Insurance Industry
Back to Home > Friday, Sep 08, 2006 Posted on Fri, Sep. 08, 2006 email this print this reprint or... Maaco Makeover...
As founder and president of the McDonald's drive-thru of auto-body shops, Maaco's Anthony Martino offers some surprising candor about his $450 million annual sales chain.
That's because anyone who has heard the phrase "Uh-Oh, Better Get Maaco," probably knows it as a place to get a fender-bender fixed on the cheap; or to have a low-price paint job sprayed on the ol' jalopy.
But with improving auto quality over the decades has come longer-lasting factory paint finishes - and an increasingly tough time for outfits such as Maaco Enterprises Inc. and its rivals to grow.
"The paints they have today are so much better than 20 years ago," said Martino, who is featured this month on the cover of Franchise Times magazine.
Owners of newer and high-end cars worthy of a showroom-finish paint job typically do not come to Maaco Collision Repair & Auto Painting after an accident, Martino concedes. They go to a new-car dealership's body shop. Or, at their insurer's insistence, they visit one of the 30,000 or so independent shops in the fragmented paint-and-collision business.
Martino, who founded the Aamco automatic-transmission-repair chain and sold his interest in 1967, wants to make inroads in that higher end of the market.
The Automotive Aftermarket Industry Association says the collision-repair market exceeds $36 billion a year. With Maaco's just under half a billion in sales, nationwide, "We're a sliver of that," Martino said.
To expand its slice, the company is heavily flogging its light cosmetic and collision "Cosmollision" service - an offering aimed at drivers of newer vehicles that sustain minor body damage. These car owners often drive around with dings and scrapes rather than risk higher premiums by filing an insurance claim.
Maaco claims these out-of-pocket repairs are affordable though, because its Cosmolission costs up to one-third less than traditional body shops and takes three-quarters of the standard time to complete.
That would be Earl Scheib Inc., a pioneer of the car "production painting" business who proclaimed, shortly after opening in 1937, "I'll paint any car, any color for $29.95."
"Depending on the location, we're either better than or just as good as they are," said Christian Bement, chief executive officer of Sherman Oaks, Calif.-based Earl Scheib.
Bement added, "We're probably 20 to 25 percent lower than they are" in price, because of lower material costs. Where Maaco charges franchisees to buy their paint through corporate, Earl Scheib's stores are company-owned, the company gets a bulk discount, Bement said.
"As I understand, about 20 percent of their stores are in constant change, because the guys can't make it," Bement said in a phone interview. Martino countered that since 2000, more than 95 percent of franchisees renewed their contracts.
He said his primary job, though, is giving franchisees a proven system, intensive training, and the ability to retire rich. Their job, in turn, is to make customers happy by getting their cars back to them like new, in as little time possible.
John Grace, auto-collision instructor for Automotive Training Center's Warminster campus, said the hit-or-miss reputation of so-called production painters was well-known.
"I know they've gotten bad raps at times," and it is often because little time was spent preparing the car, he said. That includes the time - and labor - intensive steps of removing unpainted items such as lights and trim rather than just taping them, and sanding the car before and after paint is applied.
Maaco, for its part, says it can do dazzling paint jobs as well - for a price. It charges from a few hundred dollars to more than $1,000 for different grades of service.
For all the pressure on its industry, Maaco's doing comparatively well. The firm expects to add 20 franchises this year. Martino said franchises typically cost $290,000 and average $800,000 in sales.
In some ways, Martino is a throwback to a bygone time - he compliments Toyota and Honda's automaking quality, but seems oblivious to the fact that these days, Americans pronounce the entire word, Japanese.
And yet when it comes to business savvy, the entrepreneur of the year award winner has a track record that any Wharton-trained corporate exec would envy.
He got the entrepreneurial urge as a young man when he grew tired of his and his friends' hooliganism - they'd build V-8 hot rods and race them on public roads late at night.
Besides Maaco and Aamco Transmissions Inc., he founded the Sparks tune-up chain, now defunct, and Goddard Early Learning Center Inc. - proving wrong doubters who thought he was merely an unpolished mechanic who had gotten lucky with the transmission franchise.
Even competitor Bement at Earl Scheib gives begrudging respect - his own company has struggled financially in recent years, though for its fiscal 2006 reported a $3 million profit on flat sales of $48.8 million.
Martino, sole owner of the corporate flagship, never felt the urge to take the company public. He asks, why would he want to sell equity in the company?
Going public, he surmised, "could be an ego trip for some people." A serial entrepreneur, Martino said he was not ready to stop coming to work. In fact, he is trying to launch a nationally branded car dealership.
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