Fixed Ops Journal - December 2021 - F25

FIXED OPS JOURNAL
well as independent repair shops, as long as
they're located within one of the franchise's
exclusive territories, he says.
Step One pays wholesale prices when it buys
products from Mighty.
It then sells them
marked up for retail , Kingrey says.
" As purchase discounts from OEMs disappear
- and they are going away - this is a
very good solution, " Kingrey told Fixed Ops
Journal.
Growing trend
Th e collaboration between auto groups and
parts stores is nothing new to Josh D'Agostino,
president of Mighty, which operates 100 distribution
center franchises nationwide. He
says 16 other auto groups have bought distribution
franchises, with the oldest one established
in the early 2000s.
" I think there's defi nitely momentum here, "
he says. " Auto group organizations have been
talking about this type of vertical integration
for years, adding rental cars, reconditioning
centers, service and repair of all makes and
models, collision centers and car washes.
" It seems like the trend is catching on during
the last two years . More dealers are examining
areas where they're spending money to see if
they can potentially monetize them and make
money instead.
" As people in the industry talk more about
Mighty Parts during their 20 Group sessions,
we're gaining traction and getting referrals. "
Licensing fee, royalties
Th e franchises essentially operate the same
way as fast-food, service industry and other
business franchises. Th e buyer pays an upfront
licensing fee to the franchiser, then also
pays monthly royalties based on a percentage
of sales.
D'Agostino declined to disclose the licensing
fee or the royalty percentage. But the fees
vary according to the number of registered vehicles
in the franchises' exclusive territories;
an average territory covers around 1.4 million
to 1.5 million vehicles, he says.
" Most dealerships fi nd that the acquisition
cost of a Mighty Parts franchise is far less than
what they pay to suppliers, " he notes. " Th ey're
not only cutting the cost of the products,
they're also creating a business unit that turns
a profi t. "
Warehouse locations vary by dealer. Some
use excess space in existing warehouses; they
need a minimum of 6,000 to 7,000 square feet.
Others rely on stand alone buildings, while
some are building new reconditioning centers
that include enough space for the warehouse
Thompson: Having a parts store helps a
dealership service all makes and models.
operations, he says.
In Step One's case, the three franchise purchases
included the warehouses, he says.
Early market entry
Long-Lewis Automotive Group, which owns
10 dealerships in Alabama and one in Mississippi,
was an early adopter of the franchise
concept.
Th e group bought a NAPA Auto Parts franchise
almost a decade ago, then converted it
into a Carquest franchise in 2019, says Roger
Th ompson, vice president of fi xed operations
at Long-Lewis Ford of the Shoals in Muscle
Shoals, Ala.
" We were spending $40,000 a month outside
the confi nes of our organization, " Th ompson
says. " So if I'm going to spend that kind of
money, why not buy it from myself? We had a
bricks-and-mortar store with a guaranteed
level of income before we even opened the
door.
" We service all makes and models in our
quick lanes, so we have to have a way to easily
and cost-eff ectively supply all those parts, " he
adds.
Th e Carquest retail store stands across the
street from the Ford dealership. It also supplies
parts to Long-Lewis Volkswagen of the Shoals, a
rooftop in nearby Florence that also sells Mitsubishis.
D'Agostino:
Mighty Auto Parts is " gaining
traction and getting referrals " among dealers.
Th e other Long-Lewis dealerships are too
far away to supply them cost-eff ectively from
the Carquest store, he says.
Carquest franchise owners can also buy
products at wholesale cost from Advance Auto
Parts, which owns Carquest. And Carquest
has established agreements with manufacturers
of auto repair equipment that enable franchise
owners to buy tire machines, car lifts
and the like at wholesale , Th ompson says.
More vertical integration
At Ford of the Shoals, the franchise concept
worked so well that over the years, the store
has continued its vertical integration eff orts
by opening a rental car service, a 100-footlong
tunnel car wash and a cafe, all integrated
into one facility just down the street, he says.
In addition, the store established Extreme
Auto Design, a company that installs spray-on
bedliners and sells performance accessories.
" If I'm going to sub let all that work, I'm going
to sub let it to myself, " he says. " We go to
great lengths to increase our absorption rate. "
Greater access to parts is even more important
than ever these days as supply chain issues
hammer the auto industry, Th ompson
adds.
" I think everybody should be thinking about
doing this, " he advises. " With the troubles
we're going through with parts shortages,
having all these other avenues to buy parts is a
big advantage.
" We have a body shop here, too, and trying
to fi nd parts is sometimes next to impossible, "
Th ompson continues.
" So having more resources than the guy
down the road goes a long way. Being self-suffi
cient gives us many more business opportunities. "
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DECEMBER 2021 PAGE 25
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