There is hardly a corner of commerce and industry that has not been affected by the downturn in the economy, some much more severely than others. One industry that has been in the spotlight a great deal of late is automobile manufacturing. From the heads of the three largest U.S. automakers arriving, ill-advisedly on private jets, in Washington to seek bail-out money from the government to the ongoing and radical restructuring of the industry itself, it has been a saga dominated by bad news.

But as the saying goes, every cloud has a silver lining, and one segment of the franchise community may just turn out to be the beneficiary of this one. With millions of car owners hanging onto their automobiles for longer periods of time, franchises that sell aftermarket automotive products and services seem uniquely well-positioned to benefit from the latest trends in the auto industry.

That feeling of optimism for the aftermarket industry was palpable at a recent meeting of the Automotive Aftermarket Industry Association (AAIA). As Kathleen Schmatz, AAIA president and CEO, stated at the event, "We’re on the verge of the greatest aftermarket boom we’ve ever had."

Participating on a panel of industry experts at the event, David Portalatin, director of industry analysis at The NPD Group, Inc., stressed that consumers’ dependence on their automobiles is a key driver in how they spend their dollars. He also pointed out that consumer driving behavior influences a significant portion of total consumer buying power.

In a recently released NPD report, Portalatin stated that the automotive aftermarket is a diverse industry and not at all homogenous, a situation he described as "good news for the aftermarket."

While people tend to talk about things like the economy as if every single community and neighborhood and every single automotive service bay and auto parts store had exactly the same characteristics, the truth is that there is a lot of diversity out there, he noted. "There are many areas that are doing quite well in the current economy, just as there are many individual businesses that are doing quite well," Portalatin said.

The NPD analyst also cited a change in overall vehicle makeup, with aging vehicles representing a larger share of the total. Those older vehicles are more likely to need maintenance and repair work, providing a lift for businesses in the automotive aftermarket industry.

In addition, research has shown that owners of older vehicles are less likely to take their vehicles to new car dealerships for maintenance and repairs, further strengthening the potential for aftermarket automotive franchises. As those trends continue, the picture should only brighten for aftermarket automotive franchises.

However, two important factors driving demand for automotive parts and services are the number of vehicles on the road and how many miles those vehicles are driven. Since little growth is expected in either of those areas over the near term, they could represent limiting factors on how rapidly automotive aftermarket sales grow.

The bottom line, though, is that the idea of making their existing vehicles operate more efficiently and being able to keep them on the road longer is very appealing to consumers in a difficult economy. To the extent that this consumer mindset exists, Portalatin said, there is a great opportunity for companies that can fill that need. He described it as "one of the key areas of opportunity right now."

At the AAIA meeting, Portalatin cited the example of Starbucks’ penetration into a mature coffee market and told attendees that the opportunity to grow market share in the automotive aftermarket is out there. "You can grow your market by reinventing your products, bringing unique offerings to consumers and reinventing the purchasing experience," he said.

Portalatin also stressed that it is important for those participating in the automotive aftermarket to advertise their message continually, to differentiate their products and to deliver a true value proposition. "Engage with customers and educate them about why preventive maintenance is money well spent in extending the performance and life of their vehicles," he said.

Frank Ordonez, president of Delphi Product and Service Solutions, told the AAIA meeting that the future of the automotive aftermarket is "as robust as it can be." To succeed, he suggested, aftermarket industry participants must adapt, change and move forward with it.

"Technological advances and new content in today’s and tomorrow’s vehicles, particularly in the areas of being safe, green and connected, represent real service opportunities for techs who are properly trained and shops that are well equipped to maintain them," Ordonez said.

Advancements such as adaptive cruise control, pre-crash sensing, lane departure warning, hybrids, electric power steering, safety and security enhancements and vehicle entertainment systems all represent great revenue streams for automotive businesses that ramp up to seize the service opportunities, he added.

"The technology evolution that we’re all witnessing is just the beginning," Ordonez predicted. "Today’s hybrid is the Model T of its era. There will be continued enhancements to hybrids, including size, power and packaging improvements in the next two years."

One important advantage owners of franchised automotive shops enjoy over car dealerships is price, according to a first-of-its-kind study just released by the AAIA. According to that study, vehicle repairs cost an average of 34% more at new car dealerships than at independent repair shops, resulting in $11.7 billion in excess costs annually to consumers.

The study reveals dramatic differences in the costs of parts and labor between domestic and import vehicle nameplates and from city to city. Foreign nameplate repairs performed at dealers averaged 36.8% more than at independent repair shops, while repairs performed on domestic nameplates averaged 31.5% more at dealerships than at independents. Consumers in Los Angeles pay as much as 46.8% more at dealerships than at independent shops for repairs.

The automotive industry hosts more individual franchise companies than any other segment of franchising except food. At the start of the current decade, automotive franchises were generating more than $13 billion in annual sales through almost 29,000 establishments, according to Economic Impact of Franchised Businesses, a 2004 study prepared by the National Economic Consulting Practice of PricewaterhouseCoopers for the International Franchise Association Educational Foundation.

Franchisor-owned outlets account for a small portion of that business, but more than 24,500 of those establishments are franchiseeowned and generated more than $11 billion in sales. Since the 2004 study was based on 2001 data, those numbers are surely much higher today, even in light of the recent economic downturn and reductions in the number of miles driven and new cars on the road.

Automotive franchises come in all shapes and sizes. They include everything from major transmission repairs and engine rebuilding to periodic maintenance and servicing to body work and appearance enhancement. Initial franchise fees range from less than $5,000 to more than $100,000, with startup capital requirements spanning a similar spread.

The average fee for an automotive products and services franchise is currently about $25,000, and first-time franchisees typically are looking at a total initial investment in the low $200,000 range. Both figures are subject to the type of franchise being considered, market location and other factors.

As large as it is, the franchise segment of the automotive products and services sector represents just a fraction of the overall industry. According to aMintel report on the U.S. automotive aftermarket, 2007 sales surpassed $202 billion in 2007 (the last year for which figures are available), up 3.5% from the previous year.

The report singles out specialty equipment accessories as being one of the fastest-growing segments of the aftermarket, posting a five-year compound annual growth rate of 4.6% for the period 2002-2007.

Appearance accessories account for about 56% of sales in the specialty equipment accessories category, with another 28% of sales coming from handling and performance accessories. Mintel estimates that total U.S. retail sales of specialty equipment accessories increased from $12.2 billion in 2002 to $15.3 billion in 2007.

Other significant growth sectors include tire and brake segments, which, according to the report, “benefit from premium positioning and marketing.” Sales of security and detection products also showed high growth, with a five-year compound annual growth rate of 7.2%.

In-car entertainment (ICE), meanwhile, has lost some ground since 2002, as consumers have moved away from CD-based music and toward MP3 downloads and portable players. Total U.S. sales of in-car entertainment dropped from $5.1 billion in 2002 to $3.6 billion in 2007.

However, since 2005, the ICE segment has been finding new sources of growth in the form of mobile video and Bluetooth headsets for in-car cell phone usage. Sales of the former represent about 20% of the segment, according to Mintel’s research.

GPS navigation systems were not included in Mintel’s ICE statistics, but growth has been explosive in that segment of late. At the wholesale level, sales of GPS systems grew from $349 million in 2005 to $2.4 billion in 2007. The Consumer Electronics Association projects that sales of GPS devices will more than double between now and the end of 2011.

Research conducted by the Specialty Equipment Market Association (SEMA) confirms the trends outlined in the Mintel report. According to SEMA’s market research, consumers have been purchasing more specialty equipment accessories than ever before.

The most current SEMA data, which looks specifically at specialty equipment sales, shows that the specialty accessories and appearance products market grew to almost $22 billion in 2007 from $15.5 billion in 2002.

Within the overall category, sales of video, entertainment and GPS systems increased by 178% over the past five years, reaching more than $1.5 billion in 2008. Specialty audio equipment has also risen substantially, up 95% for the period 2002-2007 and currently totaling about $5 billion a year.

"Taken together, specialty mobile electronics have more than doubled in the past five years, increasing from $3.065 billion in 2002 to $6.427 billion in 2007," says a SEMA spokesman. "Those gains have largely been due to the explosive growth in specialty GPS navigation products."

Today's automotive aftermarket is an increasingly complex and competitive business that is undergoing profound change. Rapid industry consolidation over the past decade has left fewer market players. At the same time, advances in manufacturing have resulted in higher-quality parts for new vehicles, which means that cars break down less often and have longer service intervals.

All of that means the advantages franchising offers as a means of business ownership are particularly relevant in the automotive aftermarket industry. Chief among them are a defined and proven business format, specialization, a uniform system, an advertising network, name identification, training, a franchisee network, and increased buying power and technology capabilities. It’s worth taking a closer look at some of those advantages.

A key component of what most franchisors are selling is a defined and proven business system, which generally refers to a method of operation. The franchise systems that have risen to the top of their industries are those that have developed a proven, recognizable format that is easily duplicated by franchisees. A defined format is largely responsible for creating the positive public image and identification most successful franchises enjoy.

Specialization is important. Franchises cater to the specialized needs that characterize today's consumer economy. Many American consumers no longer want a muffler installed by a service station. Specialists, it seems, do it better. The ongoing trend towards specialization will keep franchising at the forefront of business distribution methods.

Likewise, franchise uniformity carries weight. Even though most are highly specialized, automotive franchises thrive because they offer consumers a dependable source of high quality products and services in an efficient and cost-effective manner. What makes that possible is a uniform system of operation that brings with it the advantages of mass purchasing power, brand identification and customer loyalty.

Collective advertising funds and cooperatives give franchisees who would otherwise only be able to afford local advertising the size and strength needed to do expensive national and regional advertising. Franchisees benefit from the highquality creative talent and resources the parent company is able to tap. Good franchise advertising plays a vital role in developing brand recognition and building customer loyalty.

Brand identification is a big plus of franchising. Being identified with the franchisor's name is an important benefit to franchisees. Name recognition is one of franchising's intangible benefits that becomes more valuable as it increases over time. Being able to align themselves with the franchisor's accumulated brand equity gives franchisees instant integrity and recognition.

Since reproducing the franchisor's format is critical to the success of the entire network, many franchisors have strict training requirements. That training allows franchisees to successfully offer the same quality service or product in a uniform manner, regardless of their previous experience or lack of it.

A network of existing franchisees represents a knowledge base unlike anything else in the business world. With dozens, hundreds or thousands of individual business owners facing the same set of challenges, the array of creative solutions they come up with can be nearly limitless.

Increased buying power and technology capabilities are important benefits of franchising. Many franchise systems include cooperative buying organizations sponsored by the franchisor or a group of franchisees. Often, they are able to negotiate volume discounts and specialized services from vendors that individual franchisees would not be able to command on their own.

The same principle applies to the technology infrastructure that has developed into a de facto requirement for most businesses today. The combined clout of franchisor and franchisees puts more technological prowess within the reach of all participants in the franchise system.