Les Schwab: Expansion beyond current footprint is on agenda

BEND, Ore (June 10, 2016) — Known for decades as the leading tire retailer in the Pacific Northwest, Les Schwab Tire Centers Inc. is embarking on a multi-year growth plan that will see the dealership push further into California and Colorado while also evaluating potential growth areas beyond its existing nine-state footprint.

Chairman and CEO Dick Borgman shared those plans and other details of the company's operations with Tire Business recently in an interview at the company's headquarters on the outskirts of Bend.

Les Schwab plans to open as many as five stores this summer in southern California along with others in the greater Denver metro area.

The push for new stores coincides with the introduction a few years back of an open-floorplan look for Schwab's stores — one that features lots of glass and natural light. The new look will be used on all new stores, Mr. Borgman said, and the format's essentials also will be incorporated in upgrades to existing stores within the dealership's footprint.

“There's some room for growth within our existing footprint,” he said, “but the focus now is expanding beyond our current market, especially into Southern California and Colorado.”

Stores due to open this year extend as far south as Temecula, along I-15 halfway between Los Angeles and San Diego, and the company is evaluating sites in California's Inland Empire as well as Denver and surrounding communities, according to Mr. Borgman, who's been at the head of the nation's fourth-largest independent tire dealership since 2009.

Opening several stores in California over the coming months falls in line with the dealership's strategy of adding multiple stores in new markets, Mr. Borgman said.

Les Schwab's renewed push into new markets coincides with the broader rollout of the new store design, a product of Portland architectural firm GBD Architects Inc., which also designed the firm's modern headquarters in Bend.

“This is part of our brand and image,” Mr. Borgman said. “We try to be quite clear in these new markets about who we are and how we go about our business.”

In a bid to make the store design both practical for the staff and positive for customers, the company built a prototype store at its sprawling commercial/retreading complex in Prineville, Ore., and invited both Schwab employees — store managers and assistant managers — and customers to look it over.

“One thing the customers really liked was the window looking into the bays,” he said. “That was a very popular.

“We also broke up the counters, stressed natural light, designed in a couple of waiting areas….”

Moving to an open floor plan with a 15-foot-tall atrium-style waiting area also had a positive effect on customers, reducing the rubber smell too often prevalent in tire store showrooms.

There are two layout variations that are adaptable to differing plot sizes, according to GBD, occupying 10,000 to 12,000 square feet. Mr. Borgman said the variations also extend to accommodating commercial tires and related services at those sites that include commercial.

Each store includes a showroom with ancillary spaces, six service bays (typically), on-site tire and parts storage and “site-tailored” vehicular traffic and parking configuration.

While the stores are not LEED certified — the company chose not to seek the LEED environmental label because of costs — the stores incorporate a number of sustainable features, including natural daylighting; high-efficiency windows; operable windows; recycled rubber flooring and building materials; low-flow fixtures; and drought-tolerant landscaping.

But to Mr. Borgman and Les Schwab management, the most important aspect of a store design — new or old — is a positive customer experience, the executive said.

In that respect, one mainstay of the existing stores remains: free popcorn.

Les Schwab also intends to incorporate the new look and design at existing stores when it's determined they need refreshing.

“The plan is to fairly soon begin refreshing existing stores,” Mr. Borgman said, noting that many of the firm's stores have been in markets for decades.

“The plan is to look at all the stores, for instance that have outside bays — we still have those — and those stores where we can improve efficiency and those where we can improve the customer experience. Not sure we'll try to replicate the new store design at older stores. Many of the older stores are quite large. We'll have to be pragmatic.

“The important thing is to make sure the stores offer a good customer experience.”

Les Schwab does not disclose its spending on new stores or remodeling. The company owns its properties wherever it can.

Expanding further from the company's base of operations in rural Oregon presents some logistics challenges, since Les Schwab supplies all 460-plus of its stores throughout nine states from a single distribution center, on the outskirts of Prineville, where company founder Les Schwab opened his first store.

The distance from Prineville to Aurora, Colo., for example, is roughly 1,150 miles.

The distribution hub covers 1 million square feet under roof and dozens of ocean containers placed strategically around the building holding tires and other parts and components used by the stores.

From this location, the company schedules deliveries to most stores twice a week, although some get just one delivery per week, putting the store managers under the gun to place orders accurately and timely, according to Dale Thompson, chief marketing officer.

“We have a process that's fairly involved to get qualified,” he said of the company's store manager selection process. “So we have a pool of candidates when we open new locations.”

However, the company has worked out order scheduling for each store based on seasonal variations and accounting for sales specials, Mr. Thompson said. The store manager is responsible for approving or adjusting the orders.

Opening new locations creates opportunities for the dealership's pool of store managers and assistant managers, Mr. Borgman said, since Les Schwab always promotes from within at the store level.

Les Schwab store managers average about seven years at that position, Mr. Borgman said, although there's a measurable pool of managers who have 30-plus years with company and 20-plus years in management.

Mr. Borgman said Les Schwab has relatively little turnover in the store management, a company strength he attributed to the firm's “significant profit-sharing policy” and other benefits.

The company's website states new employees can apply for the firm's management training program after two years in a sales and service position. Program graduates can go on to become assistant store managers and eventually store managers.

The company's recruiting video pitches prospective employees with: “Join for a job. Stay for a career.”

To date, the dealership has one female store manager, Jenny McCool, who's managed the new-look store in Portland's Sellwood district for the past four years.

Les Schwab was the subject of an Equal Employment Opportunity Commission (EEOC) investigation a decade ago that resulted in the dealership paying a $2 million settlement in 2010 and agreeing to provide anti-discrimination training for all its managers, assistant managers and employees.

Reflecting on that case, Mr. Borgman said Les Schwab's recruitment policy is to seek the “best employees possible, male or female. We recruit actively from lots of areas — from auto training schools, references from current employees, etc.

“The idea is we want to reflect the community with our employee base…. At least half of our customer base is female,” he said, noting that auto service “is not an area that immediately stands out to most females that it's something they want to do.

“But we've been fortunate, we have a lot of females in various roles. We're hoping they'll move up to store management.”

Store managers are the face and backbone of the company, Mr. Borgman said, and responsible for ensuring that their store is an integral part of the community. Store managers, for example, choose which charitable endeavors their outlets will support.

Total employment throughout the company is more than 7,000. Sales revenue in 2015 checked in at $1.78 billion, split roughly 80/20 retail/commercial.

For now, Washington and Oregon remain the company's bedrocks, with 125 and 100 stores, respectively, but California will break the 100 barrier this summer as well. 

Mr. Borgman has been with Les Schwab for 26 years, joining the dealership in 1990 as general counsel after 10 years as a partner with a law firm. He was promoted to senior executive vice president of administration in 2002 and president of Les Schwab Holding Co. in 2006, the first person other than company founder Les Schwab to hold that position.

He succeeded Phil Wick as chairman in 2009.