Automotive News - September 23, 2019 - Best Practices Supplement - A14

14 | SEPTEMBER 23, 2019
R AY B R A N D T A U T O G R O U P, H A R V E Y, L A .

WINNING WAGER

Talked into opening
1 body shop, retailer
now considers a 7th

Published in Automotive News Jan. 28, 2019

Urvaksh Karkaria
ukarkaria@crain.com

n 1988, a young mechanic approached
auto dealer Ray Brandt about converting
a vacant building in a rough area near
New Orleans into a body shop.
It was a novel idea and a gamble for the retailer, given that collision repair is capital intensive. But Brandt's bet paid off.
Over the past three decades, the venture
mushroomed into a business with six locations
and 140 employees in Louisiana and Mississippi and annual sales of $30 million. The original
body shop has expanded to occupy a city block
in suburban New Orleans and does $800,000 a
month in sales. As for the young mechanic who
pitched the idea: He's managing the business.
Ray Brandt Auto Group, headquartered in
Harvey, La., is a rarity. Fewer than a fourth of
U.S. dealership groups also have body shops,
according to the National Automobile Dealers
Association. Many retailers are scared to enter
the body shop business because it is capital
intensive and highly competitive, said Brandt,
a member of the Nissan National Dealer Advisory Board.

Protecting profit margins
Running a body shop involves investing in
pricey buildings, expensive tooling and employee certification, he said. He spends
$12,000 per technician every year on training.
"You can't get certified if you're not up to
date on all the equipment that you've got to
have," he said.
But Brandt relies on his multilocation,
18-brand dealership group to keep his body
shops busy. Ray Brandt Auto Group's franchises
include Nissan, Toyota, Mercedes-Benz, Chevrolet and Hyundai. In 2018, the group sold 7,799
new and 5,696 used vehicles.
"I don't have to do the marketing that I
would normally have to do," he said. "We do
better when we have dealerships in the area."
That vertical integration helps protect profit
margins.
"My internal rate on fixing cars is cheaper
than if I had to send them to a third party,"
Brandt said. "If I bought a used car that need-

Dealer Ray Brandt says the body shop business, with about a 10 percent profit margin, is a hedge
against declining profitability in the dealership business.

Ray Brandt, owner of Ray Brandt Auto
Group, has a thriving body shop
business that generates $30 million
in annual revenue and helps offset
declining profitability in new-vehicle
sales.

ed some bodywork, I can get it done quicker if
I had my own body shop."
Doing bodywork in-house also drives customer satisfaction, while the faster vehicle
turnaround time means lower loaner fleet
costs for the dealership.
The body shop business, with about a 10
percent profit margin, is a hedge against declining profitability in the dealership business, Brandt said.
"When you look at eroding profit margins in
the new-car department, it is imperative that
we focus on fixed operations, which includes
parts, service and body shop," he said. "The
fixed operation business is like your defense.
If you've got a great defense, you're going to
be in every game."
Despite the economies of scale, Brandt fac-

es challenges with body shops. The past year
was tough because of competition, high certification costs and cost-conscious consumers
forgoing fender bender repairs to pocket their
insurance claim checks.

Competition from consolidators
To resolve insurance claims faster and reduce rental car expenses, insurance companies write the customer a check and move on,
Brandt said.
"Joe Blow doesn't fix the car. He just cashes
the check," the dealer said.
National body shop consolidators are also
pressuring profit margins.
"They are buying stores and they have more
economies of scale," Brandt said. "They're
very smart in managing their business and
they are a fierce competitor."
Despite the headwinds, Brandt's body shop
business is growing about 10 percent annually. To meet demand, Brandt is considering
adding a seventh location this year.
Brandt scouts areas with high population
growth that are underserved, preferably in cities where he also has dealerships. He said,
"We look at opportunities every day." a

Automotive News - September 23, 2019 - Best Practices Supplement

Table of Contents for the Digital Edition of Automotive News - September 23, 2019 - Best Practices Supplement