Mergers and acquisitions again played a measurable role in the makeup of this year's Top 100 independent retail tire dealerships in North America, with the action led by Mavis Tire Supply's purchase of Somerset Tire Service (STS) and its 156 retail stores in New Jersey, New York and Pennsylvania.
Mavis' acquisition of STS, coupled with its own organic growth of a dozen stores, expanded the Millwood, N.Y.-based dealership's network to 324 stores—good for fifth on Tire Business' Top 100 dealership ranking.
Mavis' ability to essentially double in size was supported by its minority owner and financial backer of less than a year, private equity firm ONCAP Group of Toronto, which contributed $48 million to the deal and has indicated its willingness to support continued growth.
Monro Muffler Brake Inc. solidified its position as the No. 3 retail chain in North America with half a dozen deals for 57 stores, expanding its tire-centric outlet network to 521 locations—to go with a nearly like number of Monro-badged auto service-oriented stores.
Rochester, N.Y.-based Monro also delved into the world of franchising with its May purchase of the Car-X Tire & Auto business from Tuffy Associates Corp.
Discount Tire/America's Tire retained and solidified its hold on the No. 1 ranking, adding 13 stores since September 2014 to sit at 906 locations starting the fourth quarter of 2015. The Scottsdale, Ariz.-based retailer continues to build a nationwide network, opening its first
stores in Arkansas, Mississippi and Montana earlier this year to put its brand in 31 states.
TBC Corp. is a solid No. 2 despite a net loss of 32 stores—predominantly corporate-owned Big O Tires and/or Midas franchise locations that were re-franchised—in the past year.
TBC operated 779 Tire Kingdom, National Tire & Battery (NTB) and Merchant's Auto stores at last report to go with 402 Big O Tires and 1,429 Midas/Speedee franchised locations.
Other dealerships with measurable store network growth in the past year include Express Oil Change & Tire Service (23 stores in three acquisitions), ATV Inc./American Tire Depot (12 new stores), and Tire Discounters Inc. and Les Schwab Tire Centers Inc. (10 each).
It's expected that Discount Tire will continue to add a dozen or so stores a year—its average for the past several—as it grows toward the 1,000 outlet threshold.
Discount also reported a change in leadership with the promotion of Michael Zuieback, president for the past few years, to CEO, succeeding Tom Englert, who remains an adviser to Mr. Zuieback.
“It is time for us to pass the torch to the next generation of leadership,” said Bruce Halle, founder and chairman. “We are grateful for Tom's tremendous service and look forward to his contributions for years to come. Tom will remain an important member of the board of directors as adviser to the CEO.”
Mr. Zuieback has been with Discount Tire for 14 years, first as executive vice president of strategic planning before becoming president. He is Mr. Halle's stepson.
Likewise, Monro stated in its more recent earnings report that it is evaluating at least 10 additional acquisitions of independent tire dealerships with anywhere from five to 40 outlets. Its third quarter earnings report was due out Oct. 22, a day after the deadline for this report.
As for the Car-X deal, Monro said it will derive income from the system both directly—Car-X franchisees pay royalties of 4 to 5 percent—and indirectly, which should deliver about $2 million to its earnings before income taxes, depreciation and amortization starting in fiscal 2016.
Mavis Tire Supply plans to continue using both the Mavis Discount Tire and STS names in the marketplace, according to co-owner David Sorbaro, who noted the “significant brand loyalty” both brands have in the marketplace.
As Mavis opens new stores, it will select either the Mavis or STS identity depending on location, Mr. Sorbaro said.
A comparison of the Mavis and STS store locations reveals the companies both have stores in 13 locations, so there's relatively little overlap. Noting that Mavis already uses the Cole Muffler brand name alongside the Mavis name in many locations, Mr. Sorbaro said Mavis plans to continue operating both store brands side-by-side in those markets where there are overlaps.
Toronto-based ONCAP, part of the publicly traded private equity investment firm Onex Corp., bought a 46-percent share of Mavis in October 2014. It cited Mavis' “strong cash flow characteristics, leading market position, experienced management team, diversity by site, customer and by supplier, in addition to a very attractive set of organic and acquisition growth opportunities.”
Onex paid more than $100 million (Canadian) for its interest, according to its financial filings. Among its other holdings, ONCAP owns Cici's Pizza and casinos in western Canada.
Mr. Sorbaro called ONCAP/Onex a “fantastic partner” that's “completely supportive of growth.” In that vein, he said Mavis anticipates continuing to keep growing beyond its current footprint.
Monro's single largest acquisition of the past year—of Kost Tire & Auto Care's 27 locations in central New York and Pennsylvania in mid August—takes the seven decades-old Kost Tire name out of the New York market...for now.
The similarly named Kost Tire & Auto Service—owned by a separate branch of the Kost family—is alive and growing with 23 locations in Pennsylvania, predominantly in the eastern part of the state.
“We plan on growing our business, both retail and commercial,” according to Erwin Kost Jr., vice president of the Clarks Summit, Pa.-based business, who explained that the Kost family set up separate corporate entities in New York and Pennsylvania years ago under the direction of brothers Michael Sr. and Erwin Sr., respectively.
“We have a couple of irons in the fire now,” he said earlier this year, referring to stores the dealership plans to open in the coming year to 18 months. Mr. Kost said his growth plans now could include opening stores in New York.
Tire Discounters' aggressive growth the past few years has pushed the Cincinnati-based dealership to 100 stores in four states and a 12th place on the Tire Business Top 100. The company has opened six stores in Tennessee and plans call for up to 16 stores there by next year.
To “accommodate the company's accelerated growth strategy,” Tire Discounters is moving its headquarters to downtown Cincinnati and has opened a distribution center in Murfreesboro, Tenn., to support the dealership's expanding footprint in the Volunteer state.
Belle Tire Inc., No. 13 on the list with 91 retail locations, is growing as well, adding stores in northern Indiana to complement its extensive store network in Michigan and northwest Ohio.
Belle has opened two stores in the greater South Bend, Ind., area and has two more under construction.
The Allen Park, Mich.-based dealership recently hired an industry outsider, Jack Lawless, to be CEO and promoted Don Barnes III to president (see story on page 17).
Some of the trends noticeable in this latest version of the Tire Business Top 100 dealerships: More franchised dealers made the list than ever before, and predominantly commercial dealerships are adding retail services steadily to more and more of their outlets.
There are a baker's dozen dealerships on this year's list that operate franchised businesses—four with ties to Big O Tires, four to Car-X Tire & Auto, two to Midas/Speedee and three to RNR Tire Express & Custom Wheels.
In all, these franchisees represent more than 270 outlets.
Big O—Leeds West Group, 52 locations (some are Midas/ Speedee); Golden West Tire/Southland Tire, 26 locations; MFA Oil Co., 15 outlets; and BBAC Partnership Group, 13 stores.
Car-X—Gorrepati Service Systems Inc., 28 locations; Brex Inc., 18 locations; Nona Inc., 15 locations; Car-X Associates Corp., 13 locations.
Midas/Speedee—Auto Systems Experts Inc., 36 locations; Leeds West.
RNR—Gulf Coast L&P, 12 locations; RIMS USA Inc., 12 locations; RNR Tire Express (Larry Sutton), seven locations.
New to the rankings this year are:
c Auto Systems Experts Inc., a Davenport, Iowa-based Midas Total Car Care franchisee with 36 locations;
c Golden West Tire Centers/Southland Tire, a Huntington, Calif.-based Big O Tires franchise group that grew to 26 locations recently with the purchase of nine Big O stores in Colorado from longtime Big O franchisees Kevin and Valerie Brooks;
c Ziegler Tire, a Massillon, Ohio-based commercial tire dealer that has been adding retail tires and auto services to its 24 locations;
c Cross Midwest Tire, a Kansas City, Kan.-based commercial tire dealer that has been adding retail tires and auto services to a dozen of its locations;
Returning to this year's ranking after a few years' absence are: Beverly Tire & Auto, a Barrie, Ontario-based Goodyear-affiliated commercial and retail dealership, which operates 20 locations with retail services; and Bruneel Tire Factory, the Boise, Idaho-based dealership associated with Tire Factory, which is converting its 14 locations to the Point S brand identity.
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