Service Departments Look Beyond Their Franchises

Not many import-brand dealerships are in the small town of Weimar, TX, about 90 miles (144 km) east of Houston.  So when import owners need to get their car fixed they often head to Brasher Motors, a Chevrolet/Buick/GMC dealership.  

“We love to help our customers, no matter what vehicle” they are driving, owner Tommy Brasher says.   

The service department always has been an important profit center for dealerships, but service income is dropping as car quality improves. A dealer can boost service business by working on vehicles outside the franchised store’s brands. 

“It will always make sense for dealers’ service departments to work on every make and model of car, not just those sold on the new-car lot,” says Steven Brooks, Edmunds.com’s regional director-dealer initiatives.

“After all, the service department usually keeps the dealership’s lights on: it’s that much of a profit center,” he says.

Non-franchise repairs account for about 50% of service business at Brasher Motors. Advertising is all word-of-mouth, says Brasher, who claims his well-trained technicians can fix almost any vehicle. They recently repaired a tractor’s air conditioner. 

“If we can get the parts, we work on it,” Brasher says.

Dealership service revenue fell to 12% of total sales in 2012 compared with 13.2% in 2011, according to the National Automobile Dealers Assn.

The service and parts absorption rate fell to 55.3% in 2012, compared with 57.8% in 2011. The absorption rate represents how much backend operations cover the overall expense of running a dealership. A 100% absorption would cover all costs of doing business throughout a store.  

Meanwhile, profit margins on new vehicle sales have gotten thinner, says Karl Brauer, a senior analyst with Kelley Blue Book.  “Dealers have always made more profit off used cars and service,” he says, adding that higher fixed-operations profit margins are driving the trend to service all brands. 

Not all dealers are eager to work on vehicles of brands they don’t represent, says Donald Gerbaz, general manager of Berthod Motors in Glenwood Springs, CO. He doesn’t seek service business outside of his Buick/GMC and Chrysler/Jeep/Dodge franchise brands.   

He prefers to expand his service business by marketing to owners of his brands who aren’t already Berthod customers. 

Gerbaz worries about “driveability” issues for non-franchise repairs and is loathe to send a car to another dealer for repairs if his service technicians are too unfamiliar with the vehicle to service it.

“There are a lot of dealers who are (servicing other brands) and doing it successfully,” he acknowledges. “The concern comes from the 30% that we would have to send to (another) dealer.” 

These days, cars are more complex, but they are easier to repair, contends Kelley’s Brauer, pointing to, among other things, built-in diagnostics features. “The nice thing about having smarter cars is they can tell you what is wrong. A 1968 Chevrolet didn’t do that.”

Brasher Motors uses a hand-held electronic diagnostic tool to determine vehicle malfunctions, Brasher says. His technicians don’t have special training. “They just plug in the computer, and it tells them what is wrong with the car.” 

Not servicing all makes and models is a missed profit opportunity, says Don Reed, a dealer for 27 years and the founder of DealerPro Training, a fixed-operations consultancy.

Much of service work involves filters, brakes and hoses. “It is a bunch of nonsense” to think it requires specialized training to work on out-of-franchise models, he says, noting that technicians recondition different makes and models of used cars.

The key to growing non-franchise service business is to encourage all dealership employees, from service advisors to cashiers, to tell customers about the store’s service-work inclusivity, he says. “If dealers can do that, they can expect to get 10% increase in traffic,” Reed says.   

David Griffith, owner of Griffith Motors in The Dalles, OR, added an express lube and oil-change shop to increase his non-franchise service business. The dealership represents Toyota/Scion and Honda brands.

The shop, flanked by the Toyota/Scion and Honda outlets, is about two years old. It is taking longer to catch on than Griffith had originally thought, he says.

His website prominently advertises that Griffy’s Quick Lube services all makes and models. Griffith even put in a repair stall big enough to accommodate recreational vehicles, and he advertises that prominently on the nearby highway. He figures the Quick Lube indirectly will help boost his new-car sales as well. 

“If someone likes their service experience on their Subaru, at some point they are going to need another car,” Griffith says.

He cites an auto-retailing adage: “Sales sell the first car, service sells the second.”