Automotive News Canada - December 2022 - F20

FIXED OPS JOURNAL
NURSED BACK TO HEALTH
Struggling service department's remedy yields great prognosis
KEN WYSOCKY
foj@autonews.com
I
n medical parlance, the service department
at Bristol Honda in Tennessee
was in critical condition when
Shawn Butler was hired in April as fi xed
ops director - still taking nourishment
but ailing nonetheless.
But after roughly six months of intensive
care and rehabilitation, the department now
is in fi ne fettle as evidenced by signifi cant increases
in critical metrics such as repair orders
per day, average revenue per repair order,
overall gross and net revenue, combined
eff ective labor rate and fi xed absorption rate.
Tightened up protocols and processes - including
a drastic reduction in the number of
department operation codes - have greatly
improved effi ciency as well as communication
between the parts department, technicians
and service advisers. Th at, in turn, has
boosted productivity, which translates into
increased revenue and better profi tability,
Butler says.
Fixed Ops Journal interviewed Butler in
April shortly after he was hired to manage the
service department at the 55-year-old Honda
dealership, one of 31 rooftops owned by the
Memphis-based Umansky Automotive Group
in California, Mississippi, Tennessee, Virginia
and Wisconsin. In the June issue of FOJ, he
outlined the challenges he faced and presented
a detailed game plan for reviving the moribund
department.
Butler also agreed to provide an update on
the department's condition in six months. Th e
verdict? A big thumbs-up.
" We've made a lot of progress, " says Butler
about the department, which features 19 service
bays and employs 11 line technicians,
and the fi gures he cites tell a compelling recovery
story.
For starters, repair orders have approximately
doubled to 40-plus compared with the
low 20s in April, he says.
" Our goal is 60 to 70 ROs per day and we
have the capacity to do that, " he says. " So
there's still room for improvement there. "
In addition, revenue per repair order nearly
tripled to $300 compared with the low $100s
when Butler came on board. Moreover, the
department's gross service and parts revenue
jumped around 100 percent to about $325,000
a month from around $160,000 a month. And
net revenue, which was in the red to the tune
of $25,000 a month, now consistently totals
between $50,000 and $75,000 a month, he
says.
Drilling even deeper into the numbers, Butler
notes the department's combined (both
customer-pay and warranty work) eff ective
labor rate - a measure of the profi t a service
department generates per billed hour -
stands at a robust $136. Th at's a 60 percent increase
compared with the department's $85
eff ective labor rate last April, Butler says.
At the time, Butler determined the departShawn
Butler, fi xed ops director at Bristol
Honda, says a lot of progress has been made.
four express-lane technicians (one more than
last April), six people in the parts department
and four service advisers (one more than before).
" Th
e right processes are in place and the
numbers are right, " he says. " Everyone is in
tune with one another, too. So we have fewer
breakdowns in communication. "
Butler is fond of saying numbers don't lie,
Bristol Honda's recovery, by the numbers
APRIL 2022
ROs per day
Avg. revenue per RO
Net revenue per month
Combined effective labor rate
Absorption rate
Operation codes
Service website pages
PAGE 20 DECEMBER 2022
Low 20s
Low $100s
Gross revenue per month $160,000
-$25,000
$85
60%
300
1
OCTOBER 2022
Low 40s
$300
$325,000
$50,000 to $70,000
$136
90%
60
20+
ment's " door rates " were dramatically underpriced
compared to local competitors, a problem
he moved quickly to resolve.
" Th e higher [eff ective labor rate] is a healthy
sign that we're priced competitively in the
marketplace but not overpriced to the point
that we're driving customers away, " Butler
says, noting the department routinely price
shops its competitors. " For most stores today,
that cost is around $100 per labor hour. So if
your [eff ective labor rate is] under $100, you're
losing money. "
Th e department's fi xed absorption rate also
rose signifi cantly to 90 percent from 60 percent.
Th at's well above the industry average of
about 70 percent, he says.
" Our goal is 100 percent, which would mean
that fi xed ops is covering all of the dealership's
expenses leaving sales revenue as pure profi t, "
Butler notes.
Better marketing spurs traffi c
Butler credits more robust marketing eff orts
for the improved fi nancials. Driving more traffi
c to the store was a critical fi rst step that's
been accomplished via a much improved service
department presence on the store's web
Automotive News Canada - December 2022

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