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Monday, 18 April 2016 23:12

From Tiny Dallas Body Shop to 299 Locations, Service King's Made An Impact in 40 Years

Eddie Lennox 1

Founder Eddie Lennox didn’t even have running water in the metal building where he started Service King . Today it has 299 shops in 23 states. Early on, he saw the trends of insurers steering the business and of industry consolidation.

Brandon Wade/Special Contributor

Forty years ago, Eddie Lennox would throw a piece of scrap wood onto the fire in a 55-gallon oil drum to warm his tiny body shop in West Dallas.

If he needed water, he would run a hose from the business behind him to his bare-bones corrugated metal building on Hardwick Street.

The nearest restroom was at a service station a block or two away.

“Most people wouldn’t even drive down there, it was so rough,” said Lennox, 62, the founder of Service King Collision Repair Centers. “I had four guard dogs killed in four years.”

But Lennox, who learned the basics of bodywork at Grady Spruce High School, had dreams that no tin shed in a rough corner of Dallas could contain.

As Service King celebrates its 40th anniversary this year, the company he built owns 299 shops in 23 states, has more than 6,000 employees and expects revenue to top $1 billion this year.

It is the fourth-largest chain in the collision repair industry.

“I say it all the time,” Lennox said recently from a contemporary fourth-floor conference room at Service King’s corporate headquarters in Richardson. “I can’t believe how lucky I have been.”

Lennox, who also enjoys playing golf, retired in 2012. He’s on Service King’s board of directors but no longer has an active role in running the company.

His business is changing, though.

Although small, independent shops still account for most of the 34,000 businesses in the fragmented collision repair industry, big chains like Service King and Lewisville-based Caliber Collision appear to be the models for the future.

“All of a sudden now, a guy with two sons and his wife running things up front, there’s no way,” said Scott Shriber, publisher of Body Shop Business in Akron, Ohio. “The business has really become complicated for small shops.”

Fewer shops

In the last 15 years, the number of body shops in the U.S. has dropped by at least 30,000, Shriber said, as operating and capital costs continue to rise.

Insurance companies largely control the business now and tend to steer customers to shops that can make repairs for the lowest costs, which favors chains with their greater volumes and efficiencies of scale, Shriber said.

At the same time, car crashes in the U.S. have been in a slow, steady decline.

Though the total jumps up temporarily in some years, mostly because of weather, it fell from 6.3 million wrecks in 2003 to 5.6 million in 2013, according to the National Highway Traffic Safety Administration.

And the amount of safety equipment in cars that led to the decline — systems like anti-lock brakes, automatic braking and lane departure warnings — increases annually.

All of those factors, in turn, have resulted in consolidation and, more recently, buyouts of the bigger chains by private equity firms, which occurred at Service King.

“If you can take the fat out of the middle — and private equity groups are good at that — you can get some decent margins,” Shriber said. “Wall Street and private equity have decided that the collision repair business is worth looking at.”

The Washington-based Carlyle Group initially bought a majority of Service King in 2012, selling most of its stake to the Blackstone Group in a deal in 2014 that The Wall Street Journal said was valued at $650 million.

Things were a lot less complicated in 1976, when the 23-year-old Lennox borrowed $10,000 from a neighbor in Garland — a retired Dallas city bus driver — to buy the shop in West Dallas.

“I told my neighbor, ‘You may be crazy,’” said Lennox, who was married, had one child and another on the way. “‘I have no idea what’s going to happen.’”

What ensued were 60-hour workweeks and lots of hustling up business.

Sometimes Lennox repaired hard-driven used cars for the small dealers on Ross Avenue.

“I would do the whole side of a car, taking dents and dings out for $85,” he said. “I had to do things cheap, and I learned.”

He also sought business from Lone Star Gas, which had a huge fleet of vehicles often in need of body repairs.

Eventually, a few insurance companies heard about the kid in West Dallas, and, while they weren’t the force they are today, they sent business his way.

“I was at $10 an hour — half what dealers or big body shops did,” said Lennox, who still owns 7 percent of Service King.

Within four years, Lennox had four shops and kept nurturing his burgeoning links to insurance companies.

“That was where the business was, not in competitively bidding against other shops,” he said.

The growth got an additional push in 1980 when Lennox bought some of Lone Star Gas’ old fleet vehicles and put them at his shops as free loaners to customers.

“This was before insurance companies paid for rent cars, and those cars allowed people to bring their cars in right then and not have to schedule time off or do it when they could get a ride to work with someone,” Lennox said. “They were 7-, 8-, 10-year-old cars but were good, reliable transportation.”

As insurance companies learned of Lennox’s fleet of loaner vehicles, which would grow to about 100, they began informally referring customers to Service King because of the convenience.

“That was really a period for us to get out of the mom-and-pop, single-store mentality,” he said.

Key hires

In a seemingly innocuous move in 1988, Lennox hired Jeff McFadden as a service adviser at the Service King shop in Carrollton. By that time, the business had grown to six collision repair centers.

Seven years later, he hired McFadden’s good friend from Bryan Adams High School, Chris Abraham, as a service adviser at the Plano shop.

Both young “shop guys” proved their worth. Today McFadden is president of Service King and Abraham is CEO. “We are unique because we have shop guys running the business, and through a lot of the years, the company was run by three guys from DISD,” said McFadden, 48.

By the time the Carlyle Group bought a majority stake in Service King in 2012, the company had ventured outside Texas for the first time to purchase some shops in Phoenix and had grown to 47 locations.

Within a year, flush with cash from Carlyle, Service King had 100 shops, acquiring facilities in Tennessee, Arkansas, Oklahoma and Nevada. In 2014, Service King bought Sterling Auto Body Centers for an undisclosed amount in what was described as the largest acquisition in collision repair history. The deal was for 62 shops in 16 states.

Blackstone bought Service King after the Richardson-based company had tripled its revenue in two years.

Despite some clouds on the horizon, Abraham, the CEO of Service King, believes the industry remains “wide open.”

“There’s still a lot of opportunity,” said Abraham, 49. “All of the big four [collision repair] companies combined control less than 14 percent of the industry. There’s still a huge runway for growth.”

The company will be making that trip without Lennox’s active involvement.

He and wife Lisa own a home in Turtle Creek and a ranch in Whitney. They also have an apartment on a residential ship called The World that cruises to various spots on the globe.

They have five kids and three grandchildren.

“I was like a pro athlete,” Lennox said. “I knew the way things were changing. I felt like I had my day. But Service King can do this for a long time.”

AT A GLANCE: Service King

History: Founded in 1976 by Eddie Lennox as a one-man body shop in West Dallas

Today: 299 collision repair shops in and 23 states, including 35 in the Dallas-Fort Worth area. Majority of the company is now owned by the Blackstone Group, a private equity firm based in New York.
Employees: About 6,000 employees

Size: The company expects revenue this year of more than $1 billion and it intends to get larger.

Distinction: Fourth-largest chain of collision repair shops in the U.S.

We would like to thank The Dallas Morning News for reprint permission.

Brandon Wade/Special Contributor

Founder Eddie Lennox didn’t even have running water in the metal building where he started Service King . Today it has 299 shops in 23 states. Early on, he saw the trends of insurers steering the business and of industry consolidation.

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