It appears that a number of manufacturers are trying to out-do each other with the size of facility they require for you to stay in the game and maintain the franchise, right down to the design and colour of the usually over-priced furniture in your offices and waiting rooms. It is too bad that a shiny new building does not necessarily bring in shiny new dollars! Or create higher customer satisfaction!
One has to ask the question: "Is it branding the manufacturer wants? Or is all this mandatory investment a form of constructive dismissal?" European example
Looking at Europe over the last several years there has been a significant reduction in the total number of automotive dealerships and a move towards multi-franchising for survival. The numbers are continually changing but as examples, consider the following:
- In France multi-brands have increased from 3.4 percent in 1997 to 20 percent in 2004; in Germany from 1.6 percent to 11.3 percent; and in the United Kingdom from 12.2 percent to 23 percent.
- In the UK it is estimated that the total dealership count is down by over 40 percent and still dropping.
Now comes the interesting part. The latest poll carried out by the National Franchise Dealers Association in the UK suggests that one in three new car dealers are considering cutting loose from unprofitable manufacturer relationships. That’s right! Some of the remaining dealerships are prepared to leave their franchises and walk away, mainly due to their manufacturers’ continual pressure to expand and upgrade, and invest more money that will give them little or no return on their investment. One estimate tells us that one in 10 dealers have spent in excess of 2.2 million dollars (Cdn) on upgrading over the last four years.
What about us?
How does this situation relate to the fixed operation and your service department? Well, take a look at our current market. As a generality, it appears that the strong service departments are performing fairly, the fair service departments are performing poorly with a struggling bottom line, and the weak service departments are in the red.
Before you even contemplate building take a look at your current service department bay utilization. There are a lot of dealership numbers that look like the one in this profile:
- It is a ten-bay service department running with seven productive staff.
- The hours produced in a 21 working-day month = 1,176.
When we divide the hours by the 21 working days we get 56 hours per day, and when we divide those daily hours by the number of bays (10) we get just 5.6 hours per day per bay of actual work. The math is straightforward but the results are startling!
Service managers hate it when we crunch the numbers and reveal those results. They say things like, "you shouldn’t count the empty bays!" But the accountants have to count their contribution to the overhead, empty or full. Don’t they?
A common dilemma
Now we have a mature industry with extended service intervals, almost no warranty work relative to 20 or even 10 years ago, and decreasing hours per work order. So how do you increase the hours produced in the 10 existing bays? Adding technicians probably won’t do it and could result in losing some current high-producing technicians. We often see new stores built with more bays by owners who could not fill their old shop. So why did they build a bigger shop? Has anyone worked out where the additional business is going to come from?
If you haven’t and you are planning on expanding your shop, perhaps you had better re-think your plans. And if you have figured it out, please let me know.
Jim Bell, of Oakville, Ontario, has been in the auto business for more than 35 years and brings a wealth of industry experience. He is a writer, consultant, and motivational speaker. For in-store consulting and training you can reach him at GAC, by phone at 416 520 3038 or by e-mail at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
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