EDMONTON, Alberta—Fountain Tire Corp. is expanding its reach in western Canada by purchasing 14 commercial and retail outlets in Manitoba, Saskatchewan and northwestern Ontario from Goodyear Canada Inc. The deal, for which no price was disclosed, will give Fountain 132 locations and fits into the company's goal of 200 locations throughout Canada's western provinces, President Brian Hesje said.
"We've got a ways to go," he said. "I'm getting old too quick. We've got to speed it up."
The Edmonton-based dealership bought two outlets in Thunder Bay, Ontario—a York Tire Commercial Centre and a retread plant—and two Goodyear retail stores in Regina, Saskatchewan, Jan. 3. The acquisition of 10 other locations in Manitoba—nine of which are York Tire outlets—will close Jan. 31.
"These acquisitions are consistent with our strategy for long-term, profitable growth and with the trend of consolidation in the retail tire business," Mr. Hesje said in a written statement.
"By purchasing these outlets from our partners at Goodyear, we are capitalizing on Fountain Tire's retail expertise and Goodyear's strength in manufacturing and product development."
Goodyear Canada owns 49 percent of Fountain Tire.
Mr. Hesje estimated that the new locations will add $30 million to Fountain's total sales of $187 million in 1998 (all amounts in Canadian dollars).
The company sees further consolidation in the tire industry and is looking for acquisition opportunities, particularly in British Columbia, Saskatchewan and Manitoba, he said. However, the dealership isn't limiting itself to those regions as it also recently opened a new store in Yellowknife, a mining town in the Northwest Territories.
But operating east of Alberta provides several advantages for Fountain. The firm, which carries Goodyear products exclusively, can now integrate its marketing and sales strategies more effectively with Goodyear Canada's, Mr. Hesje said.
Buying the York commercial outlets in particular gives Fountain access to national fleet accounts across the western region instead of in just two provinces.
"What's in the best interests of Fountain has to be in the best interests of Goodyear and vice versa," he said. "Now we're more in sync with Goodyear after this move."
Because Saskatchewan and Manitoba are similar to Alberta in geography and in reliance upon agriculture, Mr. Hesje is confident that Fountain can make the transition easily into the two provinces. He noted that all three provinces have a similar culture and work ethic, and he's confident that Fountain can thrive in that market.
Although Goodyear Canada owns a minority interest in Fountain, the dealership is buying the outlets from the tire maker outright, Mr. Hesje said. Goodyear Canada will continue to have an ownership interest in the outlets through its relationship with Fountain, but Fountain will manage the stores on its own, he said.
"We've bought operations from them before, and they'll be managed exactly the same as any of the others," Mr. Hesje said. "Our people will decide who the (employees) are. We will control our destiny there. We'll have to blame ourselves if they don't work."
Fountain eventually plans to spin off all the newly acquired stores into 50-50 partnerships—sharing equity interest with its store managers—during the next two years, Mr. Hesje said. The Thunder Bay locations—which will be combined into one facility—already have a managing partner in place.
Mr. Hesje noted that Fountain's equity partnership structure distinguishes it from other independent dealerships and is the ownership route the firm prefers.
"We have no goal here to have any corporate stores," he said. "Our objective is to have 50-50 partnerships. But until we've had a relationship with people for at least one year, we feel it's too early for us to know whether or not we are compatible as partners, and it's too early for them to know if they want to be partners with us."
In October, Fountain entered the Saskatchewan market by purchasing a 50-percent interest in Nor-Sask Tire Ltd., which operated an outlet in Regina and one in Saskatoon, Saskatchewan.
Fountain also signed on Misskey Tire in Melfort, Saskatchewan, as an associate dealership.
This is Fountain Tire's second purchase of a block of stores from Goodyear Canada. In 1995-96 the company bought 24 Certified Auto Service locations in Alberta.