Driven Brands’s Eyes Bigger than Its Belly

It seems Driven Brand Holdings Inc.’s appetite for rapid growth, particularly in its auto glass segment, created a bad case of heartburn for a group of investors.

They launched a class-action lawsuit against the Charlotte, N.C.-based company on December 22.

The Genesee County Employees’ Retirement System (GCERS) sued the company and two of its top executives for allegedly misleading investors about the integration of its auto glass business (Auto Glass Now) and the performance of its car wash business segment, according to a shareholder class action complaint filed with the U.S. District Court, Western District of North Carolina.

The investors allege that Driven Brands and two of its top executives misled investors about the company’s ability to integrate the auto glass business into its overall operations and the performance of its car wash business segment.

According to the complaint, the automotive services company, which acquired International Car Wash Group in 2020 and Auto Glass Now in 2021, allegedly touted its ability to integrate acquisitions for nearly two years and concealed issues with both segments of its business.

Earlier this month, Driven Brands laid off nearly 400 employees at its Auto Glass Now division on the eve of the Christmas holiday season. Former AGN workers told GlassBYTEs.com that their franchises suffered from Driven Brands’ corporate mismanagement, which offended long-time customers.

According to former employees, staff cuts reduced the glass shops’ ability to provide quality customer service, something AGN was known for.
GCERS, the plaintiff in the federal lawsuit, claims that through various corporate filings and investor calls, Driven painted a rosy picture of its ability to fold the different companies into its larger operations “in an orderly and profitable structure.”

“Throughout the class period, Driven repeatedly touted its ability to execute and integrate acquisitions as a ‘core strength,’ and assured investors that it had made ‘significant progress’ integrating the auto glass businesses it had acquired,” according to the shareholder complaint.

The investors insist that those statements were false.

“In truth, Driven was ‘several quarters’ behind on integrating its auto glass businesses, and the company’s car wash business was faltering and more exposed to a decline in demand from retail customers than it represented to investors,” the complaint says.

According to the complaint, investors learned the truth about the company’s troubles in May when former CFO Tiffany Mason left the company under unusual circumstances.

In August, the firm announced disappointing financial results for the second quarter of 2023 for its auto glass and car wash business segments and slashed its full-year economic outlook. According to the complaint, Driven admitted it needed to catch up on the integration of the businesses it had acquired just over a year ago.

GCERS claims Driven “made materially false and misleading statements and omissions and engaged in a scheme to deceive the market,” which “artificially inflated the price of Driven common stock and operated as a fraud or deceit on the[the investor].”

Driven Brands did not respond to requests for comment on the ongoing lawsuit.

 

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2 Responses to Driven Brands’s Eyes Bigger than Its Belly

  1. Wow this is crazy to hear! Glad I did not have any stock in this!

  2. Matt Taylor says:

    AGN was never ever known for quality anything.

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