Auto Aftermarket Franchises Offer Profitable Opportunity

Karen Axelton
Tue, 05 May 2009 00:00:00 +0000

As the recession slows down, auto aftermarket franchises are shifting into high gear. Aftermarket companies provide all types of products and services for automobiles, including maintenance and repair services, glass and windshield repair, appearance services such as body work or detailing, parts and accessories, tires, and more. Although the automotive aftermarket industry has always had a strong core customer base of car lovers in the United States, in the past year or so, more people have turned to aftermarket products and services to help keep their cars running well and looking good.

According to a recent survey (PDF) by auto trends research company R.L. Polk & Co., drivers are keeping their vehicles longer. The average length of ownership of both new and used vehicles has grown from 37.2 months in 2002 to 46.3 months in 2008, an increase of 24 percent.

What’s bad news for automakers and dealers is good news for franchises in the aftermarket industry. As vehicles get older, they need more repairs to keep running smoothly. According to Polk, 64 percent of consumers in its survey said that due to the economy, they are "very or extremely likely" to keep their current vehicle longer than they would normally. And 81 percent said they plan to take better care of those vehicles. But this data should be viewed with caution -- thanks to the economic slump, many drivers are putting off more expensive repairs until times get better.

The economy is having a trickle-down effect. People who would normally buy a new car as soon as the old one shows signs of wear are instead keeping the old car and turning to an automotive service provider to keep it going. People who usually keep their cars for a long time and use service providers to maintain their vehicles are instead trying to save money by doing maintenance themselves. As a result, automotive aftermarket companies are seeing an influx of new customers, including more upscale consumers and more female consumers than ever before. According to the 2010 Auto Aftermarket Industry Association Fact Book, the auto aftermarket industry is expected to grow by 4.5 percent this year, which would be the largest jump in sales since 2002.

But today's auto aftermarket industry faces both opportunities and threats. Amy Antenora, editor of automotive aftermarket Web site aftermarketNews.com, believes consumer and legislative demand for more fuel-efficient vehicles is driving opportunity. "The development of in-vehicle telematics and fuel-efficient products provides great potential for the automotive aftermarket's entire distribution channel, down to [parts retailers] and the service sector," she says.

As for threats, the downward trend in miles driven and the slowdown in new vehicle sales are concerns, she says. Only about 10.4 million light vehicles were sold in the United States in 2009 -- the lowest number since 1982. In the short term, fewer new cars on the road mean more business for repair and service businesses, Antenora explains; but "in the long term, fewer cars being produced and sold in the U.S. will [cause] a trickle-down effect impacting every level of the aftermarket."

Many factors that will affect the future of this industry are still up in the air, including fluctuating oil and gas prices; President Obama's environmental initiatives; and the fact that safety issues have led Toyota to recall millions of vehicles and halt production on several of its models, tarnishing the brand’s reputation and devastating its sales. In this challenging environment, buying into an auto aftermarket franchise can be a smart move if you ensure that you have the support of a franchise company that's on top of the latest industry trends and knows how to respond to them.

If you're considering buying an auto aftermarket franchise, what skills do you need to succeed? Although it's nice to have, automotive experience isn’t necessary, says James Jacobs, director of franchising at Tuffy Auto Service Centers, an automotive repair franchise. "We are looking for businessmen and -women, not just people who know how to fix cars," explains Jacobs, who adds, "Experience as an entrepreneur is a plus but not a requirement."

Equally important is customer service ability. "We are in the relationship business -- relationships with our customers, relationships with our employees, and relationships with our vendors," says Jacobs. "We are also in the retail automotive repair business, and retail is detail. How successful one becomes is a by-product of how well someone manages the details."

For a list of auto aftermarket franchises, visit the Automotive Franchises section of the AllBusiness.com Franchise Directory.

Karen Axelton is chief content officer at GrowBiz Media, a content and consulting company that helps entrepreneurs start and grow their businesses.