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Rent-to-own leads to cash-and-carry

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Rent-to-own leads to cash-and-carry

Turning away customers due to poor credit or lack of credit is a sometimes unpleasant but necessary function of running a profitable tire dealership. Of course, bad credit doesn’t stop customers from buying tires and wheels from rent-to-own retailers.

But before you write off rent-to-own tire stores as inconsequential, consider this: cash buyers also patronize rent-to-own retailers, creating another source of competition for your dealership.

“A lot of people who look at our business model think 90% of our revenue is rent-to-own, but that’s not the case,” says Larry Sutton, president of Rent-n-Roll LLC, a Tampa, Fla.-based operation with 67 franchise locations throughout the United States. In actuality, Sutton says traditional rent-to-own contracts make up 50% to 60% of his company’s sales. “Cash customers are starting to find out about us.”

“There is good retail business with the general public where we can do cash sales,” says Bob Bloom, CEO and president of ColorTyme, parent company of RimTyme, another rent-to-own tire and wheel chain.

The rent-to-own sub-segment of the retail tire industry generates $165 million to $200 million in annual sales, according to Sutton, who estimates there are 175 to 180 rent-to-own tire and custom wheel shops nationwide. He believes there is potential for many more.

Rent-n-Roll, which is in the process of changing its name, wants to have 100 franchise locations in place by the end of 2008. (Sutton himself owns an additional eight Rent-n-Roll stores.) RimTyme has one company-owned store and 11 franchise locations; it plans to open nine more stores this year.

The country’s biggest rent-to-own tire and wheel retailer, Van Nuys, Calif.-based Rent-A-Wheel Inc./Rent-A-Tire, has 52 company-owned locations that operate in several southwestern states, including California, Arizona, Nevada and Texas (see sidebar on page 30).

“There are tremendous opportunities in this business,” says Sutton. “That’s why it doesn’t surprise us that there are other people getting involved in the concept.”

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Keep it professional

Both Rent-n-Roll and RimTyme are working to dispel the perception that rent-to-own tire and wheel retailers are “last resort” options. Their turn-key franchise programs ensure that stores share a uniform, professional look and have access to co-op advertising.

Both companies encourage franchisees to hire managers, sales personnel and technicians who have prior tire and wheel experience. RimTyme’s format calls for at least one store supervisor -- the general manager or assistant manager -- to be familiar with tire retailing.

Sutton has found that businesspeople with previous rent-to-own experience make good candidates. In fact, most of Rent-n-Roll’s franchisees have run other rent-to-own operations.

“But we tell them up front, ‘This is not your old selling model.’ We try to get them to understand the differences between the wheel and tire rent-to-own model versus the traditional rent-to-own model. Everyone who works for us goes through a four-week training program learning machines, fitments and things like that.”

Rent-n-Roll technicians are encouraged to become certified through Specialty Equipment Market Association programs.

Both companies’ stores have service bays -- in Rent-n-Roll’s case, the usual number is three bays per store -- that are equipped with modern mounting and balancing equipment.

Roll on

While Sutton and Bloom report that high performance and ultra-high performance tires make up a growing part of their firms’ overall sales, custom wheels remain the companies’ prime movers.

The average Rent-n-Roll showroom displays more than 250 styles of wheels. RimTyme carries 100 to 125 sets of wheels at each location.

Rent-n-Roll locations differ from standard tire dealerships in that they’re primarily wheel outlets, according to Sutton.

“A traditional tire dealer may have 10 to 12 wheels (in his store). He may be playing in the wheel business, but he’s not in the wheel business; he’s in the tire and auto maintenance business. We’re basically wheels. That’s not to say we can’t put a great tire deal together... it’s just not our specialty.”

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Nevertheless, both Sutton and Bloom realize that tires are often part of the wheel sale. Their stores’ stock several tire brands. Rent-n-Roll carries Kumho, Nitto and Pirelli products.

“We’ll use Nitto, we’ll probably offer Michelin, we’ll use Goodyear, and we’ll also use off-brands,” says RimTyme’s Bloom. “The name of the tire is not as important to (our) customer as the wheel.”

Rent-n-Roll will readily plus-size tire and wheel packages; RimTyme stays away from the practice. “We’re not going to put lifters or spacers on,” says Bloom. “We’re going to do what (is recommended) by the original manufacturer.”

Sutton says it’s a matter of responding to customers’ preferences. He reports that the vast majority of Rent-n-Roll’s customers want to plus-size their tire and wheel packages. Rent-n-Roll also offers nitrogen inflation at its locations. “We jumped on that early,” says Sutton.

Flexible payments

Both firms offer several payment options for tires and wheels. RimTyme offers 90 days same as cash as well as a “lease to own (plan)... between a year and 18 months, you make payments, typically on a weekly or monthly basis, and at the end you own the merchandise,” says Bloom.

Sutton says Rent-n-Roll customers often mix and match components of available payment plans.

Customers who patronize rent-to-own centers are a loyal breed, says Bloom. “People don’t drop in and out of our market. The analogy we give is that you’re a Cadillac driver and every four years for the last 20 years you’ve bought a new Cadillac. When your economic situation changes you don’t drop down to a Nissan; what you do is buy another Cadillac and go six years in between.”

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Don’t let the name fool you: Rent-A-Wheel/Rent-A-Tire also sells tires

Even though rent-to-own franchising has emerged as a popular concept, Van Nuys, Calif.-based Rent-A-Wheel/Rent-A-Tire Inc. stores will remain 100% company-owned, says John Bowlin, president of Rent-A-Wheel Inc. and Rent-A-Tire Inc., two separate entities.

All Rent-A-Wheel and Rent-A-Tire stores carry tires. However, Bowlin says the vast majority of his customers are looking for wheels first. And while some clients buy rims and tires outright, most of them prefer using the companies’ 52-week payment plan.

“Our customers view us as a rim shop,” says Bowlin. “We don’t have many customers walking in the door asking for tires only. But a lot of customers who come to us for rims come back to us for tires.”

Each Rent-A-Wheel/Rent-A-Tire store can mount and balance tires, as well as repair flats. “We’ve been fixing flats from the very beginning -- for the life of the tire, not just when customers are on our rental program,” says Bowlin. (Rent-A-Wheel started in 1996; the company acquired Rent-A-Tire six years ago.) Falken is the chain’s main tire brand.

Twenty two-inch tire and wheel packages are big sellers for passenger cars, he explains, and the 24-inch segment is gaining steam for large SUVs. Rent-A-Wheel/Rent-A-Tire plans to open 20 to 25 new stores in 2008, with the goal of eventually having up to 150 locations. “Our customer has a little more money in his pocket” than the traditional rent-to-own appliance or furniture customer.

Proper I.D. -- New name better reflects operation, says Rent-n-Roll owner

Rent-n-Roll LLC is in the process of changing its name to RNR Custom Wheels and Tires in order to position itself “as a wheel and tire store that offers several payment options” instead of just a rent-to-own chain, says Rent-n-Roll President Larry Sutton.

“In existing markets where we have invested a lot of marketing funds in the Rent-n-Roll brand, we will be evolving over a two- to three-year period by adding point-of-sales, advertising, store fixtures and store design elements.”

In new markets, stores will open under the RNR Custom Wheels and Tires name. Sutton says the company will retain Rent-n-Roll as the name of its rent-to-own program.

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