Ken is founder and president of K&M Tire, a fast-growing distributor based in Delphos, Ohio. We caught up with Langhals at K&M’s recent dealer meeting in Chicago.
Q: With the demise of American Car Care Centers, what do you see as the impact in the market? What that’s going to mean for, particularly, the member dealers, a lot of which were not aligned with other programs?
Langhals: Well, for us and for our dealers, there should be very little because we’ve only been part of American Car Care for a short period of time. We had a few Eco-Express dealers signed up, but we had no American Car Care dealers signed up. So, for us and for our dealers, again, very little impact. I would think some of them who have been carrying the American Car Care brand for many years; I think they’re going to have to re-identify themselves. That will be, I think, a challenge for them. Where does it go from there, or what are their best options? I don’t know for sure.
Q: Do you see that there might be another group that would fill that void of 1,200 retail store locations, or do you think those dealers will end up going to a more regional program?
Langhals: I think ACCC has run their course. With the changes in the industry, I don’t think there’s as much need for that type of program as what there was in the past, because right now, of course, American Tire Distributors has its own program, U.S. AutoForce has its own program. We have our own program with Mr. Tire. So, I don’t think there’s a need like there used to be for American Car Care-type program. I don’t think anybody’s going to step in and fill that void. With the manufacturer’s programs and the distributor programs, I think there are plenty of options out there. I don’t see anybody else stepping up, and I think it would be very difficult for them to put something together that would really have much meaning to the dealers.
Q: At last count, Mr. Tire was at about 380 dealers, and Big 3 was at about 45 locations. Where do K&M Tire’s dealer programs stand today location-wise?
Langhals: With the Big 3 group and Mr. Tire group combined, there are just over 600 now.
Q: That’s phenomenal growth in the last couple years. You just started Big 3 two years ago?
Langhals: Right. Actually, the two together have grown, I think, 35% a year over each year for the last two years. So yes … phenomenal growth, no doubt.
Q: What’s your goal? Are you looking to get a number like 800 locations? 1,000 stores? Does the number matter?
Ken: No. To me, the number does not matter. What matters to me is how good we can service those dealers and if there is an added benefit we can give to the dealers. So, the most important part is that we’re doing something and providing a service that they need. Whether it’s 100 dealers or 1,000 dealers, that’s not too important to me. There’s no number at all in my mind, but I do think it will continue to grow at a fairly rapid pace. It won’t grow at that 35% pace because we’ve got a lot of dealers signed up, but I can see 10% to 20% growth over the next few years.
Q: In terms of the overall business, how was 2013 for K&M Tire?
Langhals: Sales wise, overall, we were up 15% to 20%. I don’t have the exact number, but we were up 15% to 20%.
Q: And that was all organic, right? Because you had no major acquisitions last year.
Langhals: Our locations in Texas were fairly new, and some of the newer locations, of course, they grow much faster than the locations we’ve had for 10-20 years.
Q: What do you see for 2014? How do you see the market playing out?
Langhals: I think 2014 is going to be a challenging year, just like 2013 or 2012 have been. I think it will be a challenging year to keep the gross profit up where we want. I see our sales increasing probably more like 10% overall, and that’s because some of our newer locations are still growing, and we will continue to promote those new locations.
Q: Last question, what is K&M looking at in terms of other acquisitions? Do you have specific plans?
Langhals: You know, we have no definite plans to grow so much or to buy so many warehouses. I can tell you right now we are working on a distributor and we should finalize that deal yet this month. (Within days of the interview, K&M Tire did announce that it was buying Mid-Tex Wholesale Tire in Texas, effective Jan. 27.) We will continue to look, and if the right opportunity presents itself, then we will act. We’re primarily looking within the same footprint we have; we really don’t want to expand the footprint too much. We’ve got a big area right now.
Link to acquisition of Mid-Tex Wholesale.
