CORONA, Calif.—Freedom Tire Distributing is spreading its wings and moving into a larger warehouse that it hopes will allow for future expansion of the business.
Freedom Tire Owner Tom Hofmann said the company's long-term goals and strategic growth plan “involved buying a building somewhere down the road” but it “really hadn't planned on it this year”—that is, until the landlord for the its existing warehouse decided to raise the rent 35 percent.
“Fortunately, we were able to find a building that would suit our needs nearby,” he told Tire Business.
It made sense to make a real estate investment at this time, he said, since the company was going to be paying more regardless. Freedom's soon-to-be-vacated facility has capacity for about 25,000 units while the new building will allow the Corona-based wholesaler to stock about 50,000 units.
Mr. Hofmann said the company is “feeling pretty good” about its progress because “eight years ago we didn't exist. We started off in the corner of a buddy's warehouse with 200 tires in my pickup truck.”
Freedom Tire will be moving in November into the new, approximately 40,000-sq.-ft. building, which is about four miles to the west of its current 25,000-sq.-ft. location on Corona's east side.
The company paid slightly more than $3 million for the new building, Mr. Hofmann said, including some upgrades, such as a sprinkler system and replacing the warehouse floor, which is costing about $70,000. He said the floor is expected to be done by the first week of November so the business can start moving in.
“Our racking is ordered and should arrive a few days after completion of the floor. If all goes well, we should be able to start moving in the middle of November and doing business at the new location the first week of December,” he said.
One of the key selling points of the new location is that it “will allow us to rack to with in two feet of the ceiling,” Mr. Hofmann said—unlike Freedom Tire's current building, where the sprinkler system only allows racking two pallets high.
He said the company invested almost $100,000 on a new high pressure sprinkler system and more than $150,000 on seismic racking, which soon will be required in California.
The move gives the company more than double its current office space. Mr. Hofmann said Freedom also will gain an unused upstairs area of almost 1,800 square feet that it plans to use as a training/meeting center. In the past it has hosted regional meetings of the California Tire Dealers Association and hopes to continue doing that.
The wholesaler covers all of Riv-erside, San Ber-nardino and Orange counties and part of Los Angeles County, and plans to be able to expand that reach with the new location.
“Our plan over the next couple of years is to start going into San Diego County and to expand into all of L.A. County,” he said.
According to the company's website, deliveries to all parts of L.A. County and San Diego already are available on large orders.
Mr. Hofmann said the company wants to cover all of L.A. County by year-end 2014 and will start trying to expand into San Diego County midway through next year.
Looking to the future, Mr. Hofmann said he would like to “possibly expand into central California” perhaps in the Fresno area. “There's lots of possibilities.”
If things go the way they plan, he said “two, three years down the road, we'll be spinning (the new) building, looking for a bigger one.”
Mr. Hofmann would not disclose the company's sales figures, but explained sales this year started off a little rough because of the residual effects of the end of the three-year run of tariffs on Chinese tires, but it started to pick up mid year.
“We've still got the hangover from the tariff,” he said.
“We got hit pretty hard on that because in Southern California, nobody is spending any money right now.”
The volume of Chinese product is “extremely high; way higher than it normally is,” he added, noting Freedom got hit hard “with the devaluation of our inventory when the tariff came off.
“Everything that was in stock went up.”
Mr. Hofmann added that on top of the Chinese product, some of the regular brands, like Mastercraft and Cooper, have also been dropping their price “like crazy...and they don't give you price protection so that's damaged our profitability a little bit.”
He said the company is coming full circle, but it has taken about a year. The first six months were running a little behind last year, but from July on, things started to pick up.
“Right now, with the high volume that we do in the Chinese stuff, and then plus to have some of our domestic brands drop their prices, you almost need a 25-percent increase just to be even.”
Freedom Tire handles two Chinese brands exclusively: The company shares the Venezia line with Los Angeles-based Fairmont Tire & Rubber Inc. and has the Antares line exclusively for its territory.
Mr. Hofmann said the company does not participate in any manufacturer associate dealer programs, but is putting together a program with Cooper Tire & Rubber Co.'s Mastercraft brand—a program in which the company wants to become more involved.
Part of the reason behind the company's latest expansion is gaining space to add another major brand. “We'd like to get one more major line direct,” Mr. Hofmann said, “so we can get more involved in those kinds of (dealer) programs.”
Freedom Tire is a family-owned and -operated business, founded in 2005. Mr. Hofmann said his two sons are involved: Tommy Hofmann Jr. runs the warehouse and Christian Garcia, Mr. Hofmann's stepson, heads up outside sales. He is bilingual, which Mr. Hofmann said helps “bridge the gap” with Spanish-speaking dealers.
Mr. Hofmann said he got his start in the tire business busting tires in the summer of 1973. At the age of 15—for $1.90 an hour—he worked for 4Day tire Stores through high school and then full time afterwards. “I was managing one of their stores by the time I was 19. I spent almost 20 years there and was a regional manager in charge of a third of their locations when I left. I worked both Southern California and northern California markets for them.”
He also spent 10 years in the Dallas market for the firm, supervising a wholesale center in Houston and a couple of locations in Kansas City. It was at 4day Tire where he met Don Wakeling, who was a manager.
They both worked the wholesale and retail businesses at 4day, but Mr. Hofmann admitted, “I always liked the wholesale better.”
In 1993, he left to work for Tire's Warehouse Inc. (TWI), where he was tasked to build up the dealership's wholesaling business.
Helping to get that segment on firm footing for the company, he left TWI in 2005 for a deal to do a partnership with another Southern California distributor. It fell through, “so I decided to give it a try on my own, Mr. Hofmann said.
With a couple of hundred tires and his Ford pickup, he launched Freedom Tire. Sales exceeded $100,000 the first half month, he said, and “I was the only employee.
”The second month I called Don, who was still working for TWI, and told him I needed him. He didn't hesitate; he joined me the next week. That first year Don and I unloaded, stocked and delivered every tire sold.
”The only exception was when we started buying container loads, we would have our sons, who were teenagers at the time, come help us unload while the other was delivering tires.
”We did close to $2 million in sales in 8 1/2 months that first year.”
The business has continued to grow every year since, he said, “and most of the money has gone back in the business—building a $2 million inventory. All of are delivery trucks are paid for. Other than the new building, the company is virtually debt free.”
Mr. Hofmann noted that his 74-year-old father also is in the tire business, working every day running Canyon Truck Tire in Corona, Calif.
To reach this reporter: [email protected]; 330-865-6143.