Why invest in an automotive franchise?Matt
The automotive business & franchise industry
The automotive industry in the UK is big business. In fact, in 2017 it was responsible for about £77.5 billion of turnover and £18.9 of added value to the UK economy. Across the country, around 169,000 people are directly employed in the industry and more than 800,000 in some capacity with a strong link to vehicles. In total, cars, trucks and other vehicles account for 12% of the total exported goods from the UK.
In the UK alone, 30 manufacturers make 70 models of car, with a further 2,500 component manufacturers and countless skilled engineers serving the industry. So, as you can see, it’s a very big part of the economy and one that provides plenty of opportunities for the right businesses.
Automotive franchises make up a significant amount of this vast sector, especially in the aftermarket part of the industry. That’s because while breaking into the manufacturing end of the business would require billions of pounds of investment, there are lots of opportunities for aftermarket businesses providing goods and services to existing car owners.
What is the aftermarket?
The aftermarket includes all the goods and services purchased after the first sale of an automotive. This can include replacement parts and accessories, including tyres, tools, lubricants and more. It can include maintenance and repairs, paint and upholstery, as well as rentals, car washing and other vehicle services.
The aftermarket relies on two key skill sets. One is technical ability and other is interpersonal ability. Both of these can be successfully provided and developed by franchises.
According to the UK government, there are around 37.5 million vehicles registered for use on British roads. In 2017, a further 959,000 new vehicles were registered for the first time – the highest number ever. So, with a growing market, now could be the right time for a franchise. And with more older cars on the roads than ever before, the aftermarket will continue to grow. The number of vehicles over the age of 12 years is expected to grow by 15% over the next five years. So that means more spare parts, more repairs, more servicing – all of which provide franchising opportunities.
Why choose a franchise?
As car technology has advanced in recent decades, this has led to the evolution of new skills and specialist knowledge. Prior to this technological revolution, a mechanic could be fairly confident of fixing most cars, as they were almost all identical in their design. However, with modern vehicles requiring specialised care, it is more difficult to set up a one stop shop for repairs, and training and equipment can be expensive. All of which has meant a shift towards the franchise model.
In addition, the changes in the structure of repair payments has put pressure on independent service providers. The economics of insurance-paid repairs has also squeezed margins, making it very difficult to run your own business without additional support.
Being a part of an automotive franchise system helps to keep you abreast of developments in the industry. Training is provided and there is an option to keep up with new products through conferences and meetings. Your franchise will be able to offer this knowledge, as well as software and necessary technological developments, in a way that is affordable. You’ll receive invaluable technical support, sales advice, management training and experience.
Franchises also give you a competitive edge in a marketplace that is very crowded. Small businesses and independents often find it difficult to carry out all the primary work as well as finding the time for marketing, publicity and admin. As part of a franchise you will get help, support and experience with this.
These can be very time-consuming parts of any business, and for many people involved in the more technical side of the automotive industry, it’s not necessarily how they want to spend their time. If you love cars and love working with them, would this part of the business leave you feeling very frustrated?
The franchise process explained
The first step for anyone interested in automotive franchises is to do some research online and then fill out a profile via the franchise portal. It’s then worth going to visit the franchise headquarters and spend some time learning about how they operate. These kinds of discovery days are essential for getting a good understanding of the model. It’s also worth speaking to other franchisees to find out how they have found their experience.
Once you have signed up with the franchise, they will then help you to source and secure property – a key part of any business success. The franchise will have the means and expertise to help you find premises that will enable the success of your business.
Next comes the initial training period, where you will receive instruction in how the model operates, as well as all the necessary technical training to provide a good service for your customers. You’ll get help finding and hiring staff, as well as with branding and promotion to get you up and running. All this initial investment of time and money can vary according to the specific area of franchise you are choosing.
You will have to pay the franchise fee, which covers the rights to use the franchisor’s system. This will also vary according to the type of franchise, territory granted and several other factors. Your franchise fee will also cover certain other benefits. These can include industry-specific equipment (which is a big part of any automotive industry), signage and décor, professional fees, travel costs, insurance payments and more.
What you need to think about
Before deciding on an automotive franchise, there are several things you need to think about. While the automotive industry is huge and growing, there are several key technological and legal developments to be aware of. The laws that govern the UK have an immense effect on the sector, with CO2 and emissions becoming very important political issues in recent years. The full effects of this on the market have yet to be understood in detail. The same is true of Brexit, which will surely impact the automotive industry in the UK, although no one can really say how this might happen.
New technologies such as hybrid cars and even fully electric models are also changing the way the industry operates, and this will certainly impact the required knowledge base for future franchises. It’s important to try and keep up with all this, and being part of a larger franchise model will certainly help.
No one can be sure how the market will look in 10, 20 or 30 years’ time, but the chances are that the changes will be far more radical than they have been over the past three decades. So this is something that is really worth considering when making your choice of franchise. In order to secure the long-term financial future of your business, choose a franchise that has one eye on the future of driving. Going on your own, it could be difficult to keep up to date, and simply affording the cost of new technology may make it difficult to survive.
Think smart. And choose a franchise with a future.