HOUSTON (Aug. 17, 2009)—As the recession grinds on, leaving many of the country's regions reeling from the one-two punch of double-digit unemployment and a tsunami of home foreclosures, some tire dealers in Texas, Colorado and Utah seem to be coping—and in some cases thriving.
These retailers interviewed by Tire Business, who report they haven't had to cut staffing, pay or hours, explained that they study ways to reduce overhead, generate more profit from every sale and, at the same time, strive to provide not just good service, but “great service.”
Superior Tire & Service
Superior Tire & Service, based in Orange, Texas, is family owned and operated. Owner Tim Hughes started the dealership in 1970 and today has five stores, in Orange, Vidor, Nederland, Beaumont and Bridge City.
Mike Hughes, vice president and Tim Hughes' son, said Superior Tire has provided raises in the 5- to 7-percent range in the last 12 months. During that period, cutbacks in benefits and salaries were not necessary.
Technicians, sales representatives and managers are on salary-plus-commissions, with commissions amounting to roughly 30 percent of their paychecks.
Tire techs make $9 to $12 per hour, or about $25,000 to $34,000, while mechanics pull down from $11 to $15 per hour plus commissions, with ASE-certified technicians being in the higher end of the spectrum. Mike Hughes said that mechanics' pay, with overtime, winds up being about $50,000 a year on average.
Most managers are paid in the neighborhood of $40,000 a year plus commission, which translates to between $50,000 and $70,000 a year. The owners each take between $80,000 and $90,000 a year in salaries and benefits, Mr. Hughes said.
Both regular and supplemental health insurance are available to individual employees, with Superior paying 75 percent of the worker's premium. While available as a payroll deduction, the company does not pay toward the premiums for spouses or children.
Normally, employees may participate in a company profit-sharing plan after they've worked at Superior Tire for a year. The company will dollar-match the worker's contribution to a 401(k) fund. There is a 3-percent-of-income limit. In other words, a worker making $40,000 a year can contribute up to $1,200 annually and Superior will match that $1,200.
“We reserve the right to not match if the company's not doing well,” Mike Hughes pointed out. “We went through a hurricane last year, but we still kept the match program.”
One of the keys to Superior's weathering the dismal economy is focusing on the customer. “We try to provide great service, not good service,” Mr. Hughes said. “Good service is expected. Great service keeps the customer coming back.”
That service depends on motivated, productive workers. “We try to keep a positive environment, keep benefits up and pay fair wages. We try to get (employees) to buy into the big picture—that is, to not tell them to do something but why we need to do something and how it relates to overall service and satisfaction,” Mr. Hughes explained.
“It means a lot more if we're doing this because (customers) will be very happy. We try to get them involved.”
Barnsley Tire Co.
Sam Barnsley is no stranger to crunch times—he opened his lone store in Boulder, Colo., in 1981 in the midst of an economy slammed by slumping oil prices. Barnsley Tire Co. is still at the same location, near the city's popular Pearl Street mall, on land that Mr. Barnsley said is way too valuable for a tire store.
Luckily, 28 years ago he was able to take out a “very, very long lease.”
And that's not the only thing that's stable. “The last two or three years we've all been concerned, as we've heard the bad news,” Mr. Barnsley said. “But I'll be honest with you, in my market, Boulder, Colo., it's been business as usual. My numbers are very steady. As matter of fact, we had a good 3- to 5-percent increase looking at July compared to the last three years.”
He credits the demographics of the college town and its businesses and agencies, such as the University of Colorado, National Bureau of Standards, National Center for Atmospheric Research and IBM Corp.
“There are a good number of people who are affluent enough to not have to change their buying habits like people in many parts of the country, and even in our own state.”
Mr. Barnsley reported that he issued a 10-percent raise to one employee in the last year and hasn't had to reduce wages or benefits.
Health insurance was changed in the last 12 months to a different program with a deductible of up to $6,000 (for workers with families) that “makes everyone think once or twice before going to the hospital because they have a runny nose,” he said. “It's a back-to-basics policy that's designed for catastrophic events and big procedures.”
Some workers decline health insurance because they're covered under a spouse's policy or they're willing to take the risk to get maximum pay.
While he declined to divulge his salary, Mr. Barnsley told Tire Business that his tire service workers make about $30,000 to $35,000 a year, technicians pull down between $40,000 and $50,000, and managers earn an annual salary of about $45,000.
There is no profit-sharing plan, but Barnsley Tire does have a basic 401(k) available.
Mr. Barnsley enjoys coming up with spiffs tailored to the individual worker, all of whom have been with the company at least eight years. (His alignment specialist is a 22-year veteran.)
“One of our mechanics loves watching and keeping up on all the NASCAR stuff. One year I bought him the Richard Petty Driving Experience. Another guy, someone who's been with me for 20 years, has relatives in Florida. I got him a plane ticket to Florida, a rental car and three nights at a hotel and gave him $500 and said, ‘Go have fun.'”
Mr. Barnsley said he has been trimming costs since before the current economic downturn.
“Credit card processing is such a giant expense. You can shop different processors and negotiate a new deal with them. We saved about $4,000 a year that way. You can also use co-op money to help pay for ads in the Yellow Pages.”
He said some suppliers in the Denver metropolitan area “are bending over backward to give a little extra” to their stable, longtime dealers, such as making deliveries twice a day.
Burt Brothers Tire & Service
Tire Business caught up with Wendel Burt as he was packing for a trip to Panama. The co-founder of Burt Brothers Tire & Service answered questions about his dealership's compensation and benefits structure.
Founded 18 years ago, Burt Brothers' corporate office and warehouse are in Salt Lake City. Retail locations include two Salt Lake City stores, two in Park City, and one each in Sandy, Bountiful and Farmington.
While no raises were issued in the last year and the technicians' pay was changed to a flat-rate basis to make payroll calculations easier, Mr. Burt said there were minimal effects on compensation and the move made sense because the company hired from a new car dealership three technicians who were accustomed to flat-rate pay.
Burt Brothers promotes monthly service specials, such as tire protection plans, shock absorbers, alignments and oil changes with Valvoline full or blended synthetics for normal or high-mileage vehicles. Depending on the job and employee, techs and managers often earn an extra $500 and $700 a month, Mr. Burt said.
And what is the base compensation?
Tire techs work a 50-hour week and pull in between $28,000 and $42,000. Technicians, depending on their certification and specialty, make up to $65,000 annually, but when bonuses are thrown in, some can make in excess of $100,000.
Store managers have a base pay of $4,000 per month, but there are several ways—such as maintaining or exceeding certain overall gross profit targets—for the manager to earn additional monthly income. Mr. Burt said annual compensation for he and his partner, his brother Ron, is in the neighborhood of $90,000.
“With year-end bonuses and if all the sales targets are met, the guys can make another 10 grand.”
Burt Brothers helps with technician training and certification, paying half of the cost immediately and, if the employee stays five years, the company winds up footing the entire bill. (Each year, 20 percent of the remaining balance on the worker's IOU is eliminated.)
“If he quits, he owes us whatever's left on the IOU,” Mr. Burt said. “It keeps the longevity going. If they're forthright, it never costs them anything. It's a win-win situation.”
Burt Brothers' workers are highly valued, he added. “People are always trying to hire our employees. We have a standing thing, which is, ‘Don't all of a sudden give us your two-week notice. Talk to us and let us see where we can work something out.'”
Promotion management is an effective way to boost income and cut waste, he said. “Keep promoting. Be creative. We went to Bridgestone and bought 1,000 units of their Bridgestone Dueler A/T Revo, the hot SUV tire. They asked what we could do to help stimulate sales. So to run a buy-three, get-one-free special, they sold them to us at 25 percent off at our normal cost. Some of these tires sell for $200 each and they're running out the doors!”
The dealership is always vigilant about its bottom line.
“We did make some adjustments to our spending. I dropped a couple of direct mail pieces this year, which saved $30,000. I kept the broadcast budget the same, but I start working in November for the next year. That way you can lock it down and get a good rate,” he said.