CHALFONT, Pa.—Perhaps it's one of those burdens of youth, but Andy Chalofsky is quite the restless entrepreneur.
In 2008—at age 22—Mr. Chalofsky became co-owner of Chalfont, Pa.-based tire wholesaler Network Tire Inc. Not content with one company under his belt, in 2010 he launched Simple Tire L.L.C., a separate online retail tire business that he co-owns with his brother Josh Chalofsky.
Now 28, Mr. Chalofsky has expanded his industry footprint even further. He and partners Joe Cote and Allen Mott purchased Bensalem, Pa.-based wholesaler Traction Tire Centers in a deal that closed last August. Under new ownership, the company already has set its sights on aggressive expansion.
“You know me—I don't stop,” Mr. Chalofsky told Tire Business. “We just keep seeing opportunity.”
This year marks the beginning of a new growth strategy for Traction Tire as the company looks to provide an exit for smaller tire wholesalers looking to retire from the business.
“I'm finding that there are a lot of wholesalers that really don't have an exit strategy,” Mr. Chalofsky said. “They're not big enough to be bought by an ATD (American Tire Distributors Holdings Inc.), but they're not small enough that they're irrelevant. We're finding that we can give these guys an exit strategy and give them some real value for their business.”
In fact the acquisition of Traction Tire, which was founded in 1985 by Mr. Chalofsky's uncle Jeff Cohen and his partner Joe O'Donnell, came about because its owners were seeking to retire.
Mr. Cote, vice president of sales for the company, came on board from wholesaler Max Finkelstein Inc. Mr. Mott already had been running Traction Tire under Messrs. Cohen and O'Donnell.
With the purchase of Traction Tire complete, Mr. Chalofsky said its wholesale operations gradually are being combined with those of Network Tire, which eventually will fall under the Traction Tire banner.
“We've integrated the sales team with Network and Traction, we've integrated the computer system and we're basically slowly integrating the two companies,” he said. “We'll keep the name Network Tire—we'll always be in business—but it will likely sell its local wholesale operations to Traction to continue that consolidation.”
He said that while all sales will run through Traction, Network Tire technically will remain in business in case the group opts to repurpose the name later.
Combined, the two wholesale operations do just shy of $80 million in sales annually, Mr. Chalofsky said, a number that he believes “we can conservatively double” within a two-year period.
Traction's acquisition of Network Tire's wholesale assets likely will take place in the first or second quarter,
Traction Tire's growth strategy will be focused on buying out small independent wholesalers, with a target market of businesses that do between $2 million and $10 million in annual sales, Mr. Chalofsky said. These businesses, he added, are the ones that have trouble getting out.
“ATD comes in and they buy the big distributor in the marketplace—and maybe that big distributor does $20 million or $30 million in that marketplace—but you got one or two other guys that are doing $10 million each,” he said. “And these guys are giving people very good service, but nobody's looking to buy the $5 million or $10 million guy.”
According to Mr. Cote, the firm's growth goal for 2015 is to add one location per quarter. Its first acquisition of the year already has been completed.
Effective Jan. 12, the company took over wholesale operations of North Brunswick, N.J.-based Tire Barn Inc., for an undisclosed sum. Enver Ahmed, who founded that company 35 years ago, retained ownership of Tire Barn's single-outlet retail business in the deal.
Mr. Ahmed said he hopes the change will lead to “less worry about inventory and less headaches.”
He noted that, as part of the deal, Tire Barn continues to receive a percentage of revenue from wholesale tire sales.
“I thought it was a good fit for us,” he said. “We're able to make some revenue off of their hard work, so to say, on the wholesale end and not do the labor-intensive work on our own.”
According to Mr. Cote, the location—a 15,000-sq.-ft. facility that shares a lot with Tire Barn's lone retail store—will be Traction Tire's fifth warehouse. Several other deals already are in progress for this year.
“We've got a couple that are already in the works, just waiting for the paper work and the final contracts to be signed,” Mr. Cote said, adding that the deal should boost Traction's annual revenue by about $7 million.
The next warehouses set to open are in Egg Harbor (May 1), a township in Atlanta County, N.J., and Allentown, Pa. (June1). According to Mr. Chalofsky, neither of these facilities are buyouts.
For Mr. Chalofsky, the greatest asset in all the acquisitions has been the people.
“We're getting some really good deals, but not only that, we're getting really great people,” he said. “These guys are A-plus operators, and they want to be a part of something bigger.”
Traction Tire operates 110 delivery vehicles and serves customers in Pennsylvania, New Jersey, Delaware, New York and Maryland. According to Mr. Chalofsky, the firm's business model has always been predicated on convenience and quick service.
“The best way I can describe it is that we see American Tire Distributors as a Wal-Mart,” he said.
“You go there and it's this massive store. We want to operate Traction like a 7-Eleven, where we are really the most convenient place for you to do business.”
While it may not always be able to beat a larger distributor on price, Traction Tire prides itself on being able to deliver a tire within its distribution area in under an hour, Mr. Chalofsky said.
“We see ourselves as a service provider and really a convenience provider.”
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