By Jeff Sanford
Toronto, Ontario — August 31, 2016 — As the annual CARSTAR Canada conference concluded in Charlottetown, executives involved in the blockbuster 2015 deal noted strong improvement in the business since acquisition by Driven Brands. An overarching goal of the acquisition, and business moves implemented thereafter, was to create the continent’s biggest collision repair organization.
It was in October of last year that North Carolina-based company Driven Brands announced the purchase of Kansas-based CARSTAR Auto Body Repair Experts. Two months later, Jose R. Costa, Group President of the Paint and Collision Division at Driven Brands, announced a deal for the standalone Canadian CARSTAR operation.
Since then executives at the combined companies have been hard at work merging the acquisitions into the much larger Driven Brands family of automotive brands.
Today, CARSTAR is part of a much larger organization as Driven Brands is home to numerous automotive franchises throughout North America, including Maaco and Meineke Car Car Centers. Combined, the businesses generate nearly $2 billion in sales annually. As part of this larger ecosystem, CARSTAR franchisees can expect to reap strong, consistent benefits.
One of the first moves post-acquisition was the appointment of Michael Macaluso, the President of CARSTAR Canada, to head of CARSTAR North America.
“We’re coming up to almost a year, believe it or not,” said Costa in an interview with Collision Repair magazine. “Under Michael’s leadership it has been an amazing ride.”
The combined CARSTAR business has some 450 locations and $830 million in annual sales. That total puts CARSTAR in front of Boyd as the largest combined operator of collision repair centres on the continent. The challenge now is wringing out some economic efficiencies from the merger.
The point of acquisition deals like this is to reap the advantages that follow-on the merger of two smaller companies into a larger whole. That process is well underway. Costa notes that Macaluso and the senior staff at CARSTAR’s US arm immediately saw eye-to-eye.
“Michael is spending about fifty percent of his time in each company. As he manages a bigger team, he’s having a better time,” said Costa.
There have already been some cost savings as a result of the acquisitions, most notably dollars saved in the cost structure around leases.
Another early and noticeable move so far has been to combine all of the Canadian head office functions of other Driven Brands companies, including Pro Oil Change and Maaco into the Hamilton building that houses the Canadian CARSTAR head office. The Hamilton location is now known as the Driven Brands Canada Franchise Support Centre.
“We’ve saved some money there. We’ve seen a huge benefit in having everyone under one roof,” said Macaluso during a call with Collision Repair magazine. “That’s going to be great for Hamilton.”
Another area where the new company will save money is advertising. Many Driven Brands businesses have long been a major buyers of ad time in the US. By leveraging the same partner, to purchase ad time in the US and Canada, volume discounts apply – a major benefit.
“We use the same agency as Maaco buyers in the US and Canada. I’ve personally noticed greater efficiency in six weeks,” said Macaluso.
The CARSTAR Operations Team can also draw on resources from across the wider Driven Brands family.
“Engaging the synergies of the Driven Brands organization is going to allow us to do great things,” said Macaluso. He also mentioned the Digital Marketing Team at Driven Brands that has established award-winning presence for other Driven Brands companies, and built industry-leading programs. That team is currently working to revamp CARSTAR’s online presence in the months to come.
Macaluso also noted that there are established teams in Driven Brands that can help with customer support, franchising, real estate and acquisitions.
“On the human capital side we’ve augmented our team with some high performers from Driven Brands,” said Macaluso. “That’s going to be important for the development of our US fleet program. Key leaders who came up from some of the other companies and are in Driven Brands are now on the CARSTAR team. That’s bringing some new perspective to our organization. It gives us an ‘in’ with a whole new team.”
Macaluso notes that another project in the year ahead will be to bring together the two different back-end systems at CARSTAR US and CARSTAR Canada. A major project will bring the Learning Edge platform together with the Canadian CQS platform.
“We’re bringing those programs together. Each team will become more robust as a result,” Macaulso said.
But even as executives work to bring the two organizations closer together, Macaluso is also careful to note that the two companies will maintain a certain amount of independence.
“We’re not consolidating functions or firing people. The companies are being run as separate entities,” says Macaluso. “Coming together under one entity we’ll have an open transportation, collaborative relationship there … the key focus is enhancing the relationship to insurance partners. But right now we find it’s critical for Canada to have Canadian support. That won’t change.”
Matt Bell, Vice President of Human Resources for CARSTAR Canada, notes that Driven Brands has also recognized the distinctness of the Quebec operations. “Their approach is to recognize Quebec as its own company. Leadership has trusted us and empowered us,” he said.
Bell says that many in the CARSTAR organization are beginning to take advantage of the new possibilities the change has created.
“It’s been great. There is a certain amount of autonomy for the Canadian operations, but there are also opportunities to move people among the various companies under the Driven Brands umbrella. There is change and movement happening,” said Bell.
Macaluso voiced a similar sentiment. “It’s been energizing and rewarding. With change comes challenge and opportunity … and we’re focusing on the opportunities. We’ve embraced this journey and we’re still on it,” he said.
For his part, Costa is impressed with the progress made so far. “We just had the US convention in New Orleans. The feedback from the franchisees and suppliers was very positive,” he says. Driven Brands brought in Larry Holt, founder of the entire CARSTAR organization, for the meeting who was heartened to see the development. “It was a good moment. I was very proud to see the whole team onstage. It felt and sounded like a team that has been together for a much longer than they have been,” said Costa. “If there’s a theme now, it’s one brand, one company, one future. All of these separate pieces can work as one.”
The Canadian side of the CARSTAR organization began its annual conference in Charlottetown, PEI, on August 24. For more on this, please see “CARSTAR unites as ”1′ at 21st annual conference.”
“We try to think of our business in three to five year terms. CARSTAR is a little over $830 million in sales. We’re shy of one billion, but we want the business to be close to $2 billion in three to five years and double the unit count,” Costa said. “In Canada the company just passed 250 stores. We’ll close the year north of 260. And we’ll keep that pace driving through for 2017. In terms of our plans for the acquisition we’re on track if not ahead of plan.”
For more information, please visit carstar.ca.
