First of two parts
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/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 country, 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 that 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.''
Next: ProCare's management recruiting turns to the restaurant industry, while the company maintains an employee benefits package that includes a 401(k) plan and medical coverage.