CLEVELAND (July 19, 2002) — In the automotive repair wars, one guy's minefield can be another's gold mine.
As entrepreneur David H. Sullivan surveys the landscape, he's watching where he steps. Carefully choosing his pathway, the president and CEO of ProCare Automotive Service Solutions L.L.C. took a giant leap into the wide-open spaces of the Lone Star State on June 1, acquiring 23 America's Service Station sites—15 in Houston and eight in the Big D—that's Dallas, pardner.
It's the Cleveland-based auto service chain's first foray into Texas and begins to firm up ProCare's foothold on that side of the continent, where the new locations are a long hoot and holler away from California's Orange County, home to four ProCare outlets the company opened in March 2001.
The high-volume America's Service Station operations appealed to Mr. Sullivan. They're configured almost identically to ProCare facilities in the number of bays, service offerings, extended warranty and customer profile and, by outward appearances, even resemble the prototype ProCare outlet, he told Tire Business.
This latest buyout, for an undisclosed sum, bumps ProCare's site count to 130 auto repair shops and slightly more than 1,000 employees in Ohio, Pennsylvania, Kentucky, North Carolina, California, and now Texas, with more to come, the automotive aftermarket executive promised. Actually, about 40 more of what Mr. Sullivan calls “greenfields”—new from-the-ground-up builds—in the next 18 months in places including Columbus and Dayton, Ohio, Cranberry Township near Pittsburgh, plus additional outlets in Charlotte, Greensboro and Raleigh, N.C.
The Texas locations, purchased from Dallas-based JTCO, will be rebadged ProCare and will add $20 million in revenue to the company's operations, bringing its annual sales to a little over $100 million, he said. America's Service Station—which uses the tagline “service is our middle name”—continues to operate six repair shops in Atlanta and two in the Austin, Texas, market, according to the firm's Web site.
In a competitive environment where a majority of tire dealerships perform some automotive services and neighborhood repair shops still proliferate, privately held ProCare considers itself somewhat unique. Its auto services menu includes everything from lubes, tire rotation and curing driveability problems, to such big-ticket jobs as engine and transmission overhauls and installations. The firm employs more than 500 ASE-certified technicians.
But the chain's hallmark, Mr. Sullivan pointed out, continues to be its warranty: two years or 24,000 miles, whatever comes last. “And the customers really like it,” he said. In comparison, America's Service Station—which performs most of the same repairs as ProCare—has been offering an enhanced three-year, 36,000-mile pro-rated limited warranty.
Neither company is heavily into tire sales. Mr. Sullivan said the America's shops were selling a minimal amount and “although we don't sell a great deal—in the 5- to 7-percent range—we'll do more than they did, but plan to be marketing more tires in the future. We really stress the high-end work.”
An Akron-area ProCare outlet, for example, wears a big sign boasting “Tire Sale” on its front windows, next to Michelin, General and BFGoodrich placards staring out from inside the showroom.
ProCare itself grew out of an acquisition by Mr. Sullivan and a group of investors who bought the auto repair chain in 1999 from Cleveland-based BP Amoco P.L.C. The distinctive green and yellow BP outlets were subsequently rebadged ProCare and eventually adopted a patriotic red-white-and-blue color scheme.
The America's shops, Mr. Sullivan said, started out as a handful of very successful local operator-owned sites that hit what he called “the age-old problem in this business: Once you get past a certain number of sites, it's tough to have a team that can manage” a growing number of locations. So the stores were eventually sold to an investment firm.
ProCare has retained the employees at the 23 locations it just purchased.
Meanwhile, Mr. Sullivan said his company has set its sights on other Sunbelt cities and will eventually add more shops in Dallas and Houston and some in California, as well. It is currently in negotiations for another sizable acquisition that could come within the next 60 days, but he said due to a confidentiality agreement he cannot divulge any more specifics.
In these struggling, still uncertain economic times, “there are a lot of businesses for sale, a lot of opportunities out there for good operators,” he said. “This acquisition jump-starts us. We get the critical mass we need at very reasonable prices. There are some good facilities available out there, and I'm managing for profit.”
Why are so many for sale?
Back to that minefield. A little bit of shrapnel can be a deadly thing: “The reason this business is so fragmented,” Mr. Sullivan explained, “is there are a lot of small operators with three, four sites. When they get bigger, you have to build a team that can handle the support of the growth—that's the difficult part.
“There's a lot of investment money available for auto service. But in recent years it looks like a number of investment groups have taken over (auto service) operations because they weren't happy with their performance.”
A different recruitment method
Mr. Sullivan hopes to mimic at least one somewhat different approach America's Service Station has taken to the continuing problem of finding a qualified, dependable work force. “That company has done a very, very good job going outside our (automotive) industry and has recruited service delivery and point-of-sale people and site managers from the restaurant industry,” he explained.
That has provided several bonuses for those workers: In auto service they can work less hours, while site manager and service manager pay often is in line with similar positions in restaurant chains. “These restaurant managers in big chains have really excellent personnel who've been used to clocking in at 7 a.m., often working until 3 a.m., and they're doing training in between,” Mr. Sullivan noted. “It's grueling. I think there's a group of people out there looking to transition into the auto service business.
“We're going to take what we've learned, and have opened up our recruitment plan quite a bit.”
ProCare also has recently added some employees who formerly worked for the defunct Penske Auto Centers Inc. “You gotta feel for those folks,” Mr. Sullivan said. “…It's the average worker who usually gets taken advantage of every time while you hear of some CFO building a multi-million-dollar house.”
Accentuating the ´pro´
Along with its “greenfields” expansions, ProCare plans to take a “campus approach” to building construction, Mr. Sullivan said. Most new outlets will have eight bays (sometimes six, depending on real estate limitations) and will feature two separate ProCare Express bays for quick services. The company also will be adding some standalone car washes and will cross-merchandise them with its outlets. “We won't operate them,” he said. “A car wash company will structure the facilities and we'll lease the property to them.”
They'll be upscale facilities using the latest laser technology and high-pressure water. And, he added, “it will give me 60 more cars a day per site. We want to get as many automotive customers to our site as possible, and utilize our turf as ancillary profit centers.”
In 2001, after attempting to introduce chain-wide its proprietary “Pronet” computer system—which was to include interactive point-of-sale, Internet online appointment and vehicle management components—ProCare dumped that due to shortcomings. Mr. Sullivan said he has instead opted to make a $1 million investment in a computer system from Anderson BDG that ProCare has been testing for six months. A rollout will begin on Labor Day and should be completed by year's end.
Another rollout also is under way: The firm is in the process of putting new signage on all its outlets—a new “byline for our business,” he called it—that states: “Expert auto service guaranteed—Earning your trust one car at a time.” And in a move to strengthen its leadership ranks, ProCare recently named Martin Cunningham as executive vice president. He had worked in Mr. Sullivan's consulting business. John McCurry, former ProCare president/COO and a long-time Midas International Corp. veteran, left the company more than a year ago.
ProCare, which has closed two or three under-performing shops in the last 15 months, will continue to seek locations in areas where the demographic numbers work for it. Those include dense populations, large numbers of vehicle registrations and high traffic counts. “Every now and then the demographics of a neighborhood changes on us,” Mr. Sullivan acknowledged. “So in those cases we'll (close a shop and) move with the cars and the people” to more productive locations.
However, earlier plans to possibly expand the ProCare concept to Europe—particularly to the United Kingdom, France, Germany and Austria—have been shelved. The Sept. 11, 2001, terrorist attacks on the U.S. “have frightened a lot of people” and put damper on that goal, he said.
Still keeping his eye on any potential landmines in the way of its expansion, Mr. Sullivan called ProCare “a great acquisition for us. But the greatest thing that happened was to keep a group of (BP) employees who've been simply dedicated to the customer. The employees we have are fantastic.”
When a company compiles an asset list, it should not just comprise buildings and equipment, he noted, but must include its people. ProCare, for instance, offers employees a 401(k) plan, medical benefits, life insurance and disability—“all the things BP was offering, and I'd never expect our people to work for less than what they had,” he said. Subsequently, he has found that his worker productivity level has increased, “allowing us to actually enhance our benefits package.”
The “stability and growth of our sites pushes our people along to aspire for more, too,” he continued. “We believe our site managers are kings and the sites are kingdoms. My favorite saying is that we're only here to serve the employees.”
Mr. Sullivan, who has operated various ventures out of his Sullivan Acquisition L.L.C. corporate base in Guilford, Conn., told Tire Business he has sold or merged his six other businesses. “I'm putting all my focus on ProCare. We really believe we have the opportunity to be the No. 1 automotive service provider in America. We take that very seriously.”