CARSON, Calif. (June 20, 2003)—With four to five vehicles each weekend and one a day during the week rolling into the service bays at his Carson store from two separate fleet accounts, Alan Tucker has taken a liberal view of profit margins.
Mr. Tucker, who is co-owner of the Big O Tires Inc. stores in Carson and El Toro, Calif., said the way to go is to look at volume instead of individual margins.
“I think that most wise business people like to have a broad customer base and that basically margins average out,” he said. “…I'd rather have 100 cars vs. 45.”
That reasoning is behind his and some other Big O dealers' reactions to the company's new national fleet account program, set to roll out nationally in 30 to 60 days. The program, which links fleets that use passenger and light truck tires to franchised Big O locations, has been tested in select California stores since April, said Art Herman, Big O's national account sales manager. He joined the Centennial, Colo.-based franchiser—a subsidiary of TBC Corp.— in February after a history with California-based Winston Tire Co., where he held various positions, including national account sales manager.
Mr. Herman said the program will be able to handle the largest fleets down to those with 10 to 25 vehicles. The test program linked specific Big O locations with Enterprise Fleet Maintenance, a division of Enterprise Rent-A-Car; refrigeration company Hussmann Corp.; and the Church of the Latter Day Saints. Big O plans eventually to allow any of its franchised locations to handle fleet services. Big O did not have a specific figure for the program's potential impact on sales.
The program may be followed later in the year by a second initiative that will let participating Big O dealers offer Michelin Americas Small Tires (MAST) products and services to Michelin North America Inc.'s national accounts. Officials with the tire maker declined to comment further about that program.
Though fleets have expressed interest in Big O's national program, Mr. Herman said no contracts so far had been signed.
“Until we roll out the program, we're not going to go through the credit process,” he told Tire Business.
The national account program would apply to all of Big O's products and services, he said. Big O's more than 550 stores in 22 states plus British Columbia offer oil changes, alignments, brakes, shocks, struts and undercar services.
Many Big O dealers had been waiting for a national account program, and Mr. Herman said dealers are anticipating the national roll-out.
“It's an untapped business for Big O,” he said. “The company's never gone after that business, and it's a business that has (a) 10-million vehicle potential nationwide.”
Michael Combe, manager of the Big O store in Chino, Calif.—another location testing the program—said the system has given the store a customer that before had been elusive. The shop has been servicing vehicles for Hussmann, which has a location near the Big O store. When the Chino store opened, its management offered a preferred customer program to neighboring businesses.
That offer garnered some business, “but nothing on a fleet basis like this,” he said. “This one I've been dying to get.”
The Hussmann location, which services refrigeration units in grocery stores, runs about 250 E-350 vans, Mr. Combe said. Hussmann has its own maintenance department, but the Big O shop handles overflow and emergency services.
“It's very good for business,” Mr. Combe said. “We try to get them in and out as fast as we can.”
So far, he estimated the shop had handled about 10 vehicles, or two per week. The Chino store started its test run May 1.
Mr. Combe said margins on the fleet services—a common dealer concern with national accounts in general—are not a big concern considering the extra business. He said the shop also hopes to win even more work when the people from the company look for a shop to handle their personal vehicles.
“It's all plus business,” he said.
Mr. Tucker, who has been testing the program at his Carson store, said his regular business has not been impacted from the fleet business. He services vehicles for one account on the weekends, plus about one a day from the second account. With the whole weekend to work on the first account's vehicles, he is able to juggle his individual customers, he said.
“So far the relationship's going well,” Mr. Tucker said.
As far as margins go, he said Big O's pricing structure has been fair. “They've been reasonable from what I can tell,” he said.
Ron Britton, who along with his father owns four Big O stores in Arizona, said he's looking forward to participating in the company's national account program.
“(Mr. Herman's) going in with certain margins so we can still make a decent margin on this stuff,” he said.
Mr. Britton said he had been waiting for Big O to launch a fleet program since, in the past, he had to turn away business because local companies were linked to other stores through national accounts.
All three Big O dealers also hope the Michelin program comes to fruition as tentatively described. Mr. Britton said the business would be beneficial even though the margins on tire sales would not be very high. “But on the service end, we can make up for it,” he said.