22 Winter 2016 Collision QUARTERLY collisionquarterly.ca

PERSPECTIVES

The consolidation of the collision repair industry under multiple store operations (MSOs) and franchises has been going on for some time, with the last few years being particularly active. It is very exciting to see Canadian companies and Canadian collision industry leaders at the forefront of this movement. From visionary

Steve Leal, moving forward with the global expansion of Fix World, to CARSTAR Chief Operating Officer Mike Macaluso, winner of the Young Leader of the Year award given by the 2015 Young Executive Society, Canadians are shaping the future of the collision repair industry on a global level. Special mention must go to industry pioneer and true gentleman Sam Mercanti who set the standard in Canada for those who followed.

“Our homegrown certification and accreditation programs are true

to our Canadian values.”Investment in the collision industry by private equity firms remains

strong. Fix Auto Canada received $8.8 million from the pension fund La Caisse de dépôt et placement du Québec to help speed up its strategic expansion. The sale of CARSTAR Canada to Driven Brands Inc., a Charlotte, North Carolina-based portfolio company of the Roark Capital Group, came shortly after Driven Brands had purchased CARSTAR in the USA. And do not forget the Ontario Municipal Employees Retirement System purchase of a controlling stake in Caliber Collision Centers in 2013.

This interest by private equity firms indicates good news for the

collision repair industry, as these firms are viewing the industry as profitable and as an industry where significant MSO growth is likely to occur over the next five years.

But what does it mean to the independent collision shop? Should you join an MSO, and if so, which one? If you do not want to join an MSO, or the option to join is not available in your area due to MSO saturation, what are the other options?

Joining an MSO First, let’s talk about joining an MSO. This may be something you have been seriously considering. If so, you should try to get clear answers to some key questions and explore some of the proposed advantages and potential disadvantages. None of this is rocket science, just good business practice and common sense.

�What are the MSO long-term strategy and goals? This is probably the most important question you should ask. With the rapid changes occurring in vehicle design and repair requirements and the increase in certification programs, MSOs need to keep up with the speed of change if they are intending to be in this business long term. A well-articulated strategic plan with specific goals and actions is a must. Find out what the MSO’s specific plans are for how it will meet the challenges ahead. What does its long-term commitment to the collision repair industry look like?

�How much work will the MSO bring you? This is one of the first questions you will want answered. How much work will show up at your door when you “sign up”? How much more revenue will your shop generate? Most likely there will be an increase, but you should try to

Is joining an MSO the Holy Grail? Or is Certification the path to success? Or both?

b y K e i t h J o n e s

Choose Wisely!

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find out how much and from where. How many direct repair programs (DRPs) or preferred supplier contracts does the MSO have with insurance companies? Are those contracts exclusive? What about contracts for company fleets and city and government fleets? Get some numbers, and get them in writing.

“Find out what the MSO’s specific plans are for how it will meet

the challenges ahead.”�Will you get better discounts on equipment, parts, and supplies? The other lines on a financial statement are monies going out. Increased buying power through economies of scale is a definite advantage of joining an MSO and something that you should measure. The MSO has most likely negotiated greater discounts on the materials, equipment, consumables, and services currently used by your shop. This might require you to use different suppliers, which is a choice you might have to be willing to make. Get the details of the MSO’s supplier deals/discounts, and do the math.

�Will you keep control of your business? Most MSO networks have a set of standard operating procedures (SOPs) or guidelines. They might not be that different from your own SOPs. Realistically, if you do not have a set of SOPs, or if you have one and have not been following it, you should have been. Consistency in business processes through a clear set of SOPs is one of the keys to running a successful business. A set of SOPs is intended to help your business, not take control of it. Find out if the MSO has a documented set of standard operating procedures developed for its shops.

�Will you keep your shop name and brand? Some MSOs bring a brand name instantly recognizable to consumers. The MSO will want you to rebrand your business to some extent, using its brand and marketing materials. This can be advantageous due to the power of a larger national (or regional) brand identity. The rebranding may occur in different ways, depending on the MSO: 1) amalgamating your brand name with the MSO’s brand name, 2) a complete rebranding with the MSO’s brand, or 3) loosely adding the MSO’s brand to yours. You will ultimately have to decide how valuable your brand or name is in your market area.

�How can the MSO improve your business? A good MSO can bring a level of professionalism through business coaching, mentoring, financial acumen, etc. Yours may already be a professional, high-performing shop, but you should ask what other resources the MSO can offer. What kind of business improvement programs does the MSO bring to the table? Will the MSO conduct a review or audit of your business to look for areas of improvement? Does the MSO have support staff such as business improvement experts? Does the MSO employ Lean or 5S principles? Does the MSO provide training, and will it help you get certified? Will it help you get I-CAR Gold Class certification?

�Can the MSO help you find staff? We all know of the ongoing trades shortages. What plans does the MSO have to ensure the viability of the collision repair trade? What investments is it making to develop staff, specifically technicians and apprentices?

�What is the MSO’s technology strategy? Using current technology to manage and measure your shop’s performance and communicate with business partners is important to improving your business. It is a “must have,” not a “nice to have.” Enquire about the MSO’s technology strategy.

Is it using a network-wide management system with scheduling tools and customer contact software? How is it measuring the performance of its network using technology?

�Is there an exit strategy? Some MSOs offer an exit strategy when you are ready to retire or move on. This is worth checking out.

If the MSO path is still of no interest to you, or no longer available in your community or trading area, can an independent shop still be successful today? Can it compete? In my opinion, yes!

The independent collision repair shop can compete, but, like MSOs, it must keep up with the speed of change. Today’s independent collision shop must be run like a business, professional in every way. It must accept and adapt to changes in the industry and make whatever changes it needs to in order to survive. The areas to look at are no different for an independent shop than for an MSO. The difference is that you will have to do it for yourself.

Get CertifiedCertification, offered by both collision industry associations and original equipment manufacturers (OEMs) and by the collision repair industry, is a game changer.

Getting certified may be one of the most important steps you can take to ensure the long-term success of your business. The vehicle manufacturers have aggressively pushed their collision repair certification programs. These programs are not just for high-end vehicles anymore.

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24 Winter 2016 Collision QUARTERLY collisionquarterly.ca

Almost every vehicle manufacturer has developed or is in the process of developing a collision repair certification program for its brand(s). As today’s vehicles become more complex and require more specific training and more exact procedures to repair, it is critical that you get on board with OEM certification. Meet the requirements, get the training, and get on that list of OEM-certified repairers. And realistically, if you are not trained and certified, should you be repairing these vehicles?

“Whatever your chosen path, an investment in your future and a commitment to the

collision repair industry is required.”Canada once again is leading the way with certification programs.

The Automotive Retailers Association (ARA) is rolling out its Certified Collision Repair program in British Columbia (ara.bc.ca/certified-collision-repair-program). The Automotive Industries Association (AIA) is rolling out a Canada-wide program, the Canadian Collision Industry Accreditation Program (cciap.ca/). These programs have great support from the Canadian collision industry. And, in good Canadian fashion, the ARA and AIA are working together to synchronize the programs. Both programs have been developed to complement the OEM certification programs, not compete against them.

These industry-driven programs — by Canadians for Canadians — are accomplishing what the collision industry in the U.S. has been struggling to accomplish for many years. It is vitally important that we

support these Canadian programs. The collision repair industry in Canada is unique, and our homegrown certification and accreditation programs are true to our Canadian values.

At the end of the day, you will have to do something. Only those who adapt to change will survive. Whatever your chosen path, an investment in your future and a commitment to the collision repair industry is required. The industry is at a tipping point. Many shops, both MSOs and independents, have made that commitment, but there are many which have not and which have difficult decisions to make in the near future. Five years from now, I suspect that there will be fewer shops. The remaining shops will be the ones that have made that investment and commitment and adapted at the speed of change.

“The independent collision repair shop can compete, but, like MSOs, it must keep up with the speed of change.”

The decisions you make about joining an MSO, remaining an independent, and/or getting certified/accredited may be the key to your survival in the collision repair industry. Therefore, remember the words spoken by the Grail Knight in the movie Indiana Jones and the Last Crusade: “Choose wisely, for as the true Grail will bring you life, the false Grail will take it from you.”

Keith Jones is the managing appraiser of Crash Space Appraisals Ltd. He can be reached at keith.jones@crashspace.ca. n

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