We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of tire store businesses. Below is a brief synopsis of the industry.
Description of Business
Establishments primarily engaged in the retail sale of new automobile tires, batteries, and other automobile parts and accessories.
General Industry Information
The majority of sales and installation in this industry is performed by franchise operations. There is a high population of competitors in this aftermarket of the automobile industry. Product lines typically include a variety of tires designated for specific vehicles.
Some operators offer customized wheels and related services. Often, equipment and equipment capabilities dictate the services which can be provided at a tire shop location. Equipment commonly found at business locations includes wheel alignment machinery, ground lifts, updated tools, and diagnostic equipment.
Occasionally, tire shops will furnish commercial customers with contract services. Such commercial accounts are a positive attribute for tire shops. Other positive attributes include a good location with plenty of parking, and several experience tire technicians.
There is also a relatively new regulation affecting this industry. The National Highway Traffic Safety Administration (NHTSA) requires retailers to register every tire that is sold. The law requires tire retailers to provide tire registration forms to purchasers and, in turn, the customers can voluntarily mail in the completed forms to the tire manufacturers so they can be easily contacted if their tires are recalled for defects or other safety issues.
Leaders in terms of market share are companies engaged in franchise activity Tire Kingdom, a subsidiary of TBC (tire wholesale business leader) earned approximately $5.5 billion during its 2004 fiscal year. Discount Tire Co, a large independent dealer, earned approximately $1.4 billion in revenues for the same accounting period. A large presence from Sears, Roebuck & Co exists, although tire retail is not their primary business.
Red Flags and Risks
Businesses involved in selling and installing tires face heavy competition, especially in areas close to tire manufacturing plants and in proximity to higher retailers with auto repair businesses. Such competition is credited with thinning profit margins, so buyers should consider the risk of emerging or existing competition. A factor which may affect the competition in this business is location. Visibility and adequate signage is important to this business, and the location should be large enough to sustain garage traffic. As always, it is important to review lease agreements and terms. The risk of worker injury and safety is prominent with tire shops, since they work on cars that have heavy parts and can spew hot liquids. Worker’s Compensation can be costly, and price increases can eat away at profit margins. Ensuring a threshold of safety will hedge this risk.
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