A Detroit-area Big O Tires Inc. franchisee still is awaiting word on whether any of the Kmart Corp. stores connected to his shops are part of a crop of 54 sold to Sears, Roebuck and Co.
Sears announced at the end of June that it has agreed to acquire ownership or leasehold interest of up to 61 off-mall stores for about $620 million. Of the stores, seven are Wal-Mart Stores Inc. outlets, and the remaining are owned by Kmart.
Sears expects the stores to be converted to its platform by the fourth quarter next year. The exact locations of the stores have not yet been disclosed.
``These transactions will jump start our strategy to grow the Sears brand off-mall, increase our points of distribution and acquire well-located real estate at a fair value in key markets for Sears,'' said the retailer's Chairman and CEO Alan Lacy in a statement. ``The acquisitions will allow us to quickly open more stores and significantly boost our off-mall retail presence in priority markets that have synergies with our existing mall-based stores.''
While Sears won't take possession of most of the Kmart stores until next year, Steve Wilson, president of U.S. Autocare L.L.C. is wondering if his stores will be affected. U.S. Autocare operates four freestanding stores on Kmart property and seven stores connected to Kmart outlets.
If any of those 11 Kmart stores is part of the Sears deal, Mr. Wilson said he would at least have to renegotiate the lease, or Sears could decide to close the store or install its own auto center.
Connected stores, which share an ``umbilical cord'' of service like electricity and air conditioning, could face problems if the main store went dark during a transition.
Mr. Wilson said U.S. Autocare's contract calls for some financial compensation if the Kmart store closes, but that's the only guarantee.
``We don't really control much of that,'' he told Tire Business. ``They hold the master lease. If they decide to shutter a store for performance,...they can do what they want to do.''
In the future, Mr. Wilson hopes to secure more freestanding sites, although those are becoming difficult to find in Michigan. The freestanding locations, he said, offer more flexibility with showrooms and growth.
Still, connected stores can hold their own. He said some connected stores, such as one in Port Huron, Mich., has poor visibility, yet it performs well on the strength of the store manager. Some connected stores, Mr. Wilson added, are exceeding their expectations by 10 percent.
If Sears ends up buying some of his Kmart stores and he's able to renegotiate new leases, Mr. Wilson said he would expect an uptick in business as consumers would be drawn to the new Sears concept for its novelty.
``As long as they run the stores well, it wouldn't be a deterrent,'' he said. ``As long as the building stays open, that's all I'm concerned with.''
For his own part, Mr. Wilson is working on adding more stores, possibly in the Brighton or Grand Blanc, Mich., markets. He recently moved his headquarters to Southfield from Dearborn, Mich.
He's encouraged by a bigger push by Big O to sign more franchisees in the market.
``To be able to really compete long-term,...you have to add more stores,'' he said, noting that other Big O owners will add to the market buzz in Michigan.
U.S. Autocare finished June with a 31-percent increase in sales and a 24-percent hike for the year-to-date.
``We wouldn't see the increases we're seeing now if we weren't making some inroads'' with the Big O name, he said.