As freight transportation rises, business will increase their demand for truck repairs
Los Angeles, CA (PRWEB) September 19, 2012
The Truck Repair Franchises industry was hit hard during the past five years. According to IBISWorld industry analyst Andrew Krabeepetcharat, declines in per capita disposable income and corporate profit during the recession reduced the frequency of passengers using trucks for everyday driving, and reduced freight truck use by businesses transporting goods. Also, due to the rising price of gasoline during the past five years, households and companies cut the truck use to save money, reducing the necessity for repair and maintenance services. Due to declining per capita disposable income, some consumers chose to purchase auto parts and repair their own trucks. As a result of these conditions, industry revenue fell at an annualized rate of 3.6% to $429.9 million in the five years to 2012.
The Truck Repair Franchises industry has faced external competition during the past five years, which has kept revenue down. The decline in per capita disposable income caused consumers to purchase used trucks that would require repair rather than new vehicles sold by dealerships that offered repair and maintenance services. However, the decline in disposable income also shifted demand away from truck repair franchises to auto parts stores, which allow consumers to purchase parts and fix trucks themselves at a reduced cost, says Krabeepetcharat. Larger commercial trucks were more affected by the decline in corporate profit because fewer goods were being transported across the country. As these larger freight trucks cannot be repaired without professionals and specialized equipment, the less expensive alternative offered by auto parts stores did not substantially decrease corporate demand for truck repair franchises. As a result, industry revenue it expected to increase at 0.8% in 2012. As the economy recovers, more households and businesses will return to using trucks and, consequently, will be willing to spend money on truck repairs. More consumers will be able to afford gasoline to drive trucks. As demand for goods rises, businesses will use more trucks for freight transportation. During the next five years, industry revenue is forecast to grow. In addition, profit margins are expected to increase as regulations on safety and emissions cause trucks to have a higher level of technology, making truck repairs more profitable due to the higher margin activities of repairing complex trucking machinery.
Some extremely large firms, including Walmart, have their own in-house fleet repair service centers. This decreases the odds of a large national corporation having a large contract with a single franchised truck repair service, which would give that operator a significant market share. This is because once some downstream companies become large enough to make a contract with a truck repair service operator, they typically contract with non-franchised firms due to their larger geographic reach. It is difficult for one owner of a franchised truck repair line to operate across a large geographic region because this owner must pay high startup fees for each establishment. As a result of a relatively small number of franchised stores per franchise, the industry is fragmented. Concentration has risen because the recession forced underperforming operators out of the industry from 2008 to 2010. In fact, over the past five years, the number of franchise owners fell at an average annual rate of 2.6%. This left a smaller number of franchises to scoop up the remaining demand. The more well-known, reputable and strategically placed franchises benefited the most from this landscape change, causing some firms to account for a larger market share. For more information, visit IBISWorld’s Truck Repair Franchises in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes establishments that complete repair services for trucks, including oil changes and replacement services. Reports in our Business Franchise collection focus solely on the operation of franchised outlets and exclude non-franchise data. They show the total number of franchise outlets, total franchise revenue and the average profit margin earned by franchisees. Our reports also highlight the largest franchisors by market share.
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