Volume 11, Issue 3 - May/June 2009
A Look at Shops That Have Left Networks Behind
by Les Shaver
Editor’s Note: This is Part I of of a two-part series about shops who’ve chosen not to work on networks. Part II is scheduled to appear in the July/August issue of AGRR.
When Harmon Glass launched its network in the early 1990s, Donna Guiel, owner of Guiel Auto Glass, in East Hartford, Conn., decided to give it a go. Really, what was this the downside? Here was a new entity that could divvy out business to her shop. And, the best part? She didn’t need to reach into her marketing budget.
Those good feelings didn’t last long. “When Harmon came on, we signed up,” Guiel says. “We didn’t stay on long because we weren’t getting any business. It’s been very little. The discounts kept getting deeper and deeper.”
Other shop owners like Neil Duffy, owner of Auto Glass Menders in San Jose Calif., and Mark Rizzi, owner of ACR Glass in Alliance, Neb., have come to similar conclusions over the years. The erosion of pricing power and autonomy, combined with what they say is a non-existent flow of work, are the main reasons many shops have abandoned networks. But with some a deeper discontent has fermented. They challenge the legitimacy of the networks to provide them with jobs and abhor the notion that they have to negotiate prices with Safelite Solutions, part of the Belron US umbrella. Safelite AutoGlass chain, another member of the Belron family, happens to be their stiffest rival in many markets.
Still, abandoning networks is a challenge. “I think it’s like heroin,” Duffy says. “I think you get addicted to that free insurance work.”
Kicking that habit isn’t easy, but these shops say it can be done.
The Cost Benefit Analysis
For most glass shops, like Gueil, who’ve decided to abandon networks, the process starts with a simple costs benefit analysis. They’ve decided the cost, especially when the narrow margins and loss of control to what’s often a competitor, wasn’t worth the reward. Often, that’s because many of these shop owners who have abandoned networks say there is no reward.
“I view all networks as my competitors,” Rizzi says. “They have member shops. Their job is to enforce compliance by the insurance companies. The compliance is to get them to the member shops.”
Duffy thinks steering problems are especially magnified with jobs from Safelite. “I wouldn’t hear from Safelite unless the job [was] 100 miles from a Safelite center and inconvenient for them to get to,” he says. “There’s nothing that comes unsolicited from the network.”
Even shops who are on networks see this. “I don’t think we’ve ever gotten a call from Safelite,” says Rich Lutton, owner of Metro Glass in Omaha, Neb. “They pretty much own that world.”
Because of that situation, the shops interviewed for this story said they stayed off of the Safelite network. Some still participated in LYNX Services, which is a part of Pittsburgh Glass Works in Pittsburgh. But even that doesn’t offer a steady flow of work, says one multi-state glass shop owner who refuses to participate on Safelite’s network.
“With LYNX, we think there’s a conflict of interest because PPG sells glass,” says a multi-state glass shop owner who didn’t want to be identified for this story. “But we don’t see the blatant directing of work. If Joe Schmo wants to use XX glass company, we don’t see them directing at all.”
That said, the shop owner still isn’t totally satisfied. “We don’t get a fair amount of work,” he says. “We’re on a as a part of doing business.”
That’s what Rizzi sees. “Even if you’re on them [networks], you shouldn’t rely on them for work,” he says. “If you do rely on them for work, I think it’s a big mistake.”
So, many of the network holdouts claim there’s little benefit to trying to stay on the insurance rotation. But, still, does a job here and there make it worthwhile? Not if you ask Guiel.
By agreeing to be on network, she was obligated to abide by network pricing—even on jobs she generates. And, to top it off, she contends that pricing is getting progressively worse.
“Not only did they want more for discounts, but I had to honor that price no matter who the job was with,” Guiel says. “So I stopped being a member. As time goes on, they want more and more. It’s very difficult to stay afloat.”
Even if you originally agreed to pricing that worked for you, market factors could change. That scares the multi-state shop owner. “Let’s say your auditors find some mistakes,” he says. “You can’t go back if you sign that contract. If you sign that contract and 30 days later you make a big mistake, you can’t recover.”
On a Mission
It would be easy to say people like Guiel and Rizzi just stay off networks because they’re hemorrhaging money every time they do an insurance job or they aren’t getting enough work. But that’s not the whole story.
For those shops that have been in the industry for awhile, the decision to stay off networks goes beyond a set rate for labor or the price of a sidelite. Those shops, many of whom have been in the industry in halcyon years before the networks originated, almost look at them as a thief who comes into their shop, opens the cash drawer and pulls out a wad of cash and takes off. And when that perceived thief is your competitor, it makes things even worse.
To these shops, glass companies that own networks demonstrate a clear conflict of interest. “Is there any other industry where a company is required to notify a company in advance, sign a price agreement with the company and then be paid by the competitor?,” the multi-state shop owner asks.
He’s even more inflamed when the subject of audits comes up. As the multi-state owner points out, glass shops on networks aren’t only at the mercy of their competitor’s pricing. In certain instances, they’re at the mercy of their auditors.
“When system is controlled by your competitor, what’s the sense of obligating yourself to stipulations that your competitor can walk into your place of business and audit your records?,” the multi-state shop owner asks.
But these shops have an equally pressing question about the legitimacy of networks and even insurers handing them business.
“Insurance companies don’t contract any glass company to repair or replace auto glass,” the multi-state shop owner says. “The insurance companies don’t actually contract anybody to do it.”
So, basically, their argument is the networks don’t have the right to send them jobs. Rizzi says networks want to create the impression they’re divvying up jobs, but that’s not really the case.
“Neither insurer nor the network is contracting for anything,” he says. “They are not hiring the shop to make repairs on the car. The customer hires the shop.”
Rizzi would rather avoid the network and go to whom he sees as the real customer.
“I know who my customer is,” Rizzi says. “Once you figure out who the customer is, the rest of it falls into place. You choose to deal the car owner. Every other business in the country works this way. This is my customer. I’m not going to choose to focus on these people over here because they didn’t hire me to repair the car.”
And, ultimately, the fact that the customer makes the final decision is a good thing to Rizzi. That’s because he sees them as ultimately more loyal. “I don’t see the point in chasing the fickle business,” he says. “I would rather chase the car owner. That’s where the customer loyalty is. Those are good, quality customers. Those are loyal customers. They want good service at a good price.”
Living Outside the Network
Though there are some compelling arguments to avoid networks, living outside them still isn’t particularly easy. “Is life easy off the network? No,” Rizzi says. “But you don’t have to be on the network. There are at least as many if not more people that are on them because they feel they have no choice. There’s a misconception in this industry that life only exists for a network member.”
Life doesn’t just exist for a network member. But, the shops that have left networks say life is harder off networks. For one thing, there’s no chance of getting a network job without being on their rotation. So, without that shot, shops have to ensure the customers come to them before calling that 800 network number their insurer gives them. “We generate our own business,” says the multi-state shop owner.
Generating your own business starts with marketing and cementing customers through word of mouth. Rizzi pins his success on getting out in front of customers. “We advertise,” he says. “It’s essential. Everybody has to advertise.”
But, for others, finding the money in this difficult economy to reach customers before they get to networks is an uphill battle. “We don’t go on these big marketing campaigns,” says Guiel, who keeps track of where each of her customers came from. “We tried radio advertising, but Guiel Auto Glass isn’t a name to remember. Radio and television advertising is big bucks. We tried that, and it didn’t work for us. We do yellow pages. It’s not doing as well as I thought, but we have to have our name out there.”
Fortunately, Guiel has been in business a lot of years and satisfied a lot of customers. Without that, shops without networks would be in trouble. Because, if there isn’t advertising, word of mouth is the only way they’re getting work. “Our best advertising is word of mouth,” she says. “We have a good name.”
Rizzi follows a similar tact. “Your best form of advertising is still word of mouth,” he says. “You never want to change that. You do everything you can for market awareness.
But even that doesn’t mean they’ll pass the networks when they need to make that call (even if they’ve been to your shop first). And, when a customer requests a non-network shop, glass shop professionals claim that their customers must dart past any number of obstacles from networks (including steering) to get to the shop of their choice.
“You have to deal with the steering,” Rizzi says. “We deal with steering every day in one way form or another.”
So, Rizzi deals with it by going back to the customer. “We inform the customer before they have broken glass,” he says. “You give them basic facts about what their choices are and what their rights are.”
Even after non-network shops hold the job, the battle isn’t over, though. If they get the job, the network will often send them the bills, discounts and all, that they send their member shops. “I will do the job and will not approve pricing,” Guiel says. “It really throws the network off. They will tell us, ‘this is our discount’ and I will say ‘this is my price.’”
When Duffy does take insurance jobs, he’s careful not to cash the check—unless the price is right. “I’m too small,” he says. “I can’t afford to not get paid for work four to five months later, if I do four or five claims. If you take a check from them and cash it, it means you’ve accepted their pricing. I have to hold the check. I don’t want to have any kind of money tied in this.”
When it’s time to fight that bill, Guiel doesn’t go to the network. She’s goes to the insurer. “I charge list price and I bill the insurer directly. I don’t deal with network unless I have to,” she says.
And, she won’t stop until she gets results. “Be persistent and don’t give up and talk to the powers that be at the insurance companies,” she says. “Don’t talk to the network. They won’t help you. I want to be a pain in the butt. I want my money and won’t give up. I’ll fax my paperwork to every fax number I have at an insurance company.”
But sometimes, even if it’s a customer that requests his shop, Duffy still won’t do a job through a network. “If I can get as much or more as a cash job, I’ll accept the job,” he says. “There are other times I just won’t accept the job.”
Spoken like someone who truly would rather avoid networks.
Les Shaver is a contributing editor for AGRR magazine.
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