Evolving Beyond Vertical SaaS: Our investment in Stress-Free Auto and their Tech-Enabled Service Model

American culture is synonymous with cars. Considering how much time we spend behind the wheel, it's obvious why.  In the past 40 years, the number of miles Americans collectively drive has increased from 1.5 trillion to 3.2 trillion per year, enough to take nearly 5,000 trips to the moon and back.  That’s more than twice as much driving with a population that’s only 50% larger.  And, the more people drive, the more essential the auto maintenance industry is to our quality of life.  

Unfortunately, in the world of auto maintenance, clarity and trust are rare finds and often overshadowed by predatory practices and consumer skepticism. The industry is notorious for pushing unnecessary repairs, bait-and-switch quotes, long wait times, and scare tactics. AAA found that nearly two-thirds of Americans don’t trust auto repair shops, and one-third don’t have a shop they feel confident visiting. In this landscape of doubt, Stress-Free Auto Care stands out by emerging as a destination for transparency and reliability.

What’s Under the Hood

‍Our investment in Stress-Free didn’t start with the desire to invest in an auto repair shop.  We set out with the belief that the right underlying software platform could help local businesses operate more effectively and transparently, providing a better customer experience along the way.  The Stress-Free team started out with a similar thesis, initially providing software to auto repair shops and launching a marketplace called CarDash.  But, after several years of trying to deploy software and build an efficient two-sided marketplace, they found the auto repair industry too resistant to change, too reluctant to adopt technology and, all too often, unmotivated to provide certain levels of transparency.  Traditional shops were committed to their way of doing things, and while not optimized, many shops are successful enough operating at the status quo.

After years of learning this the hard way, the Stress-Free team took a bet on themselves, acquiring a local, under-appreciated shop for only $60k in cash.  As an experiment, they decided to run the business themselves using their own software and a new compensation model that motivated technicians to do right by their customers while maximizing efficiency. After three months, the shop had repaid the initial cash; today, it has repaid the initial investment more than tenfold.  

It turns out that when running a shop, the technology “under the hood” matters.  Stress-Free’s software immediately streamlines customer bookings, taking a historically completely offline industry and moving 1/3 of appointments online, while simultaneously improving customer satisfaction to a 4.9 star rating.  However, the obvious yet under-appreciated challenge of Vertical SaaS is that it needs to be implemented correctly to reach its full potential. By owning and operating its locations, Stress-Free ensures it has well-trained and incentivized staff to make use of that software. Further, recognizing that software alone is often not enough, Stress-Free also remodels, rebrands, and modernizes all their shops, including what has become a customer favorite Stress-Free lounge with modern amenities like phone chargers, great snacks and free Wifi. Stress-Free endeavors to have the customer’s physical experience at the shop parallel the quality of the modern software experience.

Our experience with Stress-Free has strengthened our interest in tech-enabled services businesses at Forerunner, showing that owning workflows can now be a venture-scale opportunity and more impactful than merely selling software in certain scenarios -- particularly with the improvements made possible by AI.

Expansion through Activation

In the past two years, Stress-Free has continued to roll out this playbook, showing that its owned-and-operated, tech-enabled services model is working. Stress-Free has acquired nearly 20 shops, expanding outside the Bay Area into Southern California and Texas.  

Stress-Free offers a highly compelling path for established shop owners who are looking to sell their business and retire, but don’t have a liquid market given the nuances of full service auto repair.  Stress-Free’s infrastructure and best practices make the model repeatable, which enables the opportunity to scalably make these acquisitions and bring them on platform.

Besides gaining access to the physical infrastructure of the shops that make the repairs possible, the acquisition playbook gives Stress-Free a leg-up over spinning up their own locations.  First, the shops Stress-Free acquires have positive goodwill within the community through years of services and strong brand recognition, which translates to lower customer acquisition costs.  They also inherit the existing staff, many of whom are experienced technicians that are increasingly hard to recruit in the open market.

By operating these shops, Stress-Free has built out a reputable brand and further refined their technology stack.  While some software is built in house, some is integrated using best-in-class solutions, so there is as much integration and implementation as there is innovation.  From here, the Company is looking to package up their stack and move into franchising.  In line with our Digitally-Native Franchise thesis, this will enable local entrepreneurs to leverage the Stress-Free playbook while enabling the parent company to expand more quickly and capital efficiently, reaching over a hundred locations in the next few years.

Who’s Behind the Wheel

As Dominic Toretto famously stated, “It doesn't matter what's under the hood. The only thing that matters is who's behind the wheel.” So as much as the technology enabled the evolution, the process wouldn’t exist without Yinon Weiss, Stress-Free’s founder, and industry vets, like Rhett Whitehill, who he recruited to the team.  Yinon is an operator in the truest sense of the word.  Prior to starting CarDash, he served in the military for 10 years as an officer both in the Marine Corp and Army Special Forces.  His drive, combined with Rhett’s understanding of the ethos of a successful shop, has set Stress-Free on the course it’s on today. The combination of the underlying platform, refreshed brand in a stalled industry and unparalleled team  is going to reset consumer expectations in auto care and provide millions with a smoother ride ahead.  We, at Forerunner, are looking forward to the journey!