Published on February 18, 2014

TB Editorial: Know your financial picture

AKRON (Feb. 18, 2014) — John Miller, director of retail for Best One, the retail program of Zurcher Group, posed a provocative query to his audience at the recent K&M Tire Inc. dealer conference.

“Do you know you can make a profit and still go broke?” he asked.

Understanding the balance sheet and profit-and-loss statement also is a favorite seminar subject of Norm Gaither of Dealer Strategic Planning, which is in the business of helping tire dealerships improve their profitability through its Twenty Group gatherings.

Profitability and getting a better return from service bays through selling tires was the theme of the program Matt Winslow, director of speakers and content for American Training Institute (ATI), gave at the recent Tire Pros meeting in Las Vegas.

Why all the fuss about financial statements and the bottom line?

Because independent tire deal¬ers—especially one-outlet shops—are under tremendous financial pressure.

The fact is, many are succumbing, in part, because they don’t have a good handle on the bottom line profitability of their dealerships.

It’s no secret that the tire business is getting more competitive.

In the last two issues alone, Tire Business has run three stories on non-traditional outlets selling tires.

The 700 stand-alone Quick Lane Tire & Auto Center locations operated by Ford Motor Co. dealers in the U.S. sold 3.2 million tires in 2013, “which makes us one of the fastest growing tire outlets in the United States,” said Frederiek Toney, president of Ford Customer Service.

The Quick Lane network has been growing by 50 to 100 locations annually for the past several years. The outlets provide routine vehicle maintenance as well as tire replacements for all vehicle makes and models, services similar to those offered by independent tire dealerships.

Another chain, Express Oil Change & Service Center L.L.C., is getting into tire retailing, following its purchase of Birmingham, Ala.-based Tire Engineers last February. It’s starting to co-brand its 88 corporate Express Oil locations with the Tire Engineers logo and adding storage space for tires.

Chrysler Group L.L.C.’s Mopar parts and service brand also is looking to recruit more auto dealers to open stand-alone Express Lane quick-stop service operations. These shops offer oil changes, wipers and tires. Chrysler aims to change the perception that visits to the service operations of auto franchise stores take more time and are less convenient than a trip to an independent competitor.

These stories illustrate the changing demographics of tire retailing and the drive by big multi-store national and regional chains to beat independents at their own game.

Larger companies have teams of accountants and financial personnel tracking costs, looking for efficiencies, reviewing pricing models and examining the bottom line.

Dealers need to operate their financial houses the same way if they intend to stay in the game with these behemoths. That’s the message K&M Tire, Dealer Strategic Planning, Tire Pros and others are sending through programs that focus on how dealers can better understand their financial pictures.

This editorial appears in the Feb. 17 print edition of Tire Business. Have an opinion about it? Email a letter to the editor at tirebusiness@crain.com.

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