Big Brand Tire employs targeted growth strategy

MOORPARK, Calif. — Depending on how quickly certain deals are worked out, Big Brand Tire & Service, the rapidly growing Moorpark-based dealership backed by Percheron Investments Management L.P., likely will have upwards of 200 retail stores — perhaps up to 250 — in operation throughout the western U.S. before year-end.

With its most recent deal, for 11 auto service centers in the Tucson, Ariz., metro area from MPG Tire & Auto Service, now largely integrated into the Big Brand family, management can start considering some of the potential takeover candidates already targeted and/or evaluate when and where a greenfield project would complement the growing footprint.

Those are some of the observations that Joe Buscaglia, Big Brand's CEO, shared with Tire Business in a phone conversation shortly before the MPG Tire acquisition was made public.

That deal, which closed June 7, increased Big Brand's store network to nearly 180 locations in Arizona, California and Colorado.

Founded in 2009 by Patrick Lopez, MPG also listed three retail locations in El Paso, Texas, among its assets, but those apparently are not part of this deal. Big Brand's announcement did not mention them.

Financial terms of this transaction were not disclosed, as has been the case with all of Big Brand/Percheron's acquisitions.

In prepared remarks, Buscaglia said the MPG Auto transaction "exemplifies our commitment to building a premier tire and automotive service platform through strategic acquisitions, new greenfield units and investments in our industry-leading technology infrastructure."

The deal also fit some of the key Big Brand acquisition metrics Buscaglia — a former Pep Boys executive — outlined during the call with Tire Business.

In general, Big Brand looks for traditional tire and auto service shops, already operating at or capable of operating at a tires/auto service revenue split of about 40/60.

"If a business doesn't already do tires," Buscaglia said, "we certainly entertain looking at those types as long as they appear to have the right store layout and personnel. We feel we can apply our business model in converting them. In some cases we prefer doing that."

Nonetheless, Big Brand "takes tires seriously," Buscaglia said. "We feel we can drive a good customer mix (with tires). It's a value driver for future business. We try to put as much (tire) inventory as close as possible to our stores, because tire shoppers are only 'in market' for a short period of time. So having inventory — and the right mix of inventory — at hand is important."

Other questions the company's management asks include:

• Is the acquisition target in a market Big Brand wants to be in?

• Is the acquisition target in the trade areas Big Brand wants to address?

• Does the target have strong brand identity/recognition?

• Is the store footprint right for the business mix that Big Brand considers appropriate for growth?

"We have no singular 'secret sauce,'" Buscaglia said when asked about Big Brand's acquisition strategy. "We look at a business and ask ourselves, 'What do we think we can do with this business in three years?'"

If there's sufficient growth potential, then management, backed by Percheron Investments' team, discounts that backwards and comes up with a purchase offer, he said, noting no singular formula or ratio can apply to all cases.

With 200 to 250 stores, Big Brand Tire would be considered the eighth-largest independent retail tire dealership in the U.S., according to Tire Business calculations.

Big Brand/Percheron has not as yet disclosed annual sales or earnings, but Buscaglia did say Big Brand Tire — Percheron's initial purchase in the automotive aftermarket in early 2020 — was generating roughly twice the revenue as the industry average when the deal closed.

As for brands, Buscaglia said Big Brand/Percheron considers it has three names with overarching awareness: American Tire Depot, Big Brand and Tire World.

The company uses Tire World so far in Colorado, ATD in California and Big Brand in Arizona and California.

Big Brand for now continues to use the MPG Tire name in Tucson but has not yet commented publicly on whether it will retain the name long-term.

In terms of bringing new acquisitions up to speed rapidly, Big Brand has an ace up its sleeve: a retail point-of-sale (POS) system developed in-house by Big Brand founder Greg Robinson, who has a seat on Percheron's board of directors.

Buscaglia described the "Edge" POS system as a "game changer" that's very trainable, very scalable. The system provides insight into tire ordering, parts ordering, realtime inventory, etc.

In terms of integrating acquisitions into the Big Brand fold, Buscaglia said once a deal is under contract, his team starts setting up the stores with the POS system and starts training personnel so new stores are up and running with the system on Day One.

Buscaglia also points to the well of knowledge that Percheron Investments brings to the table in terms of identifying opportunities in a fragmented market and executing strategy.

Co-founded by Chris Collins and Chris Lawler — both veterans of Golden Gate Capital when it was majority owner of Mavis Tire Express Service Corp. — Percheron Investments states its focus is on partnering with "high-quality essential services businesses."

Taking all of these assets into account, Big Brand's management felt fairly confident it could tap the market potential for growth on a rapid basis.

"We were confident we'd be successful," Buscaglia said, "perhaps not quite this successful this fast, but confident nonetheless."