Steve Leal bought his first body shop in Ontario, Canada, in 2004. He was doing about $2 million per year in business, he says, and was looking to grow, so he joined Fix Auto, a Quebec-based franchise.
"If they can get me insurance work," he says, "That's the same price as a salesman."
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Unfortunately, the head office was a train wreck, Leal says. He joined forces with other frustrated franchisees and, by 2008, had bought the Ontario arm of the company himself, adding Atlantic Canada and Alberta in short order. In 2011, he became COO and by 2013, he bought the whole thing. The next year, he also acquired Mondofix, a company started by Fix Auto's founder.
"All this activity went on as we grew as a company," Leal says. I knew I couldn't compete with public companies and private equity. I wanted to make sure we have the clout to play but not lose control of the company."
Leal solved his problem by partnering with a government agency that helps Quebec-based companies grow. And grow, Fix Auto did, eventually going global.
"We created some new concepts. We've had some great success stories and some bigger challenges," Leal says. "Every country I go to, I hear, 'It's different here.' Fixing cars is fixing cars. The difference is all the business trends around."
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That's where a franchise can be an advantage, he argues. The heavy duty business in the U.S. has some challenges, and Leal outlined them for HD Repair Forum attendees on Tuesday.
The collision side of the industry is weak on franchise systems, he says, and it lacks negotiating power. Leal also cited variations in service quality, inconsistent parts and supply, a lack of standardization and leverage, and the risk of consolidation.
"It's' a very stubborn industry. To get a body shop owner to change is a very tough thing to do," he says. "If you look at this industry being fragmented, it creates a big opportunity, as I see it, on the heavy-duty side."
For instance, Leal says his Canadian franchisees perpetually complained about a lack of skilled talent. Fix Network solved this from the head office, taking on immigration responsibilities and bringing qualified technicians into Canada from other countries.
"Everything I'm doing, I'm providing this system that, as a franchisee, I wanted," Leal says.
He says he's set up a transparent system that helps owners build equity. Shops are bought and sold within. the network, with a lean 5% or so being corporate-owned.
"I don't believe in that model. If I can create you that corporate structure and harness the entrepreneur, we're going to have more success. Because you guys care," Leal says.
The cost to become a franchisee varies, he says, depending on the franchise. But the cost to wait may be steep.
'Private equity hasn't come into this space yet, but don't kid yourself," he warns. "That's when the shop owner sees his world change."
