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Alyeska Tire: Tire Pioneers in the Last Frontier

The official motto of the state of Alaska is “North to the Future.” The sentiment mirrors the life decisions of Jerry Wortham, co-founder and owner of Alyeska Tire. A native of Georgia, when his brother-in-law moved to “the last frontier” to run a new car business, he invited Jerry to follow.

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The official motto of the state of Alaska is “North to the Future.” The sentiment mirrors the life decisions of Jerry Wortham, co-founder and owner of Alyeska Tire. A native of Georgia, when his brother-in-law moved to “the last frontier” to run a new car business, he invited Jerry to follow. Soon after, Jerry and wife, Carla, packed up their three boys and left balmy Georgia for the breathtaking beauty and chill of Alaska. Jerry’s son, Alyeska Tire’s Chief Operating Officer Craig Wortham, was a year old.

Jerry said he never dreamed at the time that he would one day own a business, let alone grow it into one of the largest tire dealerships in Alaska.

The move north has apparently paid off.

With their fiercely independent spirit and innovative business practices, coupled with a true devotion to both customers and employees, Alyeska Tire has earned the title of Tire Review Top Shop Winner for 2017.

An Unexpected Journey

The business started as “Alyeska Sales and Service” in 1978 by Jerry and original business partner, the late George Navarre. The two pooled together $12,000 each to buy out a Chrysler dealership location. The intent was to sell used cars, and dabble in auto parts as the extra space in the building allowed. In time, that evolved into selling tires – so many tires that there wasn’t enough room for the parts and used cars anymore.

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“When we bought the business, the gentleman that we bought the business from had about $30,000 worth of inventory in tires, and I thought he was nuts,” Jerry laughed. “I mean, I thought, what in the world are we going to do with all of these tires! I have to laugh, because today we’ve got seven locations plus the distribution center, and we carry right around $60 million in inventory just about all the time. It’s funny how things work out.”

Jerry bought out Navarre’s half of the company in 1985.

“Partnerships, if anybody’s ever been in them, can be tough. They’re like a marriage; and sometimes it’s more expensive to get out of a partnership than it would be a marriage, but we didn’t have that problem,” he said. “We were friends right up to the very end.” (Navarre passed away in 2009 at the age of 85.)

The dealership’s name changed in the early 2000s to Alyeska Tire to more accurately reflect the business.

After graduating college, Craig joined his father in the tire business to lead a second location. The business expanded from there.

Today, the tire dealership operates to eight locations.


2017 Top Shop Winner: Alyeska Tire

Founders: 1978 by Jerry Wortham and George Navarre

Owners: Jerry and Carla Wortham

Headquarters: Soldotna, Alaska, with locations in
Anchorage, Fairbanks, Homer, Kenai, and Palmer.

Number of Locations: 8 total (6 Retail, 1 Truck Tire
Center, 1 Distribution/Wholesale Center)

Years in Business: 38

Sales Mix: 80% Tires/20% Service

Retail: 65%

Wholesale: 23%

Commercial: 10%


Giving Away Profits

Most tire dealers talk about the challenge of getting their employees to think more like owners. Hours are spent trying to coach, train and remind people to make better bottom-line and customer-focused decisions when called upon, without having to be cross-checked and micromanaged. The problem with that approach may be the lack of positive incentive attached to it – the consequence of “losing your job” might be incentive for some, but it’s not always enough to inspire a team to self-motivate.

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But Alyeska Tire has figured it out, empowering their growing team of 68 employees to think like owners – which has resulted in cutting costs while decreasing the stress of being a business owner – all thanks to a generous shift in employee compensation.

“One of the things that we concentrate on, I think, that differentiates our company from our competition in Alaska is building people and sharing,” says Craig.

As part of a unique bonus incentive program, a full 49% of Alyeska Tire’s gross profits are shared with their employees at the end of each year. Team members are eligible to take part in the bonus program as 100% vested after just 12 months working for the company.

Last year bonus program added up to almost a quarter of a million dollars paid out to 40 employees that qualified.  Twenty-seven others who had not yet been full time for a year, (mostly teams from the new locations added) received smaller bonuses for their hard work during the winter tire rush.

“Our bonus program rewards hard work, dedication, and innovation,” said Craig. “We no longer have to micro-manage our locations; rather, we treat our shops as individual profit centers, allowing our employees to act independently… as it pertains to day-to-day activities and decisions.”

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Jerry said that with the change in bonus as an incentive and the shift to a “think like an owner” culture, it’s significantly easier for them expand their operations, with an emphasis on developing people to lead and do their best work. The bonus program helps reward for success.

In 10 years since they adopted the program, the positive impact on both the business and the leadership skills of its employees has been transformational. But it hasn’t always been easy.

“It’s tough the first few years when you implement the program, it really is,” explains Craig. “Jerry took a lot of convincing. He told me a couple times I was crazy. We had a lot of fighting a lot of arguing, some really tense moments until he finally just gave in.”

Jerry says he was simply tired of arguing with him about it, but admits that it’s worked out better than he imagined. “Now we have even more stores, but we don’t really work any harder per se than we did when we had three,” said Jerry.

Over the years, Craig and Jerry had tried different programs to help engage their employees, testing out different incentives and commissions, but “nothing really clicked” and the programs fell short of expectations.

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“We just needed to do something that would get the employees to think in the same way that we think, worrying about that bottom line. So the net profit was the way to go, for sure,” said Craig.

For tire dealers considering this approach to better engage employees, Craig said it takes about three years for the concept to fully take hold before the results to begin to show.

The first year is the most painful, as you are basically giving away almost half of your profits – numbers that spoken for the year before. However, Craig says it is completely worth it. The bonus amounts are distributed based on employee contribution with managers typically receiving the highest percentage.

“Handing someone a check for [thousands of dollars] at the end of the year is about the coolest thing in the world,” Craig shares. “I think all businesses should do it. At the end of the year, I’d rather give it to the employees instead of giving it to Uncle Sam.”

The result has been an increase in employee retention as well as a more motivated workforce overall. Teams self-correct when adjustments need to be made. Efficiency, quality and savings are top of mind with staff, especially as any waste now comes out of their pockets. In addition to having team members think like owners, it also has solved for the challenge of managing locations hundreds of miles apart.

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Transparent Books

For the bonus program to work, the Worthams are completely transparent with the books for each location. Plus, everyone knows that Jerry watches the numbers like a hawk every single day and is quick to call out any discrepancies, to “trust but verify.”

However, that financial transparency makes it challenging to engage in dealer incentive programs and spiffs with the tire manufacturers they represent. Instead of figuring in backside money, Craig says that his dad is expert at negotiating the terms of agreements to bring it down to the lowest terms possible.

“He’s a master,” said Craig. “When the tire manufacturers come to us and they tell us [about backside pricing incentives or rebates], we tell them we don’t [do it]. You give us the $70 in the price of the tire. You’re not going to bypass us to get directly to our consumer and pay our consumer to buy your product. We’re the ones that put the investment in.”

Jerry added, “We keep an open book in our company. Our managers, our assistant managers can go into our system and look up and see exactly where their particular store is at all the time, and we want them to know that. This backside money just doesn’t work for the [bonus] program that we got going. I get awful, awful upset with the distributors when they come in and try to sell me on the backside money… I’ll tell them I don’t want it. Instead, I want to see [another two or three points] on my invoice.”

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Part of the culture of employee empowerment means the Worthams let each individual store make their own decisions regarding equipment purchases. Craig said they do provide guidance and steer them a bit, “but we allow them the autonomy to decide what alignment machine they want to use, [so the decision goes to] the technician or the group of people who will be using it [because] they ultimately know the equipment better than [we do] and what’s going to be most efficient for them. Over time, you might have one manager switch brands, but either he finds out he didn’t like that brand and goes back to an old brand, or everybody else jumps on the same brand.”

Jerry adds, “We do encourage them to talk to other employees in other stores [for consistency]. If we transfer one employee out of one store and into another store, he’s got to be totally familiar with the equipment and everything that’s in that store, and that store needs to run the same way as the store he just came out of.”

Rich Lamar, manager of the new Anchorage location since 2016, has been in the tire business for 44 years, most of that time spent with a local tire-dealership competitor. He said there is no other place that does business the way he prefers to do business than what he’s experienced with Alyeska Tire. He appreciates the honesty and transparency that are part of the Alyeska culture.

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“When a vehicle comes here, everybody truly cares about the customer’s car or vehicle or tires,” he said. “What’s unique about this place and about working here is [the Wortham’s] approach to business…. [For customer interactions], you’ve got to be able to look somebody in the eyes and know that we’re telling them the truth, and that’s the way I feel we do things around here.”

The transparency of the books results in friendly competition between locations. Managers often work together and reach out to each other when there’s a concern or when they’re looking for ideas to address an issue. According to the managers we spoke with, it creates and open environment with increased collaboration.

Beholden to None

Perhaps as a byproduct of their pioneering spirit, Alyeska Tire remains fiercely independent and refuses to be beholden to any tire brand or outside organization.

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As the story goes, Alyeska Tire began its focus on selling tires because the Goodyear representative in the state of Alaska, Harry Oden, was “too persistent, kind, and persuasive to ignore.” Jerry says Alyeska started selling and carrying tires because, “Harry was so nice and would simply not leave me alone about selling tires, so I wanted him to stop pestering me.”

But once Harry left the territory, the relationship with Goodyear changed. Distribution concerns and the lack of availability of snow tires to feed the high demand of Alyeska clients forced the pair to bring on other tire brands, eventually ending their relationship with Goodyear in favor of high-quality “tier two” brands. Brands currently stocked include: Nokian; Toyo; Hankook; Lauffen; Yokohama; Kenda, and Milestar.

That experience made Jerry cautious about having “all your eggs in one basket.” The two believe that going all in with a single line or manufacturer – especially with the distribution challenges of Alaska – opens up the business to vulnerability, especially as so much of their business is based on the early availability of seasonal tires.

“My dad was a Goodyear dealer for many, many years, and when I came back from college, we had a parting of the ways with them… I think I worry that we marry ourselves too much with another company that can control us,” said Craig. “There’s no doubt in my mind, if we woke up tomorrow and two of our major suppliers called us up and said, ‘Sorry, we’re not doing business with you anymore,’ that the stress level is minimized because I know that our company strength is in our people and our relationships.”

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Jerry added, “We did learn that we could sell other brands than Goodyear, and [more importantly] we could sell ourselves, and we weren’t dependent on them [or anyone else].”

In 2000 after being further squeezed by distribution challenges, the two realized their success as an independent tire dealership also depended on increasing the size of their operation.

Go Big or Get Out

It was 17 years ago when Craig Wortham looked at his dad and said it was time for them to either go big or get out. His father, Jerry, agreed. At the time, they were a small, two-store operation in two small, rural communities with a customer base of about 25,000 people.

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Instead of struggling to squeeze the most out of their two locations on Alaska’s Kenai Peninsula, the two made a commitment to expand their operation, increase their purchasing power, grow their customer base and take a calculated risk to increase their footprint across the Last Frontier. The “big” decision paid off.

In 2001, they expanded into the nearest small town, Homer, roughly 100 miles away from their original location. The business there was very successful and quickly became profitable. Next was an opportunity to purchase a store in the city of Fairbanks, about 500 miles (a nine-hour drive) from Kenai. To manage the distance, the entrepreneurs bought both the Fairbanks location along with a Cessna 182 airplane to help them visit the store. Craig and Jerry both quickly learned to fly while juggling a second wave of expansion.

Later Alyeska Tire expanded into Palmer and Anchorage. Then in 2015 they opened a 24,000 sq. ft. distribution center in Anchorage for both wholesale operations and to serve Alyeska Tire locations across the state.

Open less than two years, Jerry says the $2.8 million distribution center is already running out of space. The wholesale and distribution business is managed by Don Rutherford, a self-proclaimed “geek” and former software engineer. He left a career with Andreoli & Associates to join the team at Alyeska Tire. Even though he had a great career with the software solution provider, he jumped at the opportunity to work with the Worthams and make a move to Alaska.

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Don first met Craig met several years earlier when he was a prospective customer for shop management software. After spending several years trying to convince his dad to embrace the new technology, Craig paid for Don to fly to Alaska to meet with his dad as a last resort. Primed by years of failed attempts by Craig, Don won Jerry over by in about 10 minutes. The three hit it off.

On that trip, Don was both charmed by Alaska and impressed with the Alyeska operation. A few years later, in 2014, he was a ready for a change at the same time the Alyeska team was ready to build out their wholesale and distribution operation. Don’s background was a perfect fit.

“I got tired of selling, I was burned out and I was ready for [a move],” said Don. “Plus, I like to fly-fish and what better place to fly-fish than Alaska.”

Under Don’s leadership, the distribution operation is primarily digital. It’s also enjoyed 30% year over year growth in the two years since it opened – so much growth that Jerry and Don agree that it’s time to expand before they run out of space. Containers line the back lot to provide Don’s team with some flexibility while Jerry scouts for possible locations.

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In addition to supplying tires to most of the Alyeska Tire locations, the distribution center also enjoys a base of about 65 wholesale customers. Don sees the potential to grow that base further in the months ahead.

For such a large operation, the team at the distribution center is quite small. The majority of the orders are placed online, though they do take calls. The team runs only “hotshot” deliveries similar to parts houses versus established delivery routes. Don says this gives them an advantage over other distributors in the area.

Though successful, the truth is that growing the business into the Anchorage area was not initially in Wortham’s plans. Anchorage was too big and too expensive a market, they thought. It wasn’t until the leading tire dealer in the area suffered a few missteps in recent years, opening up the opportunity for Alyeska to expand into the city.

Craig and Jerry agree that the rural nature and isolation of Alaska has actually helped them grow.

“There’s a uniqueness to Alaska. These are good people, hardworking, down-to-earth and honest. People are more neighborly, more friendly here. We have a unique culture here in our state because there are times when you have to rely more on your neighbor to simply survive,” explains Jerry.

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“We’re a small-town business and we approach the business with a small-town sensibility. Fortunately for us, that same approach has translated well into a bigger city. I don’t think the opposite is necessarily the case.”

Winter Season Spike

In Alaska, Sept. 15 marks the first day when vehicles are permitted to use studded tires for the winter season, but it’s when the snow falls that people literally start lining up outside Alyeska Tire locations. Craig describes it as “controlled chaos,” the stuff of reality TV shows. The teams have it down to a science to get people in and out quickly for their seasonal tire changeovers. Though they don’t provide off-season tire storage for customers, they area considering adding it as an additional service. 

Jerry estimates that 35% of their business for the entire year is done within those three weeks of season. He said on an average day they do tires for about 25 vehicles per day per location but once the snow falls, that number jumps to about 175 a day with changeovers.

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“When the snow falls – whether it’s October 15th or October 31st or September 15th – whatever day it first hits the ground, that’s when it gets crazy,” said Jerry. “They just go nuts. And they’ve got to have it done now.”

But for the rest of the United States, that September seems a bit early to think about winter driving, so manufacturers have delayed product as a result. Warmer winters have also slowed winter tire sales in recent years. But that slump, according to Don, means there may be pent up demand, so he’s stocking up the distribution center to be ready.

With an estimated 60% of passenger vehicles running on studded tires in Alaska each year, early inventory of winter tires remains critical to Alyeska’s annual sales, which is why product availability and inventory management matters so much.

MARKETING

The Worthams insist on building the Alyeska Tire brand instead of the brands of the manufacturers they represent. To accomplish this, they last year started working with a marketing agency Walsh|Sheppard, Inc., to increase brand awareness statewide and consistency across locations. Traditionally, the company had relied mostly on word-of-mouth and community-based sponsorships, but the new marketing approach is already showing results.

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Alyeska Tire has added a slogan “We’re Always With You” which highlights their strong warranty offering, devotion to customer service and multiple locations across the state.

“Our slogan has really helped us with name recognition,” adds Craig.

Currently, Alyeska Tire uses a mix of broadcast and digital advertising. Television commercials run in select markets including Anchorage with reach to neighboring communities. Television is supplemented by radio and digital ads based on the campaign.

In a recent partnership with the State of Alaska Department of Transportation, the tire dealership sponsored a campaign against texting while driving, which included the in-store distribution of thumb and wristbands with printed messages reminding drivers not to text and drive.

On the Horizon

Five years from now, Alyeska Tire hopes to have added a few more locations. Already, they have several prospective properties for expansion in remote locations, as well as in the city of Anchorage. They’re also looking into growing their commercial business operations, adding OTR and medium commercial truck tires and a small fleet of mobile service trucks.

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Jerry’s roots in the car business expose a bit when he says, “I’m always looking for a good deal.” That means finding the right location or the right business to acquire to further expand the Alyeska Tire footprint in the snow of Alaska.

“I remember when we were at an airport and the woman we were talking to, when she heard our story, called Jerry a pioneer,” recalls Craig. “And that’s always stuck with me because [he’s] from a generation of Alaskans that really fundamentally are the last pioneers of America. They’re the last guys to go have an unchartered territory that you can go in and claim….”

Craig added, “People are a little different up here because they’re the explorers, and it may sound silly but it really is the last place that’s a true frontier.”  

 

 

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