Frank Smola thinks some tire dealers may one day embrace a new program that, he says, for now has a few people accusing him of being naÃ¯ve.
Mr. Smola, president and CEO of Merlin's Franchising Inc., implemented a lifetime tire warranty on Sept. 1 at 70 Merlin Muffler & Brake shops in Illinois, Georgia, Michigan, Texas and Wisconsin. The automotive service shops added tire sales to their staple only 20 months ago. The stores carry Continental and General lines, though Merlin is open to the possibility of additional brands. Roughly 65 percent of Merlin shops sell tires, though Mr. Smola expects to have 95 percent on board within 18 months. Of the 70 stores, 60 are franchises and the rest company-owned.
Mr. Smola acknowledges that other companies have tried similar warranty programs that quickly became 800-pound gorillas. For example, in 2002, a car dealer in Jackson, Miss., suspended his ``tires for life'' promotion because of concerns over the long-term cost. The dealership's oil change business increased with the offer, officials told Tire Business, but the replacement tires that were free to customers certainly weren't to the dealership.
However, Merlin gave the program careful consideration, Mr. Smola said, and does not expect similar problems. In addition, about 80 percent of Merlin's customers in a given month are repeat customers, so he expects misuse of the tire warranty to be the exception instead of the rule.
``This is really no different than what we do in our other service categories,'' Mr. Smola said, citing a 25-year warranty on brakes and lifetime warranties on mufflers. He added that customer feedback so far has been ``very positive.''
Though he has doubters now, Mr. Smola believes other dealers may embrace the program.
``It would not surprise me if much bigger organizations wake up and say, `This makes a lot of sense,''' he said. ``I believe anything's possible.''
With Merlin's warranty, customers must adhere to a maintenance schedule. They are responsible for regularly balancing and rotating the tires, performing a wheel alignment every 24,000 miles and fixing any other issues, such as worn suspension parts, within 21 days after they're detected in an inspection. Customers must have the balancing and rotations performed at the Merlin shop that sold the tires, but they're free to use other shops for the alignments and other work.
``We're basically saying that if you just practice the basics of good automotive maintenance, we'll cover those tires for the life of your ownership of the car for whatever reason, be it road hazard or tread wear-out or defects in materials or workmanship,'' Mr. Smola said. He added the company will consider ``wear-out'' to happen at 4/32nds-inch tread depth.
The warranty carries some exclusions, such as off-the-road or commercial tires or tires for race vehicles. Tires damaged by vandalism or accidents are not covered. The warranty is in effect for as long as the consumer owns his or her car.
At the end of the tire's life, Merlin will replace it with a new tire. A tire of comparable quality will be used if the original model tire is no longer available. Mr. Smola said the long-term costs of the program will be offset by additional revenue from other services that committed customers would bring.
``The odds are that there will be other things that they will need,'' he said, indicating the company's goal to have customers come to its stores for virtually all of their automotive needs.
For Merlin, the tire warranty program marks one tangible benefit the company extends to customers to build long-term relationships, Mr. Smola said.
``Obviously we want new customers, but our success is really dependent on keeping and satisfying regular customers,'' he said. ``This is a way to do that.''
The idea of customer relationships was the reason Merlin decided to offer tires in the first place. Merlin, which performs most automotive service except for internal engine work, transmissions and body work, decided to offer tires instead of sending customers elsewhere.
Brakes represent between 40 and 70 percent of Merlin's business. While that won't change much, Mr. Smola expects tires to represent about a third of retail dollars within two years.
The company itself is expected to grow. Mr. Smola said the Merlin program grows about 4-5 percent a year in terms of number of stores. The average store volume also increases from 5-20 percent annually. In the past 10 years the average store volume has doubled. The chain has kept its focus on customer relationships instead of other factors like price, Mr. Smola said.
``It's not about price,'' he explained. ``With us, price is part of the formula, but that's not the only thing.''