Tire Factory becomes a cooperative
Tire Factory LLC capped its final year as a partnership with 28 more stores, about 8% more in revenues, and approximately a 5% increase in units of tires shipped. The dealer program group is beginning 2014 as a cooperative. The change in structure, which was passed by 97% of members, became effective Jan. 1.
“One of the biggest advantages to becoming a cooperative is that over time it changes the way members support their own company,” says John Kreidel, chief executive officer. “By law we have to pay out our profits pro-rata to members’ purchases. So instead of being based on stock ownership, it’s now based on purchases. We’re not taxed at our corporate level, we pay out all that profit to members and they get that earning. So the more a member buys the bigger chunk of the profit they’re going to get. In most co-ops, that leads to lower prices for all members over time.”
At its annual dealer meeting in Portland, Ore., Tire Factory executives announced plans for 2014 which include a new branding initiative, testing of tire pricing on the Web, options for delivering data to help dealers make slotting and pricing decisions, and a goal to add 25 more stores.
Tire Factory is emphasizing its brand in 2014. Dealers received brand style guides, were updated on a new advertising campaign, and viewed signage, product displays, furniture, and other branding elements in a model showroom. The goal is to tell the story and leave customers room to shop, says Keith Morris, director of merchandising. “Sales floors are for selling, not storage,” he says. The model showroom maximizes wall, floor and counter space to help turn inventory quickly, according to Morris.
“The beauty of being an independent is you’re going to be different,” says Kreidel. “But we want the consumer to recognize the Tire Factory when they drive by. That’s why we’ve got the style guides. The stores need to be similar. We’re not a franchise. We’re not big brother telling dealers what to do, but we do want the consumer to have a good experience and we want the stores to be easily recognizable in any of the 15 states we do business.”
Tire Factory will make tire pricing available on the Web in 2014. Although many members opposed the concept at the 2013 meeting, opinions changed over the course of the year. “It looks like we’ll proceed in certain markets. Members get to make those decisions democratically by zone. So we’ll do some testing, we’ll see if it drives more business to us, and we’ll watch our margins very closely,” says Kreidel.
Other technology improvements for 2014 include the ability for members to schedule appointments and quote prices via the Web. Kreidel also says Tire Factory wants to arm its members with information to make good business decisions. “If we can deliver some data to them based on car registrations to help them have a good, healthy slotting based on the vehicles that are registered in their area, then they can make much better decisions in how to price.” Tire Factory will begin testing the new technologies in the second quarter.
Tire Factory ended 2013 with 154 members, 201 locations and 19 members called affiliates who are transitioning from other programs. The cooperative is emphasizing growth in Denver and surrounding states in 2014. Tire Factory recently opened a 40,000-square-foot distribution center in Denver to replace a much smaller facility. The expanded warehouse became fully operational this month.
No other group in this country is providing members with such a complete solution, according to Kreidel. Members own the inventory, the trucks, logistics, and have direct manufacturer relationships for product. They also have the Tire Factory brand, which is owned by the cooperative. “The local owner is at the sharp end of the stick to take care of customers. But the tough things to do — the aggregation of buying and the advertising — all those things come together like a large company. What that means is the dealer can buy multiple lines with very frequent deliveries at near direct cost.”
The goal is to add 25 stores a year. “The Tire Factory family is a great place for members to learn from other members and to get some great buys. The door’s always open to the Tire Factory family,” says Kreidel. For information on becoming a member, visit www.jointirefactory.com. ■
New look and peer support make store more profitable
Bob Fox, owner of J&J Tire Factory in Helena, Mont., boosted net profitability of his seven-bay store by 44% in 2013 over 2012. “Our net profit the year before was very good, so last year doing 44% over the year before was just unbelievable,” he says. Fox credits two factors for the improved results: refreshing the look of his store and participating in Tire Factory’s Top Flight peer group.
Fox entered his shop in Tire Factory’s “Ultimate Store Makeover” contest in 2013 and was recognized for his first-place finish at the 2014 Tire Factory dealer meeting in February. “I’ve been at that store since 1980, and we’ve changed it a little bit here and there.” His reaction when comparing the before and after photos of the store? “Wow, this store really looked bad before, and I thought it looked good.”
The makeover included new uniforms for his employees, who helped select the clothing. The shop was cleaned and painted, “Everybody worked on it, and they all felt a part of it. It was just a much nicer area to work in and the guys had pride in it because they were involved in it.” A hoist was removed and replaced with two new ones. The showroom was divided into three small areas that offered privacy with leather chairs, computer bar, Wi-Fi, and other amenities. Fox says the investment totaled around $30,000 with employees doing a lot of the work themselves.
In addition to completing a shop makeover, Fox joined the Tire Factory’s peer group, Top Flight. Jim and Sherri Murphy are the facilitators. Although he has more than four decades of experience, Fox discovered many opportunities to better run his store. “I’ve been in this business since 1972. Jim gave us so many different ways to improve our businesses. We measured against each other’s stores and what Jim says is the industry standard. My son started working with me, too. I made him my store manager. Just having him there and all these new ideas from Top Flight kind of energized me again after all these years. And then I could see results. Each month we were making changes, and they were working.”
The changes included switching technicians to a time management system. “They are guaranteed an hourly rate but depending on their efficiency they can earn more money per hour. It was a huge increase for them and a different attitude,” says Fox. He also nurtured a team concept among his service advisors. “We figured out our gross profit to break even and then we paid our service advisors, who are our sales people on the counter, a commission. So they work as a team together. It was a team concept for the service advisors, and they all get the same commission.”
Fox also “tweaked” his parts matrixes to improve gross margins and shopped for lower rates for liability insurance. He adopted several ideas from Top Flight to make his business stand out among competitors, such as giving women customers roses on Fridays. “They come to us to drop off their car before work, they get a rose, go to work, and their co-workers ask them where they got the rose,” says Fox. “Flower Fridays,” along with other marketing and operations-related changes, are improving results at a shop that was already profitable. Fox’s future plans include more sales training for his staff, specifically two days training on selling tires and two days on selling service.