MEMPHIS, Tenn. (June 15, 2001)—Sometimes, looking good just isn't good enough.
As much as he likes to kid about it, Big O Tires Inc. President John Adams knows when he looks in the mirror that although in some circles good looks may open opportunities, he and Big O's parent, TBC Corp., also must be doing something right.
Thanks to an accelerated expansion program that continues to roll out new locations in assembly line fashion like flapjacks at a county fair, Big O already has met its full-year goal of having more than 480 retail tire stores in operation. It's been five years since Memphis-based TBC opened its wallet and acquired the successful retail franchise chain. Since then, Big O has steadily pumped up the 395-store mark it rested at in 1996—either by opening new sites, acquiring existing dealerships or enticing dealers to have what you might call a “conversion experience.” And there's still more stores in the pipeline.
Before the year is out, Mr. Adams, an 18-year Big O veteran, expects the Englewood, Colo.-based franchiser can baptize another 20 to 25 stores. Mind you, he's admittedly offering a “conservative” number, joking that if and when that tally is surpassed, it'll only make him look even better, mirrors not withstanding.
The company, which spans some 20 states, also has ventured into new territory. After adapting the Big O franchise agreement to comply with Canadian and provincial law, it recently converted an existing one-store dealership in Calgary, Alberta, to the Big O system. It's the first Canadian franchisee to belong to the U.S. program, although there are 30 Big O dealers in British Columbia who are licensed under a separate franchise agreement inked in the early 1990s. More franchise outlets are planned in Alberta, Mr. Adams said, as Big O continues to talk with other dealers.
Hitting TBC's year-end goal at not quite the halfway mark of 2001 came about due to what he said is a combination of factors. “First, we tried to create programs with the independent dealer in mind. We listened to the concerns they have in today's marketplace and tried to address those concerns. Then we put together financial incentives to assist dealers in their trade dress and image to consumers, which is so important….”
The company has “put a real focus” on that strategy internally in order “to address our customers' needs,” he continued. “Part of that is building our brand at our outlets, and part of it is putting together programs to help dealers be successful.”
As consumers continue to wrestle with making smart buying choices, Mr. Adams said from a retailer's standpoint, “the markets are starting to recognize the importance of being aligned with a larger entity that can have regional or national presence. And we're able to do that.” For a small- to medium-sized dealership, having the clout that a recognized name can wield, from product offering to distribution advantages, often can make the difference between good looks and survival.
Commenting on what he called “an ambitious goal,” Larry Day, TBC's president and chief executive, said Big O's plans earlier this year were to open at least 20 new locations for the full year on top of its base of 462 outlets operating at the end of 2000. The company already met that objective with 482 stores currently open in the U.S., and possibly as many as 10 other locations on the drawing board and ready for launch by mid-year.
“Our expansion thus far in 2001 has been aided by the acquisition of some stores,” Mr. Day said in a prepared statement, “but our focus remains on expanding through new franchised locations.”
Chalk up at least some of Big O's success, Mr. Adams explained, to its philosophy: “We've allowed the small business person, who happens to be independent, to retain ownership under the franchise concept.”
In order to entice potential franchisees, the company has relaxed some of its criteria, allowing what Mr. Adams terms “conversion dealers” to continue performing services that in the past Big O considered to be unapproved under its franchise terms. It's now giving them an opportunity to keep those services—the two biggest ones are tune-ups and mufflers—“as we work to transition more of their revenue to tire-related services,” he said. “Many of them would like to get away from some of these challenges they have and stay focused on tires as their primary business, but they just can't drop what might be from 30 to 50 percent of their business.”
According to TBC, Big O is now the nation's largest franchiser of retail tire stores.
Last fall—during the Automotive Aftermarket Industry Week trade shows, held annually in Las Vegas—Big O unveiled an associate dealer program designed to attract existing dealerships into the Big O fold. Among its features, qualifying dealers converting to the Big O program have the $25,000 franchise fee waived; they're also given two chances to opt out of the standard 10-year franchise term, after three and seven years. The program also is offering liberal terms on up to $50,000 in inventory and dollar-for-dollar matching funds for up to $50,000 in advertising and store renovation expenditures.
With a franchise, dealerships that are used to swimming upstream on their own can benefit from a larger presence in a market, more advertising push from corporate “by belonging to a larger group with more dollars in the advertising pool,” Mr. Adams said, standardized training and products, and exclusive territories.
While there may be a few Firestone dealers around who are quietly considering other alternatives in the wake of the ongoing tire recall saga, he said Big O has only converted one Firestone dealership thus far—last December in Oregon. “We've certainly had a lot of interest and are talking with people, but we haven't been targeting Firestone dealers,” he added.
In addition to dealership conversions, some of Big O's growth has come through various acquisitions. The company bought 20 Winston Tire locations—one in Arizona and the rest in California—when they were put on the block by the Heafner Tire Group Inc. Recently, the Winston chain was acquired by Lafayette, La.-based Performance Management Inc.
Mr. Adams said Big O also is eyeing a couple of other closed Winston stores on the West Coast “if we can find a franchisee who wants them,” although territory exclusivity is always a concern for the company in the Golden State's crowded tire retailing landscape.
Meanwhile, TBC has acquired the North American marketing rights to the Vanderbilt and Turbo-Tech private brand tire lines from Goodyear. Reynolds Tire & Rubber, a division of Ganin Tire Co. Inc. in Brooklyn, N.Y., had distributed the lines until recently.
“As the marketplace evolves, independent tire dealers need a strong, complete, exclusive private label on which to focus their businesses and build overall sales margins,” said Ken Dick, executive vice president of sales for TBC's private brand division.
“Vanderbilt/Turbo-Tech supports this strategy by providing a unique product lineup, without affecting the exclusivity that is so important to our Multi-Mile, Cordovan and Sigma customers' success.”
The company—which claims its brands represent 7.5 percent of the U.S. replacement passenger tire market and 10.5 percent of the light truck aftermarket—also has stayed pretty busy managing two retail formats. It continues to boost the holdings of its Florida-based 172-store Tire Kingdom Inc. (TKI) retail chain, which just launched an associate dealer program. (See accompanying story on page 1.)
And apparently there's some “cross pollination” going on between TKI and its Big O sibling. Of the 30 new stores Big O has added through June 13, all but one have been franchised. One dealership that converted brought seven outlets in tow, and another conversion netted three stores. But that one lone non-franchise outlet, in Muncie, Ind., is a company-owned store opened by TKI under the Big O format.
“Tire Kingdom has the systems and management and incentive compensation types of programs to run company-owned stores,” Mr. Adams explained, “while it's easier for us to focus on operating franchise locations.”
Big O will continue to focus on northern Indiana, he said, as well as seek more franchise growth in and around Kentucky, and also has “a couple things cooking in Missouri.” However, any opportunities to grow the chain in the East will be worked out in tandem with TKI, which has a strong base—and well-established distribution system—in the South.
In the past, Big O sometimes built stores that remained fallow as it sought to fill them with franchisees. The company in fact has two stores built in California that have remained empty for a year, Mr. Adams acknowledged.
But over the years the company's site selection criteria has improved. Big O is “very supportive” of the concept of building stores that don't always have a ready and willing suitor, “but now we're more discriminating,” he said.