MSO Profile: Service King

March 31, 2014
Service King keeps an eye on quality while more than doubling its size from 47 locations to 111 since 2012.

When it comes to rapid growth, it would be difficult to top the last 18 months at Service King. Since the end of 2012, the company has grown from 47 locations to 111 locations, and now generates more than $475 million in revenue.

Founded by Dallas shop owner Eddie Lennox in 1976, Service King now has locations in Arizona, Arkansas, Mississippi, Nevada, Tennessee, Texas and Oklahoma. The Richardson, Texas-based company's recent growth spurt began after it was acquired by the Carlyle Group in 2012.

Jeff McFadden

"We're very encouraged by 2014," says company president Jeff McFadden. "These are exciting times and its fun to be part of this team as the company grows. We want to build a great company."

McFadden was named president after the close of the Carlyle deal. He and CEO Chris Abraham both came up through the ranks of the company. Abraham started as a service advisor in 1995, and later led Service King's expansion from the Dallas/Fort Worth region into Houston. McFadden started as a service advisor with the company in 1992.

Both men say their hands-on experience in the shops has helped guide the company's rapid expansion. In 2013, Service King acquired AutoBody America (ABA), which operated 20 locations in Tennessee, Mississippi, and Arkansas. Acquisitions of Greulich's Automotive Services in Arizona, Tri County Collision Centers in Texas, Carco Collision and Custom Centers in Texas, and Accurate Autobody in Tennessee followed.

At the end of 2013, the company expanded into Oklahoma with the acquisition of Body Works Collision Centers' three locations in Oklahoma City. In just 12 months, the company went from 63 locations to more than 100 locations, including both acquisitions and new shops.

The company added 1,200 employees and dozens of locations over the course of a year, along with hundreds of millions in new revenue. With that growth has come a company-wide restructuring as Service King transitions from a regional MSO to a multi-state operation. "That large-scale growth has us re-evaluating how we do things, how we're organized, and what our leadership positions look like," Abraham says. "What do we need to support that growth, and what can we centralize? It's a moving target right now when we talk about our structure, because the growth has been so fast."

Focus on core values
Adding new markets in Texas helped the company gain the confidence and experience necessary to expand into new markets. Abraham says Service King has targeted smaller MSOs that share the company's core values.

Chris Abraham

"If we identify a good operators and good platforms, no matter where the region is, we can be successful," Abraham says. "We're looking for good locations, exposure to major arteries of the highway system, and good leadership in place that wants to stay on grow with us."

The leadership element is key, he adds, noting that while some shop owners are looking to exit the business, many owners and managers stay on and advance within Service King. "We've got talented and tenured leaders in the Houston market, for example, that are now in the same position I was four years ago," Abraham says. "They want to expand their horizons and grow the company."

"We were a family organization for so many years, and our executive team has a lot of tenure, so there are synergies that come with that," McFadden adds. "The partnership with Carlyle puts us in a position where we have the history and culture in place that now is powered from a financial standpoint, which allows us to grow to some high levels, and provide opportunities for those teammates to better themselves."

Service King has also grown via a mix of acquisitions and new locations. In Houston, the company began with a three-shop acquisition and then opened eight brownfield locations.

Any potential acquisition has to show both strong performance, as well as some potential for growth. "What does their business look like , what is their revenue, and what can we add to that?" Abraham says. "Can we ramp up their margins? Is there anything we can learn from them?"

And as Service King has grown, the company's approach to acquisitions has changed. The company now has a dedicated mergers and acquisitions department that analyzes and evaluates potential opportunities. "A few years ago, the management team would just decide that an acquisition was a good idea based on our own evaluations," Abraham says. "There's some actual science that goes into those decisions now."

Dedicated integration team
Integrating new shops into the company is long-term process that McFadden says begins as soon as an agreement is reached with the owner. Service King employees immediately begin working closely with the shops on the transition. "That gives us a chance to get to know them," McFadden says. "Oklahoma City is a good example. Our director of operations was there for over a month, so when our integration team got involved on the week of the close, it was seamless because we had a relationship already with the leadership there."

The integration team works with the new shops across all departments to align operations and begin rebranding. "We have a robust acquisition  and integration team that is made up of service advisors, parts managers, office coordinators, and other experts," McFadden says. "We also have Service King University, which provides ongoing training for all of our team members."

AccuCenter is Service King's proprietary shop management solution, which also generates performance data and KPI measurements for the company. Every shop is brought online with AccuCenter, which helps ensure consistent processes and data reporting. "We can also integrate AccuCenter with other platforms from our insurance partners or rental car partners to make sure we have our eye on the gauge of key metrics, and we can perform at the level we need to," Abraham says.

The shops report to regional managers, although McFadden says the management model has been in flux during the expansion as the company determines the best approach to leverage both centralized operations and the capabilities of local management.

"We spend a great deal of time on our organizational chart, making sure our regional support centers are designed in a way that the market leader there has full autonomy to get whatever data or whatever interaction they need on a daily basis through HR, training, payroll, benefits, etc.," McFadden says. "We currently have a centralized call center, but as we've now grown into additional states, we have the opportunity to possibly have multiple call centers, so that every market leader in markets that are large enough can have their own call center. The departments could work as one unit under that model."

The bulk of the current management team worked their up from the shop level, which both McFadden and Abraham emphasize has aided with the current integration and expansion efforts. "We understand the application," McFadden says. "From Chris and I, to our vice presidents and regional managers, most of the team has been a service advisor or has run a location within Service King. It adds value when you have that grass-roots knowledge."

A seat at the table
By far, Abraham says one of the biggest benefits of the company's rapid growth has been the increased leverage Service King has with its partners. "We have a seat at the table at the national level with some of the larger insurance carriers, which is beneficial," Abraham says. "Our scale has also provided us with some purchasing power from a vendor standpoint."

The expansion has also created opportunities for employees that wouldn't necessarily be there in a smaller organization. "Its' great to see those opportunities that our growth provides for existing team members," Abraham says. "We can provide an opportunity for a management team at a shop that wants to do bigger and better things."

On the insurance side, being able to meet carriers' KPIs on a large scale in multiple markets has created opportunities for the company as well. Service King's Customized Management Solutions (CMS), an insurance-targeted offering in which Service King manages insurance claims and provides one-on-one support for select insurance accounts, has been critical in strengthening those relationships. "That's our self management arm that quarterbacks all the KPIs and data, and makes sure it's all pushed down to the market level," McFadden says.

Market leaders in each region work with regional insurance carriers as well as national brands. The carriers have also helped Service King identify new markets for expansion. "There are some large-scale MSO programs that have really surfaced over the last few years," McFadden says. "As we've grown, we had to adapt and think about each carrier's approach to customer service and KPIs."

"Our size and scale have opened doors to us at the national level," Abraham says. "Performance in the local markets still drives those relationships. If you aren't meeting the performance goals, then the national relationships don't mean anything."

Gregg Murry

Gregg Murry, vice president of advertising and facilities development, adds that having continuity in how the company interacts with both customers and carriers is key to managing a growing brand. "We engage the insurance companies as we engage the customers," Murry says.

Consolidation continues
Maintaining that consistency in both customer and insurance carrier interactions, as well as in shop operations, are one of the company's biggest challenges, along with effectively leveraging the scale of the company as it grows.

"Culture is another one," Abraham says. "We have to blend the cultures of the new teammates together with ours, and be respectful of the culture of the shop already in place. We're looking for companies with like-minded values. We're trying to blend he best practices of all of our team members, because we don't know everything. We're learning as we go. We're not dictating our processes to a new shop, because they may have better ideas that we can adopt."

The other challenges the company faces are systemic to the industry. Abraham says he doesn't see much improvement ahead in claims volume, repair costs or total loss levels. "We are in a flat industry, and I do see a continued wave of consolidation," Abraham says. "But private equity has entered the arena, and although we're a flat industry it's encouraging to see financial investors recognize the opportunity here."

That continued consolidation will be good for Service King (and other MSOs), since there will be continued opportunities for expansion. "There are a lot of owners out there looking for an opportunity to exit the industry, but they want a good steward for their businesses," Abraham says. "We hope to be able to continue to provide those opportunities for people that want to sell their businesses."

And while the company plans to continue expanding in 2014, Abraham stresses that he is focused on quality control across the brand rather than on growth for growth's sake. "Success isn't going to be determined by the number of stores we have or states we're in," Abraham says. "Success is determined by the performance for our team and the customer. If we meet the needs of our internal team and our customers, then the growth will take care of itself."

"It's about people," Murry adds. "As we look for opportunities for growth, we're looking for like-minded people to join the team. We care about each other and we care about our customers."

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