Developer Jim Henkel says his Honest-1 Auto Care centers are clean, customer-centric and women-friendly.
Jim Henkel, the franchise developer for Honest-1 Auto Care in Minnesota, opened the state’s first location in March 2008. He says the company could gain 40 locations in the state in the next 10 years. On Friday, he stood in the garage of the new Honest-1 Auto Care shop in Minneapolis’ Uptown neighborhood.
For Jim Henkel, switching gears from running an independent auto repair shop to selling franchises for Arizona-based Honest-1 Auto Care has gone smoothly.
After eight years at his own auto body and repair business, Henkel opened the state's first Honest-1 location in March 2008 in Roseville. It now sets the pace for the chain, quickly having grown into the leader in volume and profitability among Honest-1's 24 operating units.
Thanks largely to Henkel's efforts, Honest-1 has five locations open now and seven more in the works, all in the Twin Cities. Henkel, who is a Minnesota area developer in charge of selling Honest-1 franchises in the state, projects that the company could have 40 Minnesota locations 10 years from now, possibly in such cities as St. Cloud, Duluth and Rochester.
Each store has eight to 10 full-time employees, Henkel said. In 2010, Honest-1 locations open at least 12 months averaged more than $645,000 in revenue, up from $548,000 in 2007, according to the company's website. The company declined to specify systemwide revenue.
Such growth, coming despite the recession, is a big reason that Henkel chose to go into auto repair after working in retail. People are likely to keep their cars longer, and do major repairs, in a down economy even if they put off routine maintenance. When the economy is better, people tend to drive newer cars and have them maintained regularly.
"In the end it all works out to being pretty even for us," Henkel said.
The transition to the franchise world has been easy, Henkel said, in part because Honest-1 operates by the same principles he employed when he ran his own repair company in New Richmond, Wis., about an hour east of Minneapolis.
"It was like someone stole my idea," Henkel said with a laugh. "Their operating model is very similar to what I had tried to incorporate into my little business.''
Just as he did, Henkel said, Honest-1 aims to differentiate itself by offering repair centers that are clean, environmentally friendly, customer-centric and do business with integrity. The goal is to appeal to women, who account for close to two-thirds of auto service customers, according to industry research cited by the company.
To that end, the company offers amenities including upscale waiting areas with leather chairs, complementary beverages and separate work and play areas. Technicians communicate in non-technical terms, Henkel said, to avoid surprises and assist customers in making informed decisions.
On the environmental side, efforts focus on recycling automotive materials, preventing pollution, conserving resources and offering environmentally friendly products and services.
Honest-1's rapid growth here has come in part through Henkel's success in finding franchisees, typically people who have jobs or companies in something other than the auto industry, and are looking for additional business opportunities. He attributed that to following the company's advice to network with business and franchise brokers, developers, financial advisers, lawyers, accountants and others likely to provide referrals.
New franchisee Randy Rada, who is looking for a site for an Honest-1 location in New Hope, said the detailed procedures management has make it largely a turnkey operation. Rada, who was looking for a business opportunity because his wife now runs the dental lab he launched in 1995, said he also likes the business-to-business potential of serving fleet cars and other vehicles from nearby companies.
The franchise fee for the first Honest-1 franchise is $30,000, with a royalty of 6 percent of gross sales paid to the company plus 4 percent in national and local advertising fees, according to the company. The cost of opening a location, including the franchise fee, ranges from $174,000 to $292,000, depending on size.
Regular Honest-1 customer Lynn Stub, who said she has taken her 1992 Dodge Dynasty to the Roseville location since it opened, said she has found manager Pat Kelly and employees there to be trustworthy, helping her avoid expensive repairs recommended elsewhere. Her husband Ted, who had had an auto repair shop in Roseville, had checked out Honest-1 before he passed away.
"He said, 'Don't you ever go to anybody else," Stub said. "[Pat] tells you the truth. He doesn't do anything that shouldn't be done."
Matt Senger, general manager of Factory Motor Parts in Roseville, said Henkel's location has worked on his shop's four vehicles over the past three years.
"They're pricing seems to be pretty fair," said Senger, whose shop sells parts to Honest-1 in Roseville. "They'll let me know about problems they can see in the future and it's up to me at that point whether to take care of it then. I don't feel pressured by them."
The expert says: Mark Spriggs, associate professor and chairman of the entrepreneurship department at the University of St. Thomas' Opus College of Business, said franchises can offer valuable help in launching a new business, particularly in a capital-intensive ones such as auto repair where brand and reputation matter to consumers.
"In a service business like this, where most consumers don't really know what's wrong with their car and whether it's getting fixed right, you're looking for some assurance of quality, of somebody to go back and complain to if it doesn't get fixed right. If you're just getting started and nobody knows who you are, the franchise brand gives you a reputation as well as a perception that there's quality control."
Roughly 80 percent of franchises survive five years in business while only 20 percent of independent businesses make it that long, Spriggs said.
"The whole value in the franchise is you have somebody there [who] has a successful model to run the business," Spriggs said. "You, as the franchisee, get the benefit of what they already know.''