The Rise of Mechanical and Collision Industry Partnerships

Oct. 2, 2016
Large-scale partnerships announcements with collision companies are creating a more competitive marketplace for independents

Steve Leal, president and CEO of Fix Auto Canada, one of the largest multiple-shop collision repair operators (MSOs) in Canada, says there’s a new trend in the automotive aftermarket: mechanical shops leveraging partnerships with the collision repair segment of the industry.

In May, Prime CarCare Group, which operates both Speedy Auto Service and Minute Muffler and Brake, was acquired by Fix Auto Canada. The move was a part of company’s strategy to use its reputation as the No. 1 collision repair MSO in Canada to leverage its newly acquired mechanical brands. The December acquisition of CARSTAR by Meineke parent company Driven Brands is another example of mechanical and collision segments coming together under the same corporate structure.

Daryll O’Keefe, general manager of Fix Auto Ontario, says that there are plenty of advantages for mechanical shops, including the sharing of vendor partnerships. O’Keefe adds that the mechanical sublet work created by the Fix Auto Canada acquisition could represent $1.3 million (Canadian) for the acquired mechanical brands. In the future, Leal believes that Fix Auto will continue to research these partnership opportunities in other countries, including the U.S., to see if other acquisitions of this type make sense for the company.

With more resources and name recognition, MSOs have a competitive edge when it comes to partnering with collision segments. That being said, how can independent mechanical shops use a similar approach to compete?

The Future of Independents

Today’s more complex vehicles are costing shops more to diagnose issues and train technicians, which may force smaller, independent mechanical shops to rethink their models, says Ben Steinman, owner of Ben’s Auto Body in Mexico, Mo., a shop that has both a collision repair and a mechanical segment. With increasing price demands, like new technology, it’s becoming difficult for mom-and-pop shops to survive. Steinman says that adding a mechanical segment to his collision repair shop helped attract more customers by providing both services. Differentiation is key, and Steinman says a partnership could be just the thing that an independent shop looking to stand out needs.

An Independent Model

Steinman was ahead of the times when it came to this trend. Steinman added an in-house mechanical segment to his collision shop 14 years ago. The mechanical segment added more foot traffic to his business while the collision segment remains Steinman’s major moneymaker. By getting more people into his shop for mechanical repairs, Steinman says that he’s created more awareness for his collision repair shop.

The fact that MSOs are creating these horizontal partnerships in the industry doesn’t surprise Steinman; what does is the fact that it took so long.

“I feel like the mechanical industry is where the collision industry was 20 years ago,” Steinman says. “Twenty years ago, there were twice as many body shops as there are now. I can see that happening with mechanical shops.”

The Benefits of Partnerships

Jose Costa, group president of paint & collision for Driven Brands, says that partnerships between the mechanical and collision repair side make sense because of the cost savings. One way Driven Brands has leveraged the partnership is by creating a cross-selling program across its brands. Driven Brands piloted a counter-top program using Maaco and Meineke in 2015. Customers who got an oil change through Meineke were encouraged to visit Maaco for any cosmetic paint needs. With the acquisition of CARSTAR, the company plans to expand its referral programs. CARSTAR shop owners will now receive a discount code when they refer any of their customers that require mechanical work to a Meineke shop. The referral program is in its early stages but the company plans on tracking the number of referrals.

“In the past, the work was being subleased to independents,” Costa says. “Now, we have the opportunity to keep work within the company.”

Steinman had the same reason for adding a mechanical segment to his collision shop. When jobs required mechanical work, he used to have to drive the vehicles elsewhere and would lose out on the job. Now, he’s able to service the vehicles in his own shop. Collision shops bring in more revenue, but the number of mechanical work that comes in outnumbers the collision work. At Ben’s Auto Body, the team averages between 15 and 18 mechanical jobs per day and performs four collision repair jobs. Steinman says that he’s seen customers come in for mechanical work who later need him for collision, and vice versa.

Break into Collision

Steinman’s method of adding on a mechanical segment to his collision repair shop worked, but adding a collision repair segment to a mechanical shop is entirely different. For shops that do not have the means of partnering with a collision repair shop, O’Keefe suggests finding a niche market to specialize in as a way to compete with the MSOs.

If shop owners are able to add a collision repair segment to their shops, that is ideal. However, not every shop has the space or money to do this.

Steinman suggests partnering up with a collision shop in the area, preferably a trusted one that the shop owner has already built a relationship with. An ideal situation would be for a mechanical shop to partner with a collision shop that the shop owner has been taking its mechanical work to it already. Steinman thinks that by cross-promoting and offering deals, both sides will benefit.

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