BIRMINGHAM, Ala.—Express Oil Change & Service Center L.L.C. is getting into tire retailing in a major way following its purchase of Birmingham-based Tire Engineers in February of last year.
The acquisition of the 66-year-old family-owned tire and auto service dealership has served as a launching pad for Express Oil's entry into the tire business, and the company has since begun co-branding its existing stores with the Tire Engineers name, adding a full line of tire-related services at those locations.
So far, 20 of its 88 corporate locations, all in Alabama, now feature the Tire Engineers logo and additional storage space for tires, Express Oil CEO Ricky Brooks told Tire Business. The company plans to co-brand another 40 of its stores—located in Alabama, Georgia and Texas—during the first half of 2014, he said.
Throughout its 35-year history, the traditional quick-lube and automotive service business has done only a small amount of tire sales “just as a convenience to our customer,” Mr. Brooks said.
“We would do tires because we had tire-changing equipment and lifts and alignment in some of our stores to offer those services, but we have never focused on being in the tire business historically.”
Thus far, the additional business has been a success for Express Oil, as the company exceeded its tire sales projections in the first few months by about 400 percent, Mr. Brooks said. It also boosted business overall.
“We got the last six stores done in December. We did 14 (stores) in July and August, and those 14 stores were up about 16 percent on a same-store sales basis in the last five months of the year,” he said. “We were up almost 9 percent in the balance of the stores, so we had a very good year in 2013 anyway.”
Tire sales still were not a significant portion of the company's total sales volume, coming in at “significantly less than 10 percent,” Mr. Brooks noted, but he said the results have been promising.
“A lot of that growth came as it has year-over-year from the oil change and the mechanical service department. It's just that we were fairly conservative in our projections on what the tire model would do because we had no experience with it, and we blew those projections out.”
Beginning April 1, Express Oil plans to offer its franchise owners the opportunity to co-brand their own stores, of which there are 112. Mr. Brooks said that the company will not be offering Tire Engineers as its own separate franchise model, but the company will continue to operate the seven Tire Engineers outlets it acquired as stand-alone shops.
Tire Engineers, founded in 1948 by Johnny Johnston, continues to be managed by former second-generation owner Fred Johnston and his son Michael Johnston. Fred Johnston's other son Howie Johnston has joined Express Oil on the corporate side, assisting in areas such as tire strategy and inventory control, Mr. Brooks said.
“We were very fortunate with the Tire Engineers company,” he said. “The same family owned it the entire time. They have a great reputation, almost identical culture (and a) focus on great customer service. It was just a real natural acquisition.”
As for Express Oil's 28 other corporate-owned locations, nothing has been decided as of yet.
“We'll do these 40 (stores)—we're lined up with the sign companies and contractors and so forth—we'll take a little breather and then make a decision about the other 28 stores,” he said. “There are a few stores that we may not co-brand just because of size and configuration.”
Before launching to its franchisees, Mr. Brooks said it was important that Express Oil test the program and work out all the kinks.
“What we have done is simply said we're going to be the ones that pilot it and learn,” Mr. Brooks said. “And there's been some learning curve for sure with moving into a new business this significantly, with tire storage, tire disposal, new equipment needs and procedural changes.”
He said the company is doing a facelift on all of its co-branded stores, including the addition of racking systems for tire storage—both new tires and scrap tires—and tire changing equipment at all of its corporate outlets.
So far the company has added bays to three of its stores in order to make room for the expanded services and is in the process of adding bays to three more. Mr. Brooks didn't specify which stores were being expanded.
Right now the co-branded stores sell all major tire brands, but Express Oil is in the process of finalizing a product screen.
“At this point we can sell everything. We'll still be able to offer that, but we're going to move a lot more in the co-brands to a featured brand more so than the full-blown Tire Engineer stores because of storage space limitations,” he said, adding that the main brands the company offers right now are Michelin, Bridgestone and Firestone.
While there haven't been any surprises from an equipment standpoint, Mr. Brooks said that in underestimating its own tire sales the company discovered one problem.
“The learning curve has been in offering the full repair and maintenance opportunity to the customer as well as the tires,” he said. In many cases, the dealership's typical tire store customer has come in for an oil change then recognized the need for tires. “Our mechanical business didn't grow as much as we anticipated with the level of tire business that we did,” he added.
Express Oil had assumed a 50/50 mix of new mechanical business with new tire sales, but the company did not achieve that mix. Instead, it was closer to about 25-30 percent mechanical service, Mr. Brooks said.
“We sold a lot more tires than we anticipated,” he said. “The corresponding mechanical volume did not come, but working with our operations teams we're working that out as we speak and we've begun to have really good success in changing up our procedures through our service writers.”
Express Oil may be known for its quick-lube business, but the company has offered a variety of automotive maintenance and repair services throughout its history, Mr. Brooks said. The company's major focus in the next two years will be growing the service side of the business.
“We've made pretty significant headway there in '13, but in "14 we really believe that we will crack the code on executing a more professional model on the service and mechanical side of the business,” he said.
About five years ago when the company put an emphasis on boosting its maintenance and repair business, only one in five of its oil change customers also was using the business for mechanical services, according to Mr. Brooks.
“It's now one of four (customers), and we have a specific goal to reach one out of three and, of course, continue to grow that to hopefully one out of two or even better than that.
“We have ASE-certified mechanics in our stores, we have—for a long period of time—been dedicated to providing very high quality customer service,” he continued, “but when your name is Express Oil Change & Service Center, that doesn't resonate as well with the buying public that you are qualified to do their service work.
“They don't look at us, in many cases, as someone that they're going to use for their service work. Yet we're capable, we're confident, we've been trained to do it and we're getting more and more customers literally every year that are using us for oil change to also use us for those other maintenance and mechanical needs and repair needs that they have.”
Mr. Brooks said he believes adding tires to his firm's repertoire will enable the company to “gain more credibility” with consumers.
“We have focused on always growing car counts in the oil change department and, from that, grown our mechanical business,” he said. “That focus will not change—we will remain focused on car count growth in the oil change department—but we are also heavily focused on converting those customers to service center customers.... We believe adding the tire business to the service centers and co-branding our stores as Tire Engineers will, in fact, ramp that up significantly.”
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