MEMPHIS, Tenn. (Feb. 14, 2002) — TBC Corp. has agreed to supply tires to all company-owned Midas Inc. muffler shops in a program that could be expanded to the more than 2,000 Midas franchise outlets nationwide.
Initially, Memphis-based TBC is providing Midas' company-owned stores with TBC's own private brand tire lines but eventually could supply the automotive service retailer with its own proprietary brand.
Currently Midas is testing the tire program in about 60 stores nationwide—among them the Cleveland, Chicago and Los Angeles areas as well as in New England, a TBC spokesman said.
TBC and Midas signed the supply agreement prior to TBC's annual dealer meeting last month in Palm Desert, Calif. Gary Paulson, TBC's vice president of sales, announced the program during a speech on the event's final day.
While Mr. Paulson said at the time that TBC would supply tires to all Midas retailers throughout the U.S., the deal involving the franchise locations still must be signed.
He later told Tire Business that since the program is being run through TBC distributors, the tires that show up on Midas racks “will depend upon which brands our distributors market. However, what's important is that we're promoting this at the retail level through (point-of-purchase) support etc. as being a Midas program.
“The Midas stores are not going to promote our Multi-Mile, Cordovan or Sigma brands. They'll attempt to promote the fact that this is a Midas tire program.”
A Midas spokesman, without further elaboration, said the arrangement “will be discussed at our upcoming dealer meetings,” which were scheduled for the week of Feb. 11 in Las Vegas.
National account program
TBC is calling the deal with Midas its first “national account program” and stressed that it will be handled through distributors and not at the corporate level. It won't be a direct relationship between TBC and Midas, the TBC spokesman said.
“If there's a Midas franchise in Denver, let'say, he would buy his tires from a TBC distributor in Denver,” he explained.
Mr. Paulson, during his speech, detailed a three-pronged plan for the relationship. It calls for:
* Keeping it simple. The Midas program would include just four tire lines (depending on which brands a TBC distributor carries): a premium broadline passenger line, an H-rated performance tire, a broad-line light truck line and an entry-level light truck tire that Mr. Paulson said would be available “in just a few sizes.”
* “Midasizing” the product line. This means developing a program where the products “are perceived by the consumer to be Midas products,” Mr. Paulson said. “Regardless of what the tire you sell them says on the sidewall, Midas is going to promote it and sell it as a Midas tire.”
Eventually the tires could be sold under the monikers Midas Premium Touring Radial, Midas Premium Performance, Midas Premium Touring LT and Midas Premium All Position LT.
A benefit of marketing the tires that way is it would protect non-Midas dealers in geographic areas where TBC brands already are sold, Mr. Paulson said. Midas point-of-purchase materials will promote the tires as a house brand—not a TBC brand.
For the time being, however, Midas will offer only TBC's own tire lines, the TBC spokesman said. “They won't be Midas tires,” he explained. “It's way too early for that. You need a critical mass to manufacture a certain brand…. The important thing is that Midas is going to have the ability to carry a coordinated and integrated line of Midas tires. They're just not going to say Midas at this point.”
* Creating a national central account billing system. Once in place, distributors will be able to invoice and collect via the Internet, keeping record-keeping simple and, as the TBC spokesman said, keeping 25-tire Midas dealers as overhead-efficient as those who sell many, many more.
“That is a tremendous step forward,” he said of the billing initiative. “That really was the enabling issue.”
In northeast Ohio, where the program was originally offered through 10 company-owned suburban Cleveland Midas locations, the TBC initiative is off to a flying start, according to participants.
Darrell Hill, president of North Gateway Tire, which serves as the area's TBC distributor, said he has been delivering a lot of tires to the various Midas outlets.
North Gateway is even selling to a few independent Midas locations that were approved by Midas, Mr. Hill added. “I think it will catch on,” he said of the program.
North Gateway Manager Darrell Manke said the wholesaler is filling orders for several types of TBC's Multi-Mile brand. “The orders keep coming across,” he said.
Ed Dye, manager of the Midas store in Brunswick, Ohio, about 20 miles southwest of Cleveland, said the TBC tires have been selling well. He estimates he has moved 250 to 300 units since the program began in September.
Mr. Dye said the store changed from a franchisee to a company-owned location last June. At that time it was re-staffed with people trained to sell and install tires. He said Midas completely reconfigured the store, adding tire racks and equipment necessary to maintain a decent tire inventory.
Not quite six months into the program, Mr. Dye said customers are just learning that tires are available through his location, but that from time to time someone pops in with the sole purpose of buying tires.
“So far everything has been good,” he said. “I've had nobody come back with any complaints.”
Good for everyone
While Midas would not comment on the pending tire program, some of the early pilot-program participants think the muffler company has good reason to make the foray into tires. As North Gateway's Mr. Hill pointed out: “Mufflers aren't what they used to be. They're made of materials that last longer. Midas needed to do something, and tires look like a good answer.”
And just by the nature of the business, muffler shops spend the majority of their time with customers' cars up on lifts. “You get it up in the air and you get the chance to check the brakes out, the suspension and front end,” Mr. Dye said.
That idea wasn't lost on TBC.
“Midas understands that it needs to broaden its base of merchandise to everything under the car,” the TBC spokesman said.
The thought of up to 2,000 independent Midas franchises selling tires has TBC tallying up potentially big tire numbers. Offering the hypothetical scenario of each franchise selling one set of tires per day, the TBC spokesman noted this would quickly add up to two million units over the course of a year.
However, that would first call for bringing franchisees aboard one by one, which he admitted is far from guaranteed to happen.
What's more, not all Midas shops will sell tires equally as well.
The early returns on the pilot program are mixed, with the results varying on a store-by-store basis, Mr. Paulson said in his speech. He added that in general the program was successful early on and termed it all “plus business” for distributors. Just as important, it has not been disruptive to existing TBC business, he said.
Some Midas franchisees might struggle at the outset, the TBC spokesman said, because “you're putting people into the tire business who have never been in it before. You've got some natural resistances,” such as stores needing to be reconfigured, employees having to be trained etc. “I would say we're using it as a learn-by-doing experience,” he said.