Article from the June 2011 Fender Benders Magazine
Know Before You Grow
Opening a second shop can be a challenge, but if you do it right the experience could pave the way to further expansion. We talked to three multiple-shop operators to get their insight on what it takes to make the transition from a single facility. Jake Weyer
Expansion is a natural goal for most collision repair shops. When success reaches a certain level, owners start thinking about new ways to grow and that often leads to the possibility of a second location.
In this shrinking industry, where the big continue to get bigger, growth is becoming increasingly important to many shop owners trying to stay competitive. While some shops prefer to stay small (see “Small and Proud”), the message in the industry is loud and clear: bigger is better.
“You’ve got to get bigger to survive, because the smaller shops are going to close up,” says Matt Dewalt, co-owner of Scott’s Collision Centers in Stroudsburg, Pa., his family’s second repair center.
FenderBender recently talked with Dewalt and two other multi-shop operators (MSOs), Larry Seida of Illinois-based Riverdale Body Shop and Phil Tripp of Tripp’s Auto Shop & Collision Centers in Michigan, to get their insight on adding another facility.
Expanding the Kingdom
Since opening in 1988, Tripp’s Auto Shop & Collision Center in Jackson, Mich. has grown into “the king of a very little area,” says owner Phil Tripp.
The 19,000-square-foot shop earns $4.7 million in revenue each year and averages 240 cars a month. Not bad in a market widely thought to be downtrodden and broke. Tripp decided to build on that success last year by opening a second shop in nearby Lansing; it’s one of several new additions he has planned.
“MSOs are going to be the ones that are going to survive and our intention is to have another five shops over the next four years,” Tripp says.
Business: Tripp’s Auto Shop & Collision Centers
Location: Jackson, Mich./Lansing, Mich.
Owner: Phil Tripp
Number of locations: Two
Shop size: 18,000 square feet/19,000 square feet
Annual revenue: $5.5 million (total, with one shop operating for 6 months)
Average vehicles per month: 310 (total)
Employees: 36 (total)
The Lansing facility, which generated $850,000 in revenue during its first six months, was built in a former gymnasium purchased with cash flow from the original shop and a small business loan.
“I was shocked that I got [the loan] because banks are not lending money,” Tripp says, noting that shops should not be afraid to pursue financing options, even in this murky economic climate.
Lansing was chosen as the location for the new shop because it’s within range of Tripp’s aggressive TV marketing campaign. He spends 7 percent of his budget each year on marketing, and most of that goes toward commercials. Even though he hasn’t had a shop in Lansing until now, the population there has seen his TV spots for years.
“The residual advertising was huge and I made a bet that if we opened a location there, people would respond and they did,” Tripp says.
Tripp’s advice for becoming an MSO:
Before opening, Tripp made multiple visits to other shops, some out of the state, to get a good feel for what MSO strategies worked and what didn’t. He copied the best practices, such as the implementation of lean principles, and made them his own.
He says things have gone smoothly so far, but he did have to go through a lengthy inspection and licensing process before he could open, and he had to do a little research to meet safety codes without spending a fortune. For example, he avoided installing a new $70,000 sprinkler system by spending $7,000 on a firewall and fire doors.
Communication between shops was also problematic at first, so Tripp upgraded to a Rome Technologies management system, which he says has made a huge improvement.