Humanitarian Herlong takes short but rocky road to success

COLUMBIA, S.C. — Gus Herlong may be the only person in his company who started in an entry-level job and rose through the ranks to the top, now serving as president and chief operating officer of Palmetto Garage Works L.L.C. (PGW).

Granted, the 36-year-old made a quick ascent, as his father Jim Herlong owned the company, but the elder Herlong made his son learn the business first.

"So, I'm at the point now where my career path has led me, where I can be in the shop, and they can't pull the wool over my eyes," Gus Herlong said. "I know. I've been there, I've done that. I've been customer interfacing. I've run one of these businesses. I've run a group of businesses. I've done the acquisitions.

"So I've kind of placed myself in each part of the company, unintentionally knowing that we would be the size that we are.

"But it's helped me immensely being able to connect with our teammates because if we're going to keep that family feel as our core mode of operations, I have to be able to connect with the people," he added.

"They have to realize I'm here for your career path. I'm not here to make you a number on a sheet or a name that isn't remembered. So when I go to satellite stores, satellite markets, my intention is to connect and do the one-on-ones, take them coffee, take them to dinner after work, connect with the people and keep that family course.

"My path helped me put myself in their same shoes more easily because I've been there," Herlong said.

PGW was founded in 2008 by Jim Herlong almost on a whim.

He had a career in computer technology for more than 30 years. Early on he told his neighbor, who owned the original five Midas locations in Columbia, that if he ever wanted to sell the stores, talk to him first.

Fast forward 20 years, and the store owner called Herlong about buying the stores just as the elder Herlong was considering leaving the computer technology business.

"The stars were aligning because the technology business was changing so much for him, and there was a lot of consolidation happening, and he was losing passion being in that business. So he took a leap of faith and bought into those five stores," Gus Herlong said.

The younger Herlong was in college at the time and was interested in going into the automotive business with his father after finishing his degrees in economics, finance and accounting. But he started as an entry-level tech for $10 an hour doing oil changes.

After six months, he became a service adviser and later a store manager. He soon moved into a leadership role and is now in charge of the 32-outlet Midas/SpeeDee franchisee as co-owner with his father.

But the path to growing into a multi-state chain was rocky.

"In 2008 when we started in the business, we had no idea what we were doing, and we invested a lot in the business, and we made decisions that, in hindsight, weren't the best," Gus Herlong admitted.

"We just didn't know. And so until about 2012 we were paying credit cards with other credit cards. We were hoarding rebate checks to make payroll. We were assuming that at some point we would fall, like it's not going to work, not fun and very scary.

"And so we kind of made a reset, like this is not going to work. We need to just completely dissect what we're doing and what is not working and what is working. How can we enhance that? How can we change that?

"And so part of that was our compensation. We had bad turnover. So we had to figure out how do we retain people— And maybe that's not just compensation. Maybe that's our PTO policy. Maybe that's a holiday pay policy. Maybe that's having a handbook that they understand. Something as small as that," he said.

The business also reevaluated its pricing structure, margin goals, vendors and marketing. He also tried to distinguish his stores from the competition.

"The only difference is our people … and so that's when we took a huge effort to training our people. And a lot of people questioned us. A lot of people said, 'Why are you going to train all these people in that way and coach them and then they can just go to a competitor?'

"And my response is, 'What am I going to do if I don't train? They're still going to be here and be untrained, running my business.' So, we've really reversed the retention piece from that alone," he said.

Herlong worked on differentiating his brand. That's when he started getting involved with the community.

"Let's use that to our advantage. Let's get back involved. We can get in with the city, we can get in with the zoo, we can get in with entities that want some sort of partnership and then let's just be loud about it," he said.

He acknowledged that everybody asked, "How in the heck are you going to do that? You are broke. You're going to increase your pay. You're going to give back, and you're going to spend money on training. You're toast. It's not going to happen."

"It doesn't happen until it does," he countered. "It's a leap of faith, but you got to do that.

"You ask yourself the question, 'What's the right thing to do for this business to survive?' I can't do it by myself. I need everybody back there, and if I haven't trained them to be able to perform at the capacity that they can more than excel in their career, then I failed," he said.

"The person behind the counter talking to the customer, if I have not trained them to provide that customer that level of customer service we expect, then I'm getting what I expect, and it's not what I want.

"So it took years to get out of that hole that we ran into, I'll call it, because you're not going to train all the people overnight."

Herlong said training and coaching are vital to the profitability of his stores.

"If I don't have the right people in the right seat of that bus, or I haven't armed them with the tools and coaching, then we do see the dip. But that's not the customer's fault. It's not the car's fault. That's my fault," he said.

The business finally turned around in 2015, he said.

"Now, the challenge with that is we were also on an expansion trail at the same time, because we had those opportunities, which was a massive risk, because we didn't have the financials to expand," he said.

PGW began expanding into other markets in South Carolina and northern Florida as several Midas shops and a few SpeeDee outlets came up for sale.

"But the opportunity was there, and so we used our personal assets, which was just putting ourselves at more risk, to go take the opportunities on.

"But anytime you expand, it is extremely expensive, especially when you take over stores that are very challenged. They need equipment. They need paint. They need customer comfortability, like new waiting room chairs, new freshness, and that just takes a lot of money a lot of times," Herlong said.

"So when you do that expansion, you got to be prepared to take some pretty large hits on the expenses and so factoring that out. Our existing stores were turning a profit, but we were consciously making decisions to take on opportunities and invest everything back into the business to see that expansion.

"But ever since, probably 2015 era, it has been on an upward trajectory, and we've invested everything back into the business to be able to walk around the office, to be able to staff the people, to be able to provide waiting rooms or tire stock rooms — everything's going back into the business right now," he said.

"I don't need a big boat, I don't need a jet, I don't need a bigger house. As long as our family can be taken care of, we'll just keep taking care of all these families. And we've got 250 families that we're responsible for that work for us."

Herlong said the company has stuck with the franchise business model even as the franchise agreement with Midas comes up for renewal every few years.

"The relationship between franchisor and franchisee is a pendulum, is what I've always called it. Like it swings good and it swings bad, and then it comes back around at the end of the day," Herlong said.

"Yes, we could save a cost on our financials by not paying royalties. I don't think we would have this (success). I know we would not have the same success in recognition and marketing and opportunity for further expansion.

"I wouldn't be in Florida if I was an independent. There's no way I would be able to launch a new brand down there. It would be unrecognized. There's no way I'd be in the Washington, D.C., market (which he entered in September). I might not even be in Charleston (S.C.).

"So it would have been a different business venture that probably would have been exclusively here in the Midlands, where we're from. And there's nothing wrong with that. But I believe we've made the right decision by being a partner with our franchisor and letting them help us continue growing to where we are now."

Midas doesn't help fund PGW's acquisitions, but it has been a source of acquisition targets as PGW has bought out other Midas franchise stores looking for an exit.

Even though he is approached weekly, sometimes daily, by potential private-equity investors, Herlong said he won't consider bringing in outside partners.

"I don't want to risk the culture we've built, or the momentum, or being able to operate the way that we do with our people. I feel like, if you start entering into that, you're going to lose that core business," he said, adding, "So, yeah, does that mean we could get to 50 to 100 stores, probably. But that's not what I'm in it for.

"That's not the direction that I want to drive the business at this point. I want to keep it with us and keep it family, be able to champion that you are part of a family organization that's not changing, and that means a lot to our people. We've used that to our advantage in retaining good talent, good people, ambassadors of our brand," he said.

While Midas provides the signage, national marketing and brand identity, the franchisee is the one who provides the customer service inside the shop, he said.

A franchisee has a more direct contact with customers and is the first contact for any issues or concerns, Herlong said.

"So we will even put pictures with our face in the waiting rooms and a QR code saying, 'If you have an issue, here's the QR code. You can contact me directly.' Corporate won't do that or can't do that."

Herlong said his biggest competitors for automotive service are car dealerships.

"In my Midas stores, we've trained our people, imaged our stores and armed their operators with the tools to be as strong as anybody out there, and running the business and providing customer service. And so because of that, we can rival those huge 'Taj Mahal' dealerships with big comfortable chairs and free coffee bars and all that kind of stuff," Herlong said.

"We're much more convenient than them, and we can offer a miniature version of all that. We're right around the corner, and we provide loaner cars, just like they do. So we've positioned ourselves to kind of compete with that level," he said.

Herlong said he takes a unique approach to marketing, compared with the rest of the Midas network and probably with other automotive businesses in his markets.

Midas provides national advertising and marketing support to its franchisees, but PGW spends a lot of its own money in local advertising when there is a break between national Midas marketing campaigns, he said.

Herlong spends money not only in promoting the business brand but also in what he calls "cause marketing" — publicizing the company's philanthropy.

"When you choose Midas, this is what we're going to do. We're going to send kids that are underprivileged to a faith-based mentorship. We're going to send children, teens and young adults with illnesses and disabilities to summer camp that otherwise wouldn't be able to do that. We're going to have blood collected and sent to save lives in our community," Herlong said.

"So I just educate the customer, like 'When you choose us, this is what we're going to do. When you come and give blood, we're going to give you an oil change. Here's some pictures from when we did the event.'"

He uses marketing to encourage consumers to participate in food or blood drives by offering coupons for oil changes or other services.

"So you got to give them a call to action, like, give them a reason to still show up and feel good about it. 'I don't like coming here to get an oil change, but since you're giving 100% of that oil change to the nonprofit, then I'll choose you.'"

Herlong said, ideally, if the cause marketing brings customers in the door, a positive customer experience brings them back.