I've said it before and I'll keep shouting it until all readers have heard me: New-car dealerships cannot and should not be your yardstick for setting shop labor rates!
The sooner owners and managers grasp this, the better for all concerned.
Recently, I was discussing a technical issue with a New Jersey service shop owner/operator I have known for almost 15 years. Technical problem solved, the topic turned to overall business in the post-Sept. 11th era. He said the work seems to be there. But like so many bosses I talk to, this owner griped about recruiting and retaining good technicians. I asked him if his business was healthy because typically, the healthier the business, the easier recruiting becomes.
``Oh, we're holding our own, I think. The car dealers around here are running about 70 dollars per hour so we keep our labor rate in the 60's so we don't collide on price,'' he said.
Telling you that this floored me would be the understatement of the year. First of all, common sense dictates that you have to charge enough in order to be able to pay enough to your workers. If you aren't paying enough, you're handicapping your own efforts to recruit good techs.
But equally important here is the question: ``Since when did a car dealer dictate what you charge for labor?'' At the risk of offending lots of people, I'll make the general statement that anyone who's obsessed with local car dealer labor rates isn't running his or her own service department like a business. He or she is playing ``me-too-ism.'' Lacking the business skill or training, they simply ape what competitors do-especially car dealers.
My years in the industry and extensive travels have taught me an axiom: Show me a boss who's focused on a car dealer competitor and I'll show you someone who's business never has and never will reach anywhere near its potential. Certainly, you want to keep a close eye on the competition. But obsessing on a car dealer's labor rates suggests that you don't know how to run your own store.
Basically, the cost of doing business (CODB) determines what you must charge for labor. Meanwhile, overhead is the biggest factor determining your CODB at your tire dealership or service shop. I sincerely doubt that your utilities, mortgage payment, building maintenance costs, salaries, worker benefits package etc. are the same as the car dealer's.
What's more, savvy shop owners always adjust labor rates to the skill level required for the task at hand. For example, electrical troubleshooting, emission failure analysis and driveability diagnosis always command considerably higher labor fees than general repair work does. None of the first-rate, consistently healthy shops I know are using a single labor rate.
Can a tire dealer or service shop owner justify charging more than a local car dealer can? If he or she delivers the goods, why not? For example, many independent service facilities use original equipment or equivalent-quality parts. Their techs do a more thorough repair job than the car dealer techs do. And some independents offer a better warranty on their repair work. If so, then it sure sounds like they're worth more money than the car dealer is.
On top of that, many independents I know are much more convenient than the local car dealers are. It's easier to get an appointment with them, they provide loaners or a shuttle service and they're infinitely friendlier to deal with. I think that makes them worth more, don't you?
I just mentioned that the best shops and tire dealers I know charge top dollar for the most-challenging diagnostic work. Motorists cheerfully pay because their vehicles are diagnosed and repaired correctly the first time. But once again, can an independent justify diagnostic charges that exceed the car dealer? Definitely yes!
The reason is that many car dealers are still clinging to a straight flat-rate system. Their techs really don't get paid until they do a repair or install parts. They simply aren't mentally or physically equipped to spend the time required to pinpoint electrical, emissions or driveability problems. Too often, you learn the hard way that dealer techs don't use their diagnostic equipment effectively or use it at all-because they aren't paid to use it.
To me, any service shop that has the personnel and the equipment to fix the vehicle correctly the first time is entitled to its fee-regardless of what any car dealer charges.