There have been a number of big tire dealership mergers and acquisitions this year. One of the most interesting ones, in my opinion, is Discount Tire’s recent purchase of Buffalo, N.Y.-based Dunn Tire Corp.’s 25 retail stores, which was finalized on Sept. 30. (The stores are located throughout New York and Pennsylvania.)
Why do I find this transaction extra-compelling? One, it’s a departure from Discount Tire’s traditional growth model in a number of ways. And two, it raises some natural — and interesting — questions about Discount Tire’s expansion plans, going forward.
Discount Tire’s growth has traditionally come through new store, greenfield construction, though it purchased Tire Rack in 2021, which of course, was a different type of deal.
Does the Dunn Tire acquisition signal a change in Discount Tire’s growth strategy? Does Discount Tire have plans to acquire additional tire dealerships? If so, who is Discount Tire looking at? (It should be noted that the Dunn Tire transaction did not include Dunn’s wholesale business, Exxpress Tire Delivery, plus that operation’s five distribution centers.)
Also significant is the fact that the Dunn Tire stores that Discount Tire has acquired offer auto maintenance and repair services — a major departure from Discount Tire’s traditional, tires-only strategy.
This doesn’t necessarily surprise me, since in 2021, Dean Muglia, Discount Tire’s CEO, told me, “I think you will see us experiment with other services more. We recognize the world is changing fast and so are the needs of our customers. There may be some services that we choose to offer in our stores and there may be other services we may choose to partner on, depending on the needs of our customers.”
I don’t expect to see Discount Tire offer automotive service at its existing locations, since it would be an incredibly complex, expensive undertaking to retrofit and remodel those stores’ service bays.
But who’s to say Discount Tire won’t make auto service capabilities a “prerequisite” for future acquisitions or offer auto repair services at future greenfield locations? Will Discount Tire use Dunn Tire as a test lab to help determine if it wants to make that investment?
No matter how things shake out, it’s clear that more services are in the works. In an early-October press release from Discount Tire, Christian Roe, the company’s chief revenue officer, said, “We will continue to grow our businesses in new markets and bring full-service offerings to customers.” (In addition, a Discount Tire spokesperson recently told me that the company “will explore growing its business in new and existing markets by acquiring full-service of existing businesses.”)
In the same press release, Discount Tire also said that all Dunn Tire retail stores will continue to operate under the Dunn brand. This makes sense since Dunn Tire has a well-respected name and enjoys substantial market share, especially in the Buffalo area, where it has eight locations. (Dunn Tire’s next biggest market is Rochester, N.Y., where it has seven stores.)
This leads to my next question: will Discount Tire let future acquisitions — if there are future acquisitions — operate under their own names or will there be some sort of store brand/format mix, based on the profitability levels of individual stores, their specific locations, market saturation and other considerations?
And while we’re talking about brands and names, will Discount Tire introduce new tire brands to Dunn Tire’s current product mix? Discount Tire offers more than 60 brands, according to the 2023 MTD 100. Dunn Tire offers around 20 tire brands, three of which — Kelly, Mastercraft and Sailun — are not carried by Discount Tire. Will we see some brand cross-pollination or will Discount Tire leave Dunn Tire’s product menu untouched?
Finally, the Dunn Tire acquisition is noteworthy because it’s a continuation of Discount Tire’s push into the northeastern part of the United States. The company, which is based in Scottsdale, Ariz., opened its first Pennsylvania store in Pittsburgh nearly three years ago — a move Muglia told me was “a nice entrance into the East Coast market, which we’re really focusing on.”
It isn’t inconceivable that Discount Tire will eventually have stores on both the East and West Coasts.
Whenever a deal of this magnitude is announced, there will always be speculation. In the meantime, we’ll continue to dig for more information and will share our findings with you.
If you have any questions or comments, please email me at [email protected].