Leeds West's unique structure, philosophy boosts growth

GREENWOOD VILLAGE, Colo. — If there is an adjective to describe the automotive repair management ownership platform known as Leeds West Groups (LWG), it might be "unique."

Or perhaps distinctive. Maybe atypical. Definitely different.

Take the speed at which the company has grown. Since it was founded as Leeds West Inc. in 2009 by CEO Judd Shader — then an undergraduate at the University of Colorado in Boulder — LWG has expanded from two Midas International locations in Colorado to 106 locations under three franchise brands in 18 states today.

As one of the fast-growing ownership groups in the industry, it ranks among the top 15 dealerships in North America, according to Tire Business calculations, with $100 million in sales in 2018.

• This article appears in the Sept. 28 print edition of Tire Business.

Then, there's this: Greenwood Village-based LWG, unlike few others in the tire space, operates under three distinct auto repair franchise brands: Midas (80 locations), Big O Tires (26) — both TBC Corp. franchise brands — and SpeeDee Oil Change & Auto Service (6).

The group calls itself the only "family office backed" franchise group in the U.S. — Mr. Shader originally got backing from family members — and today it remains extremely "well capitalized," according to Mr. Shader.

"There's very little cash restraints upon any deal we can do," Mr. Shader told Tire Business. That allows the company to purchase the real estate that its businesses occupy, whenever feasible, another unusual twist to the business.

But perhaps the most distinctive part of LWG's makeup is its corporate infrastructure.

The LWG leadership team includes:

• Chief Financial Officer Peter Derschang, with more than three decades of financial management experience, including a tenure at Brakes Plus Corp.;
• Chief Operating Officer Derek Wessels, who spent a dozen years at Bridgestone Americas, where he served in various senior management positions with Firestone Complete Auto Care; and
• Auto Systems Expert Division COO Alan Mahrt, who has more than 30 years of automotive retail business management experience as a Midas franchisee.

In addition, Joshua Weinreich, a career finance executive who was global head of hedge funds for Deutsche Bank and is a board member of E*Trade Financial, among others, chairs the six-member board of directors. That group also includes Markus Hockenson, with 25 years of leadership experience, including four-plus years as senior vice president, retail, with TBC Corp.; and David H. B. Smith Jr., formerly associate director with the Securities and Exchange Commission (SEC) and current board member of Northern Trust Bank.

"We're 100% top heavy," Mr. Shader said. "We're built for growth. We are lucky to be able to invest heavy for what we want to become in the future, not what we are today.

"A lot of companies, especially companies that have other models, every dollar they spend is worth $15 to them in the exit. That is the opposite of our strategy. We over-invest today to continue to build what want to build from a long-term, foundational standpoint."

Mr. Shader said that any acquisition LWG makes — and there have been an abundance over the last decade — the group intends to be there for the long haul. He said that strategy is similar to what was an industry tradition three decades ago.

"We're planted; we're there," he said. "We're very, very lucky with the board, the way we are done. We're financed with big-time players, in cash. We're not leveraged; we're not playing with anyone else's money. We're not trying to create multiples. We're putting money to use in the industry that we believe in, and we're building a foundation of one company that will be there for a very, very long time."

That's why real estate remains a focal point of the company strategy.

"Real estate is a long-term play," Mr. Shader said. "It speaks volumes toward what we are building as a company. We're not building a company just to build units. ... We're building a company built for the future and built for longevity owned by us.

"We're not playing the short game in anything we do."

Mr. Shader describes LWG's acquisition strategy as "cautiously aggressive."

"You can't just grow to grow because you can," he said. "We definitely keep that in mind. We try not to let our aggression get in the way of a smart decision. Just because we have the ability to do it, is it the right move?"

That aggression was on full display over the last six months — in the middle of the first national pandemic in more than a century.

During that time, LWG acquired:

• An established store and the real estate in Kearney, Neb., its fifth location in the state;
• Two Big O Tire stores in Kentucky and one in Ohio, LWG's first foray into either state;
• A Midas store in Oklahoma City, an area where LWG is looking to expand its footprint; and
• An automotive repair shop in Arvada, Colo., operating under the Tires Plus banner, which LWG plans to rebrand as a Midas store within the next three months.
• In addition, LWG purchased the real estate for a Midas location in Milwaukee that it has operated since 2014, and a year ago it acquired six Big O stores in New Mexico and agreed to share ownership of eight Big O locations in Texas with the Monteverde Group.

Mr. Shader leapt into the tire retail/auto service business in a big way in 2013, taking over 30 Midas International stores across the country from parent company TBC Corp. in a partnership arrangement with another Colorado entrepreneur, Jeff Genuario, owner of Midas of Colorado.

Any prospective location must fit within the franchise structure. In fact, Mr. Shader said the diversification that comes from offering all three brands provides LWG the ability to consider any type of deal.

The Big O brand, he said, provides LWG a strong tire unit franchise with an expanding repair business. Midas represents a "true repair brand" with a growing tire presence, while Speedee "gives us a true quick-lube brand."

"So when we're out there looking for acquisitions, either current franchise groups that are already operating or even if it's just real estate, it gives us the ability to plug and play us across all three repair avenues in the industry," Mr. Shader said. "That's really why we have all three."

An example: LWG entered the Oklahoma City market to build out the Midas brand, while it is using the Big O brand to expand its footprint in Kentucky and Ohio.

"If we're in that market and it's a good location and if there's a deal to be made, and someone wants to exit the business," Mr. Shader said, "it's a good fit for us."

Mr. Shader was Midas International's franchisee of the year in 2018 as well an International Franchise Association award winner the same year.

LWG turns down two acquisition opportunities for every one it secures, according to Mr. Shader.

One of the main qualities the company analyzes is synergy: Will it complement the locations already in the fold?

And if the prospective location represents a new market, does LWG have the ability to grow a cluster of locations within the region?

"Maybe it's a market we're not strong in operationally, and it might be a good deal, but if we can't run it successful for the long term future, we'll turn it down," Mr. Shader said.

Sometimes, the financial numbers don't make sense, especially for a single store opportunity.

"Sometimes, the (sellers') evaluations don't match with the market evaluation," he said. "Maybe they're testing the water because they think we'll pay whatever. There's a multitude of reasons we turn down a deal."

Once a deal is consummated, LWG begins to create synergy with the new location. That means the office will be assimilated into the group, including IT, human resources, inventory, legal, advertising — "everything you can think of," Mr. Shader said. "Our processes are going to go into place."

LWG always retains all employees of any new location, Mr. Shader said. "We want to work with them. They will be held to the same standards as the rest of our staff."

Just how much can/will LWG grow? Could it one day operate 200 or 300 locations?

The goal, Mr. Shader said, is to grow, at minimum, 10% annually from a unit volume perspective. The company has no intention of seeking locations outside of the continental U.S.

"We don't want to put ourselves in a position that we're chasing to chase," Mr. Shader said.

"There might be years that are heavy, and there might be years that are weak. We see ourselves on the same trajectory over a very long period of time."

The uniqueness that defines LWG is derived largely from its funding and its leadership, according to Mr. Shader.

"Our financial position is meant for growth," he said. "We understand that if we can't operate at a high level, at the end of the day, it doesn't matter. ... If we don't feel like we can be operational for 20 years, it's not the right deal for us.

"We're definitely aggressive, but we're definitely cautious for the long-term perspective before we do a deal."