The Kwik Fix franchise today is a leading mobile automotive paint and plastic repair franchise, and the only business of its kind to win the Franchise Council of Australia’s Franchise System of the Year award. There are currently 57 franchisees throughout Australia, with system-wide turnover approaching $6 million per annum.
The business is widely recognised in both the auto trade and franchise sector as a success story that demonstrates the benefits of franchising to both franchisees and franchisor. Although it is now fielding strong expressions of interest from prospective master franchisees in several countries in both hemispheres, it has not always been like this.
Indeed, at the start of 2003 Kwik Fix was in a very different situation. Profits were down 75 percent and franchise growth had gone backwards because the business was swept up in a prolonged legal battle with the Australian Competition and Consumer Commission (ACCC).
Background
Kwik Fix started in 1993 when husband and wife team David and Kerry Bruckshaw embarked on providing mobile touch-up repairs to motor vehicle dealerships in Brisbane. The concept and the auto industry were not new to them as the couple had operated a successful smash repair business in Redcliffe for a number of years, before selling and working for a short while in Britain.
On returning to Australia they identified a gap in the market for mobile touch-ups – those small repairs that disfigure a car, but which are not large enough to justify the cost of taking the vehicle to a smash repairer. The couple built their business from scratch, and two years later began franchising.
The early years were characterised by strong growth and camaraderie throughout the group. By 2001 the business had almost 50 franchisees and was poised for further growth – then disaster struck, with a disgruntled franchisee making allegations about Kwik Fix to the consumer watchdog.
All plans for expansion were suddenly overshadowed by the development – something that would fully occupy the owners of the business for the next 18 months.
The ACCC and Kwik Fix
With almost all business development and growth grinding to a halt, the Bruckshaws became increasingly stressed and disillusioned with the business of franchising.
By the end of 2002 the stress was about to cost the couple their marriage. It was then that they decided to hire a CEO to manage the business. At the same time, their public relations and marketing consultant, Jason Gehrke, was winding up an eight-year contract as the Franchise Council of Australia’s Queensland Chapter secretary.
A new face joins the team
David and Kerry Bruckshaw made the decision to bring in an outsider to run the business and, significantly, an outsider who did not come from an auto or paint trade background. They hired Gehrke for his marketing, franchising and administrative skills, not his ability to paint cars.
“I am not a technical person and our franchisees know that,” says Gehrke. “There is a wealth of technical knowledge in our business, and bit by bit I am picking it up, but the field support staff and franchisees themselves are the acknowledged experts.”
Gehrke quickly set about assessing the position of the business, and with free reign to implement change determined new priorities aimed at taking the business forward.
Reviewing the business model
The next step was to review the business model. Kwik Fix commenced franchising using territory-based franchise agreements, and had changed to customer-based agreements after a couple of years. While the rationale for the change was sound at the time, the long-term effect did not adequately provide for the interests of either the franchisor or franchisees.
In addition, the franchise agreement had passed through three law firms in the previous three years, with each adding their own minor alterations, but without a comprehensive review to ensure that the agreement had kept pace with business development.
In early 2003, the franchise agreement was completely redrafted, and along with the Kwik Fix business model, returned to a territory-based arrangement. New franchises were granted under this agreement, and renewing franchises changed over to the agreement as they came due, thereby minimising unnecessary costs or concerns among existing operators.
Easy does it
Coming from a non-technical background and sensitive to how this may have been perceived by the network, Gehrke took an ‘easy does it’ approach in implementing change, consulting with as many franchisees as possible for input and feedback on improvements to the system.
Kwik Fix’s Franchise Advisory Council (FAC) was to play a key role in this regard, but one problem existed – the FAC had met only twice in the previous year, and was no longer considered relevant or representative by either the franchisor or franchisees.
With the consent of the existing FAC chairman, a new charter including representation and meeting guidelines was developed, elections were held and a new, dynamic FAC was formed with a clear sense of purpose and direction. From this point onwards, the wider platform of reformation in the business was to commence.
National office efficiencies
The Kwik Fix national office had swelled to 10 staff, including the owners and new CEO, in just a few months. It operated a company-owned van with a ‘roving territory’ brief, but which was a huge drain on management resources and consistently failed to deliver anticipated returns. Attempts were initially made to improve the performance of the operation, and then after six months, it was closed down.
Substantial efficiencies were gained through business process re-engineering among administrative staff. All personnel were required to have job descriptions, initially writing them themselves, and then having these reviewed, and where necessary, key performance indicators added by the CEO.
Administrative procedures were streamlined by the implementation of improved IT systems, which resulted in faster and more accurate reporting. Customised software was developed for the business that resulted in savings of around 10 staff hours per week on one task alone. Overall, efficiency gains allowed the administrative team to expand its range of duties with fewer staff in just under a year.
By reorganising the way in which the technical support staff operated, yet more efficiency was gained. A training and field visit calendar was planned for the year ahead, maximising the effectiveness of contact time with new and existing franchisees. A complete overhaul of the approach and methodology of field visits resulted in significant improvements in franchisees’ technical proficiency, with a corresponding increase in franchisee morale.
By doing things differently, and with less people (due to natural attrition), Kwik Fix achieved a 20 percent increase in gross sales, a 50 percent increase in net profit, and a nine percent increase in franchised outlets in less than 18 months.
Kwik Fix settles with the ACCC
Kwik Fix’s troubles with the ACCC had been under way for 18 months prior to the appointment of a CEO. While specifically excluded from his service contract, Gehrke nonetheless saw that the issue had to be resolved sooner rather than later if Kwik Fix was to move forward. Legal overheads and redirection of company resources was costing the franchise dearly.
By March 2003, after two frequently heated face-to-face meetings with the ACCC involving a team of people from either side, a negotiated settlement was reached in principle. The finer details of the written settlement took another six months to thrash out.
However, the outcome did not represent a victory for either party. Kwik Fix consented to undertake a Trade Practices Compliance program, which ordinarily would have cost up to another $20,000 in legal fees to conduct. Instead, it was produced in-house by the CEO, and achieved the ACCC’s final tick of approval in early 2004. It was probably the first time that a service franchise system in Australia had ever written and implemented its own Trade Practices Compliance program in-house.
New growth begins
With the ACCC action effectively resolved in September 2003, Kwik Fix finally moved back into growth mode after almost two years of battening down the hatches. During this time, more franchisees had left the system than had joined, and it was time to reverse the decline.
A new, two-pronged marketing campaign was launched to both promote Kwik Fix’s range of automotive paint and plastic repair services, as well as franchise opportunities. New sales aids directly lifted franchisee sales and customer awareness of the full range of services, while a redesigned website was launched. Kwik Fix advertised nationally in Franchising and other publications, and participated in franchise exhibitions in Brisbane and Melbourne.
As a result of this and other activity, Kwik Fix has almost doubled the number of franchisees in Victoria, opened new markets in New South Wales, and is filling valuable gaps in Queensland. Still, there are many more areas available, particularly in Sydney, Melbourne and Adelaide.
The importance of being online
Its website is now a very important source of jobs for Kwik Fix franchisees, as well as the number-one source of inquiry for Kwik Fix franchises. Many franchisees report booking jobs directly from customers who have seen the website, while more than 60 percent of qualified franchisee leads now also derive from the site.
However this has not always been the case. The website, along with many other aspects of the Kwik Fix system, was reviewed and found to be in urgent need of overhaul. The old version only talked to potential franchisees, not customers, and lacked credibility. It was developed at the height of the dotcom boom when it was considered essential to be online, even if strategy and content were secondary considerations.
A graphic artist designed a new structural ‘look and feel’ for the site, but rather than outsource responsibility for the communication device to an external webmaster, Kwik Fix manages and updates all its own content in-house. This is done by Gehrke himself, and is a core management responsibility.
The website has become a critical part of the system’s marketing communications, is highly regarded by existing franchisees and provides comprehensive information to prospective customers and franchisees.
Increasing the price of the franchise
At a time when the system needed to kick-start growth, and in a service sector where price sensitivity is generally greater than in retail franchising, Kwik Fix raised the cost of its franchises from $43,945 to $49,950. However, according to Gehrke the move was not intended to provide any direct benefit to the franchisor. Rather, the cost increase has been reinvested in additional equipment and services in a franchisee’s opening package, thereby helping franchisees to more effectively hit the ground running and contributing to greater differentiation from competitors in the marketplace.
The strategy appears to be working, with franchisees that have joined the system at the higher price level in most instances more rapidly achieving developmental milestones. The benefit for Kwik Fix is higher royalties, sooner.
Industry involvement
A key platform of the revitalised system involved greater participation in industry associations so as to enhance learning opportunities for management and staff, and maintain better contact with customer and stakeholder groups.
CEO Gehrke continues to be heavily involved in the Franchise Council of Australia as Queensland vice president, and also sits on the ACCC Franchise Consultative Panel, as well as the Australian Bankers Association’s small business consultative forum. Kwik Fix has joined the Motor Trades Association of Queensland, and participated in the Australian Automotive Dealers Association and Motor Body Repairer’s Association conferences.
According to Gehrke, being involved in these and other industry associations allows Kwik Fix to continue to expand its knowledge base and benchmark against practitioners throughout Australia and overseas.
Communication
Gehrke emphasises that none of the improvements or changes in the Kwik Fix business model or operations would have been possible without continual two-way communication with all stakeholders involved. A watershed was the introduction of a weekly newsletter written not by an office junior, but the CEO.
The Kwik Fix franchise conference was also overhauled and turned into a forum where franchisees could learn as much from one another as from the franchisor. Indeed, the new format has been unilaterally rated by all franchisees as the best and most informative conference they have attended. Further, the relaunched Kwik Fix Franchise Advisory Council has been a critical sounding board for developments in the business. Improved reporting and administrative systems have facilitated communication among national office staff, and communication levels within the franchise are higher across the board.
Conclusion
“If any one thing can be identified for taking Kwik Fix from a struggling system to an Australian Franchise System of the Year winner, it has been a commitment to improve,” says Gehrke. “Without this commitment, nothing would have changed and the business would continue to struggle, or even risk being overwhelmed. Nothing changes unless something changes and in Kwik Fix the mantra ‘perfection is a journey, not a destination’ has become an ethos critical to the franchise’s turnaround.
“Things can improve if you are prepared to make changes, follow new directions, and above all, not be afraid to innovate.”
This made the difference for Kwik Fix. It almost certainly can for other systems too.
8-May-2006