Driven Brands & Auto Glass Repair: Competing vs Safelite

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That makes sense. With insurance, it's a bit of a chicken and egg problem, right? You're not going to win an insurance contract if you don't have the presence to actually serve.

Yes, there are a couple of things they cared about. First, they wanted a footprint of locations. They never specified a number, but it was understood that having 80 to 200 locations could get you into some RFP processes with larger carriers. Second, they didn't want any administrative issues, so they required a TPA to manage all claims. Third, they were concerned about how to compete against Safelite, which was primarily on price.

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Do you think it's possible for anyone to come close to Safelite in terms of their cost of providing services? There's a question about margin since Safelite is very profitable. You could undercut them or match them and have lower margins. I know, for example, that aftermarket glass is a huge advantage for them. Do you think that's within the realm of possibility?

You can undercut them a bit on price for TPA work, but it's hard to do so on service work and remain profitable. It's changing with recalibration. For example, a few years ago, an average glass repair might have been $350, with a 25% to 30% contribution margin post-labor and cost of sale. With recalibration, you're essentially doubling the ticket. The labor isn't that incremental, and the technology is more like a capex treatment. You can make low to mid-40s on that same ticket margin. Recalibration is changing the industry, giving room to move on price per ticket if you get the recalibration work.

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On that point, do you think Driven could run the TPA as well as Safelite anytime soon? How operationally intensive is it? I know they have the Canada business too, so maybe they learn there.

That's where a lot of the learnings came from. In Canada, Driven's TPA is similar to Safelite. They pretty much dominate that market. Safelite is the number two player behind Driven Brands and the TPA. The idea was to leverage the Canadian TPA into the US. However, when we started to break it out, it wasn't scalable to the claim volume needed in the US and Canada. So, we decided to scrap it and build a completely new solution. It took about a year and a half, and the MVP cost about two and a quarter million. You need the budget for the capex requirements, which creates a barrier to entry for other players outside of the larger firms. However, I heard they were able to get some pilots with mid-sized carriers, and it's going well. During the RFP process, you actually do a pilot with the carrier, so it's not just about receiving a certain amount of claims.

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