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Tire Factory boosts store count, may opt to become co-operative

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PORTLAND, Ore.—The Northwest Tire Factory L.L.C.'s network grew by 28 stores in 2012 to 209 locations, and the marketing/buying group has set a goal to add 25 more this year.

The group's management team presented that assessment at its annual membership meeting in Portland, Feb. 21-23, which drew about 500 dealers, vendors and guests.

Portland-based Tire Factory also unveiled plans to revamp its “Best in the West” warranty program and proposed changing its corporate status to a co-operative from its existing limited liability corporation status.

Tire Factory's 209 locations are spread across 14 western states—about 180 network members operate 191 Tire Factory-branded locations while an additional 18 affiliated dealerships buy tires from the distributor.

Tire Factory CEO John Kreidel told Tire Business that the marketing group is looking to increase the number of locations within its current markets with a special focus on boosting the number of affiliated dealerships in the Denver area, where it has 10 locations.

The group operates distribution centers in Portland, Salt Lake City and Denver. The small Denver operation—housed in a leased warehouse which accounts for about 2 percent of Tire Factory shipments—may be moved to a larger facility once more dealerships are added to the local market, he said.

Tire Factory officials acknowledged that fill rates from the warehouses fell late last year as the centers tried to reduce the inventory of price-point tires. They set a goal to push the fill rate percentage up to the 90s this year.

About $3 million in “slow moving” inventory was sold at or below cost to members, Mr. Kreidel said. “That was a savings of about $500,000 to you,” he told dealers at the meeting. “But it reduced our 2012 profits by the same amount.”

However, Tire Factory was able to make $1 million in profit for 2012, with Mr. Kreidel assuring members, “This organization is in solid shape.”

Other goals for the network include improving phone communications with potential customers, increasing training for service counter employees and providing customizable websites for the various Tire Factory locations. In its aim to improve consistent quality among its locations, Tire Factory is implementing a peer rating system in which fellow members rate each others' locations for appearance and service.

Other details from the meeting include:

c Warranty program changes, expected to be implemented in March, provide member dealers two policies they can offer with their tire sales—”Good as Gold” and “Platinum.”

The Gold Warranty can be included in the price of the tire and offers free air checks, tire inspections, rotations and flat repairs and a pro-rated road-hazard policy, Tire Factory said. The road hazard policy, serviced at any Tire Factory location, provides full replacement for the first 30 percent of treadwear and pro-rated to 3/32nd-inch of tread depth or 36 months.

The Platinum Warranty offers an upgrade that can be included in the tire price or used as an upsell from the Gold Warranty. The Platinum Warranty includes the features of the Gold coverage plus free balancing, tire pressure monitoring system reset with tire rotation and alignment check, the group said. The road hazard warranty provides full replacement for four years or up to 3/32nd-inch tread depth. The warranty also provides out-of-service-area road hazard replacement, in which the customer can have a tire replaced and receive a Tire Factory reimbursement plus $15 from the original seller location.

c Tire Factory management is looking into converting the marketing group to a co-op for tax purposes. Subject to membership approval, the co-op business operation would maintain many of the same ownership benefits but owners would not be subject to the minimum state business tax in every state where Tire Factory has locations.

Under a co-op, member earnings would grow as purchases increase and members would receive cash distributions every year as dividends. After 10 years of capital payments into the co-op, a dealer member would be fully vested and would no longer have to make the payments.

The proposal was prompted by the hefty $800 minimum state tax California has been imposing on Tire Factory dealers in all states. Tire Factory encouraged members to join in a legal action against California citing the state minimum tax as unlawful and seeking a tax refund.

c Tire Factory, which distributes Goodyear, Dunlop, Kelly, Hankook, Yokohama, Nokian, Summit, Trazano, Headway, Black Lion, Venezia and Boto tires, added Cooper tires to its VIP program that offers rebates for member purchases. In addition to the Hankook medium truck tire lines, Tire Factory has added Yokohama truck tires to its program.

Tire Factory officials noted that the group had its best year in farm tire sales last year, however, overall units shipped from its distribution centers were essentially flat in 2012, compared with the previous year.

c Tire Factory encouraged members to participate in its Traction POS system and set up local store websites through the network website that has been reworked for better search optimization and increased customer calls. So far 30 dealerships are using the system.

c During the meeting, members elected Eric Gill of Nelson Tire Factory in The Dalles, Ore., to a three-year term as chairman of the board, succeeding Chris Cornelius of Clair & Dees Tire Factory, Rexburg, Idaho.

Other members elected to the board were: Don Fowers of Fowers Tire Factory, Clear-field, Utah; Bill Spencer, Creswell Tire Factory, Creswell, Ore.; Dave Daniels, Rimrock Tire Factory, Cody, Wyo.; and Bob Fox, J&J Tire Factory, Helena, Mont.



To reach this reporter: kmccarron@crain.com; 330-865-6127.
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