Taking Advantage of Franchise Opportunities in Auto Repair

While perhaps no business is truly, completely “recession-proof,” it is safe to say that businesses in the auto repair and maintenance industry are very much solidly recession-resistant.

The proof of this assertion is evident right now, during the COVID-19 pandemic. As essential businesses, franchise automotive shops largely have stayed strong—in many cases not just surviving the situation but thriving by adapting their ways of doing business and serving customers.

A Needs-Based Industry

“As essential businesses, our lender partners appreciate the necessity of these types of franchises,” according to Karen Newell, business financing advisor at Key Commercial Capital, a partner of the Moran Family of Brands. “Regardless of the state of the economy or the current health-related crisis, people need to keep their vehicles maintained and in working order. Whether it be common maintenance items or major repairs, every American needs his or her vehicle working.”

The strength of the automotive aftermarket gives Ben Reist, franchise development representative for the Moran Family of Brands, confidence in the future for the company’s Mr. Transmission and Milex Complete Auto Care brands.

“We offer needs-based services and products,” said Reist. “Currently America has more than 272 million vehicles on the road, and the average age of vehicles and light trucks is 11.8 years. People are keeping their cars longer and maintaining and repairing them.”

Mr. Transmission

An established trade name (50-plus years) specializing in transmission and drivetrain repair, Mr. Transmission falls into the category of a needs-based business.

“Most consumers do not have a go-to transmission shop until they need one,” said Reist. “And they may use us once and then never have to have transmission work again.”

The brand’s high-margin model benefits from a low cost of goods and operating in a $3.6 billion market in the United States. The average ticket is high.

Milex Complete Auto Care

While Mr. Transmission specializes in the focused world of transmission world, Milex Complete Auto Care, a brand more than 40 years of history, has a wider scope.

Milex services include diagnostics, maintenance and repair. Like Mr. Transmission, Milex sees high margins—but also strong repeat business and a high customer count. A low inventory requirement with excellent parts procurement is another plus.

“The general average ticket price is $380,” said Reist. “By comparison, one of our large competitors in general repair, at a franchising level, is much more-light automotive or parts replacement. Their average ticket comes in at around $175. So, it’s not that we’re more expensive for the same type of job, but the scope of our work drives up average ticket prices.”

A number of franchisees own co-branded Mr. Transmission/Milex shops, providing all of the above. The benefits of this model are a subject for deeper discussion in upcoming article.

Investment

A co-branded, single-unit Milex/Mr. Transmission franchise costs from $204,364 to $288,067. The franchisee must have approximately $75,000 liquid assets and a $300,000 net worth.

With SBA loan interest rates at historic lows—currently 6% (prime plus 2.75%)—the time is right to launch a franchise and tap into the advantages that come with it.

Moran Family of Brand works closely with franchisees across all phases of the business, including site selection, market analysis, marketing, ongoing support, operations expertise, hiring assistance, and identifying opportunities for moving into a facility.

“Most of our franchisees move into second-generation businesses with existing buildings,” said Reist. “The big advantage is that it’s a real estate investment, moving into a vacant ‘shell’ property. So, the initial investment encompasses the franchise fee, furniture, fixtures, signage, equipment, and working capital to ramp up and get to break-even.”

In some cases, a franchise owner may use the conversion strategy, which involves buying a local independent that is looking to close. This approach is more variable and can involve bringing in existing resources such as customers and employees.

With a number of mom-and-pop independents opting to close permanently in the wake of COVID-19, the conversion strategy can be appealing for prospective franchise owners.

Regardless which approach an entrepreneur takes, the resilience of the automotive aftermarket makes it a smart long-term investment.

For more information about owning a Mr. Transmission franchise, click here.

For more information about owning a Milex Complete Auto Care franchise, click here.