry.  During the 1970s, full-service gas stations began to decline.   Since then, more than 100,000 of them have closed and many others have converted to self-service, gasoline-only operations, leaving millions of motorists without their traditional source of oil change services.  Some motorists turned to do-it-yourself oil changes, but for the most part, Americans simply don't have the time or inclination to change their own oil.  What's more, may motorists don't want to suffer through the inconvenience of leaving a car for a half-day or longer to be serviced at a dealer.   In 1979 Jiffy Lube International, Inc. seized the opportunity and now is the largest franchising organization in this rapidly growing industry.  Over the next five years, the fast lube industry will need to expand to service more than 120 million vehicles a year, compared to 90 million a year in 1998.  Since 1979, Jiffy Lube has grown to more than 2,300 centers in 49 states.  About 70 percent of these are franchised.

It's not just under-the-hood that needs attention, either.  The car washing business is a $4 billion a year industry in the Western United States alone, according to the International Car Wash Association.   The Car Wash Guys, a mobile car washing service, is one of the many investment opportunities in the car washing market.  Franchisees own operations where they wash and detail cars at offices during normal business hours and at private residences after 5 p.m. and on weekends.

Care of the exterior also means painting and repair.  In this market niche, MAACO Enterprises Inc., has become the world leader in auto painting and body repairs.  The company's 565 centers currently paint more than 650,000 vehicles each year.  It's a success that keeps franchise owners enthusiastic.   Brian and Net Musfeldt, consistently one of MAACO's top producers and million dollar owners, say they still rely on their relationship with the franchisor.  Late last year, these stellar owners renewed their franchise agreement for another 15 years.   Musfeldt says they're successful "because of what we perceive as the benefits of the MAACO system - the way the system stretches our advertising dollars, the marketing they have in house that gets us accounts for national fleets, the discipline that being a part of the system builds."

The auto aftermarket industry offers other options for looking good, too.  Dent Doctor pioneered a new industry by introducing "paintless dent repair" to the marketplace in 1986.  Since then, this Doctor has replaced millions of hail dents, minor pints, and door dings without the expense usually associated with repair shops.  Most repairs are completed for about $100.  With that concept, Dent Doctor grew to become one of the top 15 automotive franchises in the January 1998 issue of Successful Franchising magazine and was cited as one of the top 500 U.S. franchises in the January 2000 issue of Entrepreneur magazine.

Ziebart also has built success in the automotive service industry, renewing, protecting, and preserving cars and trucks.   With more than 40 years experience, Ziebart is the world's largest installer of automotive accessories, including window tint, sunroofs, alarms, hitches, running boards, bed liners and other components to protect and enhance vehicles.  In that time, Ziebart has grown to some 600 stores in 55 countries.  The company plans to continue penetrating markets worldwide and has designated Western Europe - including France, Spain and Germany - as well as locations throughout the United States, as target market development areas.

So brake right there.  Whether you look under the hood or on top of the hood, the automotive aftermarket industry offers carloads of opportunities for potential investors.  In fact, a report by FIND/SVP estimates that the automotive aftermarket will grow some 12.9 percent in the next five years.   That's why - if you're a prospective franchise owner - you could begin to enjoy the crush of all those cars next to you on the highway.

Article reprinted from USA Today, October 18, 2000.

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