Les Schwab Tire Centers

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Les Schwab Tire Centers

1250 East 3rd Street
Prineville, Oregon 97754
U.S.A.
Telephone: (541) 447-4136
Fax: (541) 416-5488
Web site: http://www.lesschwab.com

Private Company
Employees: 7000 (2001 est.)
Sales: $790 million (2001 est.)
NAIC: 441320 Tire Dealers; 421130 Tire and Tube Wholesalers; 441310 Automotive Parts and Accessories Stores

Les Schwab’s first attempt at selling tires in Prineville, Oregon, has blossomed into one of America’s largest and most successful independent tire chains, Les Schwab Tire Centers. Les Schwab Tires includes over 330 locations throughout Oregon, Washington, Idaho, Montana, California, Nevada, Alaska, and Utah. Les Schwab Tires prides itself on continued customer service—the practice of greeting customers as they drive into the shop’s parking lot has long been a company trademark. In addition to selling tires and batteries and doing alignment, brake, and shock work, Les Schwab Tires produces truck tires, constructs new trucks and equipment, and operates five tire retread plants. Another major source of pride for Les Schwab Tires is the profit-sharing and retirement programs that Schwab began during the beginning stages of his career. When Les Schwab was recognized as Modern Tire Dealers magazine’s Tire Dealer of the Year in December 2000, his policy of sharing more than 51 percent of his company’s profits with employees was mentioned and applauded. This policy makes millionaires out of many Les Schwab employees by the time they retire.

Humble Beginnings

Les Schwab tried his hand at many trades before settling on the franchised tire business. Orphaned at a young age, Schwab was left to fend for himself when he was just 15 years old. He proved that he was extremely capable of taking care of himself and his brother when he convinced the principal of his school to let him out early to deliver newspapers. This job allowed him to earn the $8.00 a month he needed to pay his and his brother’s rent. By the time he was 16, he had become circulation director of one of the newspapers he had been delivering. After serving in World War II and working once again as the circulation manager upon his return to Oregon, Schwab was anxious to open a business of his own. In 1952 he and his wife, Dorothy, sold their house, borrowed $1,100 from Dorothy’s brother, and purchased OK Rubber Welders, a franchised tire shop in Prineville, Oregon. Although Schwab barely knew anything about tires, he was able to make a success of his store, grossing approximately $10,000 in sales a month, and $150,000 in the first year. In the next two years, Schwab expanded his business to include two more stores.

By 1955 when Schwab acquired his third OK Rubber Welders store in Redmond, Oregon, he knew that operating as a franchise was not going to work for him. It was not his own creation and he had too many ideas and theories that he wanted to test out. Soon after he acquired the third store, Schwab changed the name of his shops to Les Schwab Tire Centers, developed and began implementing an idea that is now called the “supermarket tire concept.” The supermarket tire concept turned his tire warehouse into a showroom that customers could walk through in order to select the exact tires that they would like to purchase. Schwab also aimed to stock multiple brands of tire in each size to give customers more options. Schwab’s idea was not popular with the major tire distributors but proved an incredibly successful business strategy for Les Schwab Tires.

Independent Thinking

As Schwab opened more stores, he became increasingly independent in his strategic business plans. In 1966, Schwab decided to take down all of the rubber company’s signs that advertised particular brands of tires and replaced them with his own Les Schwab Tires sign. Many of the rubber companies were disgruntled at this change; one supplier who objected adamantly to Schwab’s new practice found his brand dropped from Schwab’s offerings altogether. In 1966, Schwab added six stores and a retread shop in Idaho to his empire, bringing the count of stores he owned up to 18. Retreading was a significant addition to the Les Schwab Tires business plan. Les Schwab Tires retreads worn tires and sells them with the same warranty that would come with a new tire. By 1972, Schwab had increased his number of stores to 35, and he had not stopped opening stores. Schwab was able to grow at such a fast rate, partly due to his sales success, that Les Schwab Tires redoubled its sales volume every five years.

Prineville, Oregon: The Perfect Spot for Headquarters?

Les Schwab’s headquarters has been located in Prineville, Oregon, since the purchase of his first OK Rubber Welders store. The Prineville location has grown from the 1,400 square-foot shed with no running water that Schwab purchased in 1952, to a large cluster of buildings including a three-story administrative building with offices for 150 staffers, a large training-and-meeting facility, a computer center that keeps Les Schwab Tire Centers computers running in five states, and the largest retread shop in America. Within eyesight of the administrative headquarters, Schwab created a storage area for four million scrap tires that would be chopped up and buried. The Prineville compound also included a 450,000-square-foot warehouse that stores hundreds of thousands of new tires.

Although Prineville was significantly off the beaten track, Schwab opted to keep Les Schwab Tire Centers headquartered there for the long haul. In 1995 when word leaked out that Les Schwab Tires was considering moving its headquarters to be closer to the regions that the company was expanding into, Prineville’s community rallied to keep Les Schwab Tires where it was. Phone calls streamed into Les Schwab Tire Centers headquarters, and a plan was concocted to help the company build the new warehouse it needed at the site of the Prineville Airport Industrial Park. Prineville was thrilled with Les Schwab Tires decision to stay and the town held the company responsible for its burgeoning growth.

Computers to the Rescue

The Les Schwab Tire Centers Prineville headquarters had been computerized since 1972, but it was not until 1982 when the company began considering the possibility of computerizing individual retail stores in order to speed up the invoice process. The company updated its computer system to IBM System/38 and dial-up modem technology and began the process of outfitting its stores with a computer network. When 80 stores were computerized, they finally saw a measurable difference from the previous system. The computerized-stores sent out invoice statements ten days earlier than before, and received payments earlier as a result. The system that Les Schwab Tires had chosen to use had many advantages: it was relatively inexpensive, it used a programming language in which the Les Schwab Tires programming staff was already fluent, and the system was programmed so that if a store had serious computer troubles, they could be dealt with remotely from headquarters.

In 1994 when Les Schwab Tires found that the POS (point of sale) terminals in their retail stores were not operating as well as they needed them to be, the company opted to look for a new solution. “The problem,” explained Les Schwab Tires Telecommunications Manager Pam Ontko, “boiled down to transaction speed and memory capacity. During regular business times, transactions took about 30 seconds to process, but during our peak times the old terminals we had been using could take as long as three minutes to obtain a transaction authorization. This caused extensive queuing at checkout counters and caused anxiety for the customer waiting for their credit card to process.” Les Schwab Tires opted to install the T7E terminals from Hypercom, Inc. in Phoenix, Arizona. The new terminals were significantly quicker than the previous ones, and featured considerably more memory capability. Ontko noted, “The T7E has separate, single, labeled keys to press to perform the most common functions, and so requires minimal training. In fact, after installing the initial 12 stores, we fine-tuned the instructions that include some special procedures for our stores. From this, our stores were able to install the equipment.” The process for generating reports and other daily transactions was simplified with the new system, due to its user-friendly layout. The new computers also gave Les Schwab Tires some of the tools it needed to stay competitive in the near future, like the capability to support debit/ATM cards, check scanners, and other necessary business components.

Compassionate Company

Les Schwab Tires took advantage of many opportunities to raise and donate money to charity. Some of the community service activities that Les Schwab Tires was involved in were uniquely suited to them. The company donated tires/wheels to the Cottage Grove, Oregon, Police Department’s D.A.R.E. (Drug Abuse Resistance Education) program. A police officer who is part of the D.A.R.E. program drives a fancily decorated and stereo-sound enhanced GEO Tracker, a car that was recovered from a drug dealer, when making rounds to the local elementary schools to teach the 7-part D.A.R.E. program. Les Schwab Tires contributed to the community when the company participated in the Society of Vintage Racing Enthusiasts (Sovren) Group’s Northwest Vintage Races. In that event, for $10,000, a person could drive a vintage car, souped up with Toyo Tires and Les Schwab Tires decals. Ten executives from the Seattle area purchased rides. The event raised more than $300,000 for the Children’s Hospital of Seattle. In addition, Les Schwab Tires became well known for its practice of sponsoring sports teams (commonly basketball teams) in towns where the company has shops.

Company Perspectives:

The Les Schwab Company’s biggest challenge is to continue to offer opportunity for its employees and to build people. Its goal is to continue to provide the Les Schwab basics of customer service, to be original and innovative, and to stay independent. It’s important to always remember we are in business for one thing, and that is to take care of our customers.

Tire Troubles

In the early 1990s, a general concern about the growing piles of old vehicle tires grew into legislation. Many of the states that Les Schwab Tires operated in passed their own laws, and in 1991, an Idaho law went into effect that prohibited the disposal of tires in landfills. In 1994, Idaho’s Board of Health and Welfare voted to require a tracking system for used tires. These types of laws were passed because it was found that tire piles posed major fire risks. Les Schwab Tires noted that their company had a built-in $1.00 fee on all new tire sales that was slated to pay for tire cleanup. The company piled its tires and waited patiently for an economical solution to the problem of disposing of old tires. However, in 1996, Les Schwab Tires headquarters had more than four million tires stacked a few miles west of it, and still no economical and environmentally sound solution regarding the old tires was in sight.

Seizing Opportunities

When the Asian currency markets fell in 1998 and the Asian automobile market took a dive, Les Schwab Tires wasted no time taking advantage of the strong dollar-value in Korea. Les Schwab Tires quickly swooped into the Korean rubber market and scooped up the deals left behind when tire suppliers’ customers began to bow out of orders.

Another example of Les Schwab Tires’ ability to quickly turn a potentially harmful situation into a success for the company occurred in 2000, when Firestone tires, in a highly publicized tire recall, recalled tires that had been standard on the Ford Explorer. While Ford dealerships and Firestone tire stores were having trouble servicing all of the people that were flooding their shops, Les Schwab Tires was waiting patiently for car owners to find their way to their shops. Schwab’s history of stocking Firestone-brand tires made them uniquely prepared to deal with the influx of people seeking tire replacements. In addition, when the tire recall went into effect, Schwab had begun to stock thousands of extra tires in its Prineville tire warehouse and hired additional truck drivers to distribute them. Les Schwab Tires replaced the tires for free as long as the $100-a-tire reimbursement Firestone was willing to pay was not exceeded.

Tire Dealer of the Year

In 2000 at the age of 83, Les Schwab received recognition as Modern Tire Dealers (MTD) magazine’s Tire Dealer of the Year. Les Schwab was the eighth person to be chosen as the recipient of this award. During the ceremony that took place at the Les Schwab headquarters in Prineville, Oregon, Les Schwab Tires was awarded an etched-glass plaque, a portrait of Les Schwab, and a $1,000 donation in his name to the Prineville Community Hospital. During a speech given by an old friend and former editor, Lloyd Stoyer of MTD, Les Schwab was honored for his business and personal successes. Stoyer talked of Schwab’s policy of sharing 51 percent of the company’s profits with employees, stating that, “Never in the history of the tire industry has one person been so generous to so many.” Les Schwab’s wife, Dorothy, was also honored for her role in the company’s success. She was presented with a dozen roses while the crowd applauded her with a standing ovation.

Les Schwab Tires has been repeatedly selected in local polls as one of the public’s favorite businesses. In 1990 the company was awarded one of Oregon State University’s Family Business Awards; in 2002, the Wenatchee Business Journal’s Readers’ Choice Awards announced Les Schwab the winner in their “Best Customer Service” category.

In recent years, President Tom Wick has been chosen to head up Les Schwab Tire Centers while Les Schwab continues to reduce his responsibilities at the company.

Principal Competitors

Discount Tire Co.; Sears, Roebuck & Co.; TBC Corporation; Wal-Mart Stores, Inc.

Key Dates:

1952:: Les Schwab purchases a small OK Rubber Welders tire store in Prineville, Oregon
1954:: Les Schwab starts his first profit-share program with the store manager of his Redmond, Oregon, OK Rubber Welders branch
1966:: Les Schwab decides to abandon the OK Rubber Welders franchise and operate them as an independent business. He changes the business name to Les Schwab Tire Centers and forms the Les Schwab Retirement Trust
1972:: Les Schwab opens his 35th Les Schwab Tire Centers store
1982:: Company computerizes individual retail stores
2000:: Modem Tire Dealers magazine recognizes Les Schwab as Tire Dealer of the Year.