Midas shop capitalizes on expansion opportunities

COLUMBIA, S.C. — Palmetto Garage Works L.L.C.'s (PGW) rapid expansion is not due to any aggressive plans on the company's part, but more from acquisition opportunities presenting themselves.

The company has grown to 32 Midas and SpeeDee stores in three states since its founding in 2008 with five locations in Columbia.

President and COO Gus Herlong noted that up to this point, most of his acquisitions have originated with the seller, or Midas International, approaching him.

"We have said 'no' to opportunities far more than we've said 'yes,' but we've never sought out (acquisitions)," he said.

"We've never been the initiator of, 'Let's go after this.' It's always been somebody coming to us and presenting the opportunity or idea of either acquiring them, or Midas asking if we would be willing to go into the market. So I would not be agnostic to looking at any opportunity," he said.

Most of PGW's operations are in its home state of South Carolina, but in recent years the business acquired stores in northern Florida and, in September, in the Washington, D.C., market.

The dealership now has 16 Midas locations in South Carolina — Charleston, Columbia (six); Cayce, Florence, Greenville, Lexington (two), Mt. Pleasant, North Charleston and Summerville (two) — along with six in Florida, in Gainesville, Jacksonville (four) and Orange Park, and four in Maryland, in Capital Heights, Clinton, Forestville and Temple Hills.

The dealership has two stand-alone SpeeDee Oil Change & Auto Service locations, in North Charleston and Summerville, S.C., and combination SpeeDee/Midas locations in Columbia (three) and Lexington, S.C.

Building stores involves a lot of capital and a lot of risk, he acknowledged.

"So we made the conscious decision, if we're going to grow, we need to probably look at opportunities of taking the existing Midas stores, because that's the least risky," he said.

After expanding to several cities in South Carolina, PGW made the leap more than three years ago to buy six Midas locations in northern Florida when that franchisee was ready to get out of the system.

The stores had below-average results and had financial issues, Herlong said, but the stores had a long history in the market.

"So we can take your legacy, and we can apply our best practices, and we believe we can live it on. And that has been a great transaction for us, that we took over six very distressed locations, and they're our strongest growth stores now, which has been really exciting," he said.

"I take much less credit for that than my operator (Steve Baker) down there. He's there every day. I'm on the phone with him every day. I do coaching calls with him. I do coaching calls with him and his managers."

Part of the solution for those stores, he said, was giving the staff coaching and resources they didn't have under the former ownership.

In September, PGW decided to buy four Midas stores in Maryland near the nation's capital.

"I jokingly told our team, if there is one market that will be the last one on Earth to go down, it's that one. Like there's a lot of cars. If that place has crashed, then the world has spun off into somewhere else in the universe," he joked.

But the flip side, he said, was that D.C. was a poorly operated market for Midas.

"There's a lot of franchisees that either aren't investing in their stores, have been in the system for a really long time, and they're ready to start exiting instead of investing," he said.

"So there's a lot of opportunity, not only in the four we bought, but maybe another four, six, eight locations in addition to our four.

"Now, all of a sudden, I've got a pretty sizable group of stores and a market that's the least risky way of expansion and our best practices being applied. Hopefully we can see similar results like we did in Florida."

Herlong said he would consider expanding elsewhere in the Southeast, including farther into Florida. But he also wants to fill in his existing markets.

"I've got one store in Greenville; we should have 10. I've got seven stores in Charleston; we should have a dozen. Myrtle Beach, one store; probably could have four to five."

Those expansions would probably involve converting an existing shop or building a new store, he said.

In addition to his Midas stores, Herlong also has a few SpeeDee operations, which in some ways compete with his Midas stores.

SpeeDee used to be under the Midas umbrella. After Midas was acquired by TBC Corp. in 2012, TBC sold Spee-Dee to FullSpeed Automotive in 2017.

PGW's first foray into the Spee-Dee franchise business happened after the company bought the Midas store in Charleston, across the street from a SpeeDee shop, Herlong said.

The SpeeDee franchisee wanted to exit the business and kept urging Herlong to buy his shop. Herlong said for a long time he wasn't interested, but he finally relented.

"We made a lot of errors because that is a quick-lube and that customer does not show up to Midas. They want a different oil-change experience. The employees expect a different type of compensation, a different type of work style. It's got pits underground so you're not lifting all the cars to do it. So it was a new business venture," Herlong said.

After adjusting to the quick-lube business format, another SpeeDee franchisee in North Charleston offered to sell his shop.

"So then we had two SpeeDees down there, and once we were involved in that brand, people just started to know who we were and seeing what we were doing. We started getting a lot of calls, and we had as many as nine SpeeDee locations, but we have since gotten rid of some of those," he said.

The company is down to six locations now.

Herlong said he wouldn't be opposed to acquiring more SpeeDee locations.

"Midas is on such a good trend, it would be hard for me to not focus on the momentum we've got in Midas right now.

"The Spee-Dee locations, I mean, you've got a lot higher car count, which is very attractive to me because that's opportunity. It's very quick-moving. It's easier low-hanging fruit," he said.

While the quick-lube business is simpler, it's easier to upset the customer, he said.

"It is a convenience-driven customer, and as soon as you're inconvenient to them, they're upset. Sometimes you can't help the staffing being low or a hurricane that came through or product you can't get on the shelf because a vendor can't get it to you, or whatever, or you're really busy and you get backed up," he said, noting that with so many quick-lube shops around, an upset customer can easily go somewhere else.

Herlong has been active in the Midas franchise organization, having served as president, vice president and immediate past president for the International Midas Dealer Association that supports franchisees.

He also has worked on the franchisor side, serving on the corporation's COVID bounce-back council and operations committee. He is currently co-chair on the advisory council.

"So I get to see both sides, and that's where, in a sense, when I was the president of the association and the co-chairman, I'm fighting myself, you know. It's not the same agenda, but it actually helped me because I can see both sides."

For Midas stores that are struggling or have a bad reputation, Herlong said there is a need for coaching and training to improve their processes.

Before his acquisitions in the D.C. metro area, he hadn't expanded in a market where he wasn't the sole Midas operator.

"Now I'm playing in the sandbox with other people. This is new for me, but I have spent a decade working with franchisees all across the United States and Canada, with the association I was referring to.

"My mission, my responsibility, was helping franchisees. That has prepared me to try and be a leader in another market," he said.

Herlong noted he already is trying to connect with other Midas franchisees in the D.C. market to coordinate marketing and pricing.

He said it gives him the opportunity to open conversations with other franchisees looking to sell.

"I've got four locations up there. I don't see why we couldn't have operationally eight or 10. I'd like to be that leader up there, if I can.

"But if those franchisees want to keep their businesses, then we'll play nice in the sandbox," he said.