CHICAGO (Aug. 4, 2015) — When it comes to selecting property for a new auto repair shop, “first in and best location” should be the prime criteria, according to Greg Sands, a multi-shop owner who offered advice on site selection during the recent Automechanika Chicago show in Chicago.
Mr. Sands, founder and CEO of Mudlick Mail, a direct mail operation, also buys and sells real estate and oversees the operations of more than 35 auto repair shops.
“If you're a shop owner and you own a shop, you can make a living, Mr. Sands said. “If you own a couple of shops, you can get rich. But if you understand real estate, you can become wealthy.”
But many business owners make common mistakes when opening a second location, causing the venture to fail.
“You can make a bad location a destination location if you want to take years to do it and spend a fortune,” he said. “The way to grow is to get a great location and open up quickly and do well and move forward.”
His main advice for scouting out a location in a new market is to choose a prime location in an area where there are no other auto service businesses.
“If you go into the best areas, your chance of failure is very, very low. I have (opened) over 90 locations. We had three that were a total loss,” he said, because they were set up in bad locations or off the main road.
He urged shop owners not to pick the cheapest location, because if their store does well in a secondary location, a competitor will move into the prime location in that same area.
“So every time you advertise, all you are going to do is drive people to those better locations because people don't pay attention,” he said.
“So the key is, if there is a location, even if it's more expensive, it's first in. If you can get the first in/best location, you're going to win,” he said, noting that if the competition sees that you have the best location in the area, they will go elsewhere.
Mr. Sands offered tips for determining a prime location:
- Zoning—Look at multiple locations that already are zoned for automotive businesses, and then look at locations that could be zoned automotive, but “don't get into the zoning business,” he warned.
- Limited competition—Determine the number of auto repair shops (including those that do oil changes) in a two-mile radius of the target property. Then determine the number of ideal customers in the area (those who meet the shop's target income levels) and divide that by the number of auto repair shops in the area. If the total equals 1,000 customers per shop or more, then the new shop can expect to generate about $100,000 a month in sales.
- Visibility—Choose a location on the “going to work side” of the main thoroughfare of the town. “People are extremely lazy, even with auto repair. Believe it or not, if they are going to work and they drop off their car, they don't want to have to cross three lanes of traffic to get there,” he said.
- Good traffic counts—An ideal count is 18,000 to 40,000 cars passing a location a day. However, with a higher count, such as on a major freeway, “there's no stop lights; people are just flying by. They're not even seeing your place. So you want to make sure you are somewhere in that 18,000- to 40,000-car count,” Mr. Sands said.
- Demographics/data—Look for areas with household incomes you want to target. Mr. Sands suggested targeting annual incomes of $75,000-plus. He said that even in high-income areas, parents with BMWs have kids with less expensive cars.
- Close proximity to a grocery/drug store—If a property is close to a drug store or grocery, where everybody visits regularly, “you have a great location, you're visible.… That's 1,000 customers per store—that's a slam-dunk,” he said.
He also advised against opening a second shop close to the first because both stores would be vying for the same customers, and even the same employees. He suggested a distance of at least five miles or even 10 miles or more, between store locations.
He also encouraged shop owners to look at multiple locations and not focus on just one favorite site. He noted that people tend to have their hearts set on a particular location.
“Why? We're in the business to make money. So if a location down the street will make me the same amount of money, then why do I have to have that location? It's not where you live; it's not your house. It's just a location. So don't get discouraged. Always look at several locations,” Mr. Sands said. He also advised looking at more than one area.