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October 02, 1995 02:00 AM

BIGGEST DEALERSHIPS CONTINUE TO EXPAND: DISCOUNT TIRE, BIG O TOP ANNUAL TB RETAILER RANKINGS

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    AKRON-Despite complaints of soft economic conditions, especially in California, most of North America's largest independent tire retailers managed to bolster their sales and open additional stores during the past year. Discount Tire Co. Inc. of Scottsdale, Ariz., which added 10 stores since last year for a total of 281 company-owned outlets and increased retail sales more than 13 percent to $590 million in 1994, continues to dominate the tire retail industry as the largest independent dealership, according to TIRE BUSINESS' annual ranking.

    But with a combined total of 389 company-owned and franchised outlets, Big O Tires Inc. of Englewood, Colo., outstrips Discount Tire for the overall lead. Big O is also by far the largest independent tire franchiser group with 385 franchised locations.

    Overall, the 10 largest dealerships increased their retail locations by an average of nine stores, mostly in existing markets, and boosted their retail sales in 1994 by an average 11 percent.

    In August, seven of the largest dealerships on the TIRE BUSINESS rankings announced they were forming a buying group, Tire Alliance Groupe Inc. (TAG), to conduct volume buying of tires, automotive products and other business-related products and to eventually create nationwide warranty, marketing and advertising programs.

    TAG, which expects to begin operating in January, includes Don Olson Tire & Auto Centers, Michel Tire Co., Parnelli Jones Inc., Somerset Tire Service Inc., Tires Plus Groupe Ltd., Tire Warehouse Central Inc. and Town Fair Tire Centers Inc.

    The group's seven member dealerships represent a total of 422 outlets and combined annual sales of nearly $400 million.

    Overall, about eight dealerships listed on this year's rankings said they have been developing the tire sales end of their business, even though, according to a TIRE BUSINESS survey, profit margins on tires average about 27.6 percent, compared to 58.2 percent on automotive service sales.

    Nearly half of the largest retailers in North America complained of slow or tough economic conditions in their markets. California, in particular, where seven of the top-ranked dealerships operate, was described as a highly competitive market impacted by a ``soft'' economy.

    And while competition and poor economic conditions were problems for some, employment issues and inventory control proved challenging for several others.

    ``Good people are the key to success in any business,'' said Anthony Michel, president of Michel Tire Co. in Cincinnati. ``All of the other problems are manageable with good people. Finding good people, especially while in an expansion mode, as we are in, is our No. 1 challenge.''

    Attracting and retaining qualified employees, especially automotive technicians, has been very difficult for many firms, including Peerless Tyre Co. of Denver. ``A good deal of our energy has been focused in that direction,'' said Peerless President Sam Forbes.

    The dealership recently hired an outside consulting firm and increased internal time and expense devoted to reducing the employee turnover rate.

    Another problem cited by several dealers was maintaining inventory, especially during this year when tire manufacturers issued several tire price hikes to offset rising raw materials costs.

    David Cosco, president and CEO of Tirecraft Auto Centers Ltd. in Sherwood Park, Alberta, said the increased pricing of products has created inventory control problems for his organization. ``Stores feel the need to buy before the prices increase,'' he noted.

    Nearly all the top-ranked retail dealerships passed along some or all those price hikes to customers.

    Following are a series of reports on the activities of the largest dealerships this past year and their plans for the coming year:

    City of Commerce, Calif.

    The poor economic performance of AKH Co. Inc.'s primary market, California, continued to hamper the company's retail sales, according to President John Andonian.

    AKH, which does business in California, Washington, Utah and Oregon under the Discount Tire Centers, Evans Tire & Service and David Early Tires banners, posted 1994 sales of $88 million, down 9.2 percent from 1993.

    Sales this year are not much better, according to Mr. Andonian.

    ``At best, we are even with 1994 on like-to-like comparison, and trying to maintain as the California economy continues to struggle,'' he said.

    Southern California's depressed economy will take another full year before rebounding, he added.

    The company closed three locations and added two in California and closed two and added one in Washington, giving the firm 109 company-owned and 12 franchised outlets.

    Although the company's growth rate has slowed, Mr. Andonian said AKH will continue to expand in its existing markets.

    The company, which marked its 20th anniversary in 1995, sells Dunlop, Michelin, Bridgestone, Firestone and Star brand tires and performs shocks, brakes, alignments, oil changes and belt/hose repair.

    The retailer is looking into expanding its list of services, Mr. Andonian said.

    Simi Valley, Calif.

    Aspen Enterprises Inc. President and CEO Dennis Mangola called his company's $68 million in total sales ``peanuts,'' compared to some of the biggest competitors his Tire Pros outlets have faced in years.

    ``Goodyear is acting like an independent; Firestone is also. And they've got all the money in the world,'' Mr. Mangola lamented. ``I don't know how (an independent tire dealer) can compete.''

    Tire Pros joined the American Car Care Centers marketing group last year in part to combat Goodyear's Just Tires and Bridgestone/Firestone Inc.'s Expert Tire, Tire Station and Mark Morris outlets, which appear much like independent dealerships to consumers.

    ACCC's group purchasing, nationwide marketing and warranty programs help narrow the gap between its independent dealer members and manufacturer-owned outlets, Mr. Mangola said.

    Aspen Enterprises operates under the Tire Pros, American Car Care Centers and other independent dealer banners.

    The company plans on opening five additional franchised outletsthroughout next year, as well as one company-owned outlet in Simi Valley in November.

    Still, his dealership, which consists of 14 company-owned and 71 franchised outlets in California, is holding its own. Company-owned store sales are expected to hold steady at $13 million through 1995.

    Although manufacturer-owned outlets have provided intense competition over the past year, Mr. Mangola said he believes the phase will pass.

    ``I wish the industry would get a little smarter,'' he said. ``The only way our industry is going to be profitable has to start with the manufacturers realizing market share isn't everything. We owe it to ourselves to be responsible in the market.''

    Jacksonville, Fla.

    While Automotive Industries Inc. had to close two ServiceMax Tire stores in Michigan, reducing the total number of outlets in that market to 26, the dealership was able to expand from 27 to 31 stores in the competitive Florida market this year, giving it a total of 57 retail outlets in all.

    The dealership had an ``exceptional year'' in Florida, according to Automotive Industries President Orland Wolford. And even though tire pricing is still aggressive in the Florida market, it is not ``ridiculous'' as in the past.

    The Michigan market has been ``tough,'' he added, due to the economy and bad weather conditions earlier in the year, but business started to pick up in August.

    The company, a subsidiary of Acorn Venture Capital Corp., operates ServiceMax Tire & Auto Centers in central Michigan and Jim Martin Tire, Wall Tire, Mott Tire and Daytona Discount Tire in Florida.

    In mid-September, the company opened two Wall Tire stores in Augusta, Ga., and has plans to open as many as five more, Mr. Wolford said.

    It hopes to have about 65 to 70 stores in Florida, Georgia and central Michigan next year, according Mr. Wolford. Expansion usually involves purchasing existing dealerships or buildings.

    In the past, about 60 percent of the business was involved in tire sales, but lately the dealership has been bolstering the automotive service end of the business to match tire sales, Mr. Wolford said.

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