- Samuel Sa built a career in private equity before becoming a Meineke Car Care Center franchisee.
- In this op-ed, Sa explains the lessons he’s learned in his two years as a franchisee.
- His biggest take way was an initial under appreciation for the people side of the business.
By late 2017, I had spent nearly a decade in investment banking and private equity, grinding through hundreds of confidential information memorandums, Excel models, memos, and PowerPoint presentations.
The days were starting to blur together. I found myself wondering whether this was the life my collegiate self had imagined when I was young and idealistic about starting a career as an analyst. If I had looked at and worked with so many businesses, surely I knew enough to get more hands-on. I was itching for a change.
When the opportunity to become a Meineke franchisee came across my desk, I dropped everything and flew to the franchisor headquarters for a meeting. The business seemed simple enough and the KPIs all made sense.
Consumer demand for auto repair is simple: If something in your car breaks, you need it fixed so you can drive to work. Also, if a customer had a good experience, he or she is likely to come back even if our prices aren’t the lowest.
In addition, we can expand throughout the US, where there are over 150,000 automotive repair facilities. Last but not least, I’d be my own boss.
I took the plunge, raised some start-up capital, inked the contracts and became the proud owner of two Meineke Car Care Centers. I had analyzed the historical financials and saw a lot of opportunity to improve operations. The managers were enthusiastic. We communicated well. Sales were up almost immediately, and I was thrilled with where we were going.
I had a vision of buying centers at 3-4x EBITDA with 25% cash-on-cash returns. I’d use the Meineke playbook to improve operations and scale into a nationwide network of Meineke franchises, realizing economies of scale and multiple expansion at the same time. The back-of-the-envelope math looked fantastic.
I added my third and fourth locations over the next eight months and started sketching out a plan to add 5 centers a year. I explored growth financing options, reached out to brokers and other shops in the area to gauge their interest in selling. I even thought about expanding to other states.
Then, in the winter of 2018, we had one of the worst months in the company’s short history. Sales dropped off a cliff across the board. Our customer count, phone leads and other KPIs took a dramatic turn for the worse. I found myself increasingly spread too thin and struggled with how to spend my time most productively. All of a sudden, the thesis started to wobble.
Lesson 1: The people you hire matter more than any Excel assumption
In early 2019, I visited one of the shops and questioned the manager on his subpar sales numbers. “The customers just don’t want to get their cars fixed,” he repeated to me. “I’ve tried everything you taught me, and the Meineke way just doesn’t work in this market. The customers are different.”
“Look,” I said, “these processes and procedures work for every other Meineke in the country. Your customers are not that different. I need you to do better.” The manager listened intently and seemed to agree. I came away from the conversation optimistic of a turnaround.
Another week came and went, and absolutely nothing had changed. I found myself having the exact same conversation, only this time I was informed that the phones were not ringing. After another week, the poor sales were the result of bad weather. Every week was a different excuse.
![Samuel Sa]({"https://image.businessinsider.com/5e1748f9f4423136b76fa318":{"contentType":"image/png","aspectRatioW":4,"aspectRatioH":3}})
We were falling behind the plan fast, and it seemed that nothing we had discussed was actually being implemented. I had nightmares of us running out of money or our equity getting crushed. Ultimately, the manager had to be replaced, setting us back by months.
I realized that the only model input that truly matters is who you hire. The people are the foundation of the business.
Making the right hires who have the talent and willingness to execute is critical. By extension, the ability to accurately assess a prospective hire is critical. The wrong manager will tank a franchise quickly, taking that 25% free-cash-flow yield down to 0% faster than you can say “oil change”.
This experience drove me to spend more time thinking about how to hire and less time thinking about the assumptions in my model.
Lesson 2: Former Excel jockey, NFL coach today
After spending so much time hiring the right candidates, I quickly learned that I needed to devote just as much time making sure the staff is properly trained and has the right tools to be successful.
Most people desire to be productive and are simply looking for coaching on how to do a good job or make their numbers. If insufficient time is spent on training, even talented people will get frustrated and eventually leave, burning precious time and resources on hiring and training a replacement.
At my old PE firm, execution depended only on self-motivation. In my new role, I suddenly found myself relying on an entire team. Whether we sink or swim is now up to how everyone is motivated.
My job description changed dramatically to something similar to an NFL coach: Finding the right players that I could trust, understanding their strengths and weaknesses, constantly communicating our game plan, putting them in the right roles, and motivating and incentivizing them to perform.
As someone used to spending all of his time in an office or in front of a computer, I now spend all of my time driving to the different locations, talking to the staff, and observing their interactions with our customers. After all, how can I be an effective coach if I don’t watch “game tape”?
Lesson 3: Clear incentives drive performance
With four franchises under my supervision, I realized that no amount of yelling or diplomacy drives behavior better than incentives. That’s especially true in a sales-driven organization spread across different physical locations. To ensure self-motivation, I must structure compensation so that the team is aligned with the success of the business.
My first attempt at structuring incentives didn’t go so well. After crafting a multi-tiered incentive structure that perfectly aligned the interests of all parties, I presented this to the team with pride and excitement. I expected 100% buy-in from the staff.
However, after an hour of discussion, I sensed that no one really understood what I was talking about. On second thought, I realized I wouldn’t want to resort to a spreadsheet to calculate my weekly paycheck either.
Today we all focus on one number and one percentage based on gross profit. In addition, weekly KPI boards are sent around, with the metrics that exceeded target highlighted in green and the metrics below target highlighted in red. It’s a simple, yet powerful way to update the team on where the business stands.
What you need to know
After two years in this business, I’ve realized that I had under-appreciated the people side of the equation tremendously.
Sure, analytics and market research are important when evaluating an investment opportunity. But executing on that investment opportunity requires an entirely different skillset that revolves around the hiring, training and managing of people.
Thinking back on my investment experience, my biggest realization is how little I truly understood those businesses and how much we relied on our operating partners to make our spreadsheets a reality.
Samuel Sa is the founder of High Road Auto Group, a privately backed business focused on consolidating and building franchised Meineke Car Care Centers in the US. Previously, he helped found and build Grand Mere Capital, a new private investment business focused on the restaurant franchise space. Before Grand Mere, he was a private equity investor at Fenway Partners, a middle market private equity fund with over $1.5 billion in assets under management, and an investment banker at Morgan Stanley.
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