LAS VEGAS—Tire dealers, it seems, share something in common with Shakespeare. Some, like Will, believe the first thing you have to do is get rid of the lawyers.
"If I sat up at night and worried about half the things these strokes tell us, I couldn't do any business!" retorted Tom Wright of Wright Tire Service in Anoka, Minn., when asked whether selling used tires should be avoided because of liability issues.
Overlook used tire income at your peril, added Bob Barnes, of Belle Tire, Allen Park, Mich. "We sell enough (used tires) to pay for the disposal fee," he said. "We can't let the lawyers run our business."
Frank and open discussion was the order of the day during a two-part seminar, "Successful Tire Dealers and the Secrets of Making Money," held on back-to-back days during the recent SEMA Show/ International Tire Expo.
Drawing a crowd of about 40 people each day, the "chat room" got lively—as one might expect when the panelists run operations ranging from five stores to 540 and the moderator was industry notable Don Olson.
Dealer attendees were eager to "download" the wisdom of street-smart panelists, who included:
Day one—Paul Zurcher, Zurcher Tire, Monroe, Indiana; Jerry Bauer, Bauer Built, Durand, Wis.; Terry Chambers, West Coast Firestone, Long Beach, Calif.; and William Caulin, Somerset Tire Service, Bound Brook, New Jersey; and,
Day two—Larry Morgan, Morgan Tire and Auto Inc., Clearwater, Fla; Bruce Cherry, Big O, Dublin, Calif., and Dick Erickson, Sun Tire, Jacksonville, Fla.
Here are some highlights.
Small dealers' future
"Consolidation is quite rapid in the industry, but the place for small dealers is quite secure," Mr. Caulin said. "Our business is really about value added."
Mr. Zurcher: "A lot of people think they can't make a profit if they have sales of under a million dollars. We're finding you can be profitable." He said profits of 8 percent to 12 percent can be achieved by a store doing $1 million to $1.5 million in sales, "but things have to be right."
"Predictions are risky, (but) if history teaches us anything, it's that we create our own worlds and are totally responsible for them," Mr. Zurcher added.
"Those who refused to change when change was needed are not here today. There's going to be a place for the small tire dealer. People buy from people."
Mr. Zurcher: "Is it a losing store manager? The real question: Is it the people? We've closed a couple, I'll be honest. You have to study the market, put the right team in and run a cost-efficient operation of motivated, committed people working together.
Mr. Bauer told of one store that, despite heroic efforts, had to be closed because the business had earned "a bad reputation that could not be overcome" under its previous owner. Part of the equation, he pointed out, is to determine if the problem is worth the time and money it will take to fix. "The first thing is to get your payroll costs down."
Mr. Morgan: "Ninety-nine percent of the time it's a people problem. Not necessarily a bad person—they might be not trained properly." A big mistake, he said, is "hanging on too long to a losing store."
The bottom line
Operators need to go over the service tickets every day, Mr. Morgan said. "You can see a lot. What's going on or what's not going on." Examples he cited include how many alignments are done, the number of inspections and preventative maintenance procedures. If a car has 80,000 miles, Mr. Morgan pointed out, and the store didn't perform a service, the store probably lost the opportunity for added income, since cars with high mileage usually need something done.
Other panelists urged dealers not to let any prospect leave the store without closing a sale. Get rid of items that aren't related to your core business and try and sell more alignments and road-hazard policies.
Mr. Caulin pointed out that the gross profits available from proprietary tire lines can be 40 to 50 percent, a margin that's difficult to get from branded tires.
Profit vs. volume
Mr. Caulin: "We're very stingy when it comes to margins. We are very reluctant to give the tires away. It's bad for the industry. Service is where we really make our money."
"When you're selling four tires for $50, you're in the negative." He noted that Belle Tire's average net profit per tire is $20 to $45. To drive up traffic to the store, "sometimes we have to throw out the thought of profitability," he conceded. "You're either growing or you're dying."
Mr. Wright: "We depend on tire profit."
Mr. Bauer: "We've sacrificed volume to get the gross profit up. The real key to our success is raising profit margins."
Several of the panelists use a rule of thumb they said they learned from Don Olson, when he was a driving force at Firestone: Divide gross profit dollars by payroll dollars (not including health insurance costs), and if the result is $2 to $2.50, you're doing well.
The experts were split on the topic of running seven-day-a-week operations.
Mr. Morgan, whose 540 stores are open 362 days a year, said Sundays are "extremely important. The consumer wants to buy on Sundays. There's no question." He recommended synchronizing employees' shifts with their families, as there are often spouses who also have non-traditional hours.
Those who backed Sunday operations said the smaller Sunday staffs make more money because the shorter day is more productive.
Mr. Cherry agreed that there is money to be made, but pointed out that the owner must be prepared to come in if the manager can't cover the Sunday duty.
Like Mr. Wright, Sun Tire's Mr. Erickson wasn't buying it. "I'm against Sunday. I would not even consider it as long as my other days are profitable," he said. "Seven-day stores have not proved to me they're profitable."
Several panelists suggested doing away with newspaper advertising.
"We made a decision to de-emphasize newspaper advertising three to four years ago," Mr. Caulin said. "It did not affect our business. We wanted to shift toward branding. We put STS on the radio, TV, billboards. The cost-effectiveness of outdoor advertising is quite significant. It's good for branding."
Yellow Pages advertising also bears analysis, the panel said. Some dealers are spending $40,000 to $50,000 and don't know what return they're getting. That's why it's important also to use separate phone numbers on your ads so you can track the impact of different ads and their placement.
Mr. Olson said he enjoyed the seminar and looks forward to next year's. "A lot of the smaller dealers need the help and guidance to improve, expand and increase their profits."
Mr. Bauer heartily agreed. "Everyone's got their own issues. I learn more by talking with others one-on-one. If you want to educate yourself, ask questions and pick up ideas."
"It was great," said Rogelio Contreras, owner of El Gallito Ingles, a two-store operation in El Paso, Texas.
He and colleague Ramon Salais buttonholed Mr. Barnes after the session. "It is so hard to be in business by yourself," Mr. Contreras said later. "When you talk to these people and find out you're doing the same things, you confirm with yourself that you're on the right track."