6 Tires, No Plan : The Impossible Journey of the Most Inspirational Leader That (Almost) Nobody Knows (9781608322589)

by Rosenbaum, Michael

  As the drum spins, teammates hug each other and jump up and down as someone from their region wins a trip. Winners race up the front of the stage to claim their prizes, then exit out the back of the stage. For a half hour, the parade of winners continues to fall out the back door of the mock store, staring at their certificates, shaking their heads and, occasionally, weeping.

  Sixty-five certificates later, Bruce Halle closes the ceremony, reminding the throng that they are representatives of Discount Tire and that gentlemanly behavior is expected. He made the same comment at the opening ceremony, and the following days included no fights, no furniture thrown into the pool and no notable f-bombs on the beach. Not bad for a party with more than 350 men. And beer.

  Bruce Jr., who organized the gathering, thanks his dad and announces one last celebration, a fireworks display that lights up Lake Tahoe and fills the night sky with phosphorous and pride. As the glow fades and the snack tent beckons for the last time, veterans shake their heads and wonder what the company will do next year.

  As the rooms empty on Wednesday morning, Bruce Halle and Bill Sweatt are having breakfast together before they depart on separate Discount Tire planes. One after another, the Tahoe trippers come up to shake hands, take photos and offer thanks. As always, Halle turns the tables and credits them for making the company great. As the parade dwindles to a trickle, Halle looks around the tent.

  “These guys will all get back home after spending the last few days here and go to work tomorrow,” he says, “and the first ten customers to come through the door won’t have a chance.”

  And so ends this year’s lesson in employee motivation.

  I’M GOING TO BUILD YOU A HOUSE

  “Here’s what I’m going to do for you,” Bruce Halle says, warming up for a story he’s told hundreds of times. “I’m going to build you a house. I’m going to pick out a lot, and I’m going to hire an architect, and I’m going to have a house built for you. Then, I’m going to get a decorator in and decorate it all very nicely. And I’m going to give it to you and your wife and, congratulations, it’s yours.”

  He pauses and stares expectantly as his listener considers the possibilities. Halle has a longstanding reputation as a very generous guy, so this could get interesting. Unfortunately, there is a catch.

  “All you have to do is pay me for it,” he adds. “And, of course, you pay the taxes, and the insurance, and the gas, and electric, the whole thing.”

  “But it’s your house. Enjoy it.”

  Halle smiles and leans back in his chair as he waits for a response. So far, nobody has agreed to write him the blank check and give up the control that his offer requires. Halle wouldn’t take the deal, either. Accepting that much risk and giving up control would be crazy, he says, and crazy is one thing he isn’t.

  What Halle is, instead, is consistent. Since the day in 1960 when he opened his first store in Ann Arbor, Halle has built more than eight hundred houses for Discount Tire Company.

  Of course, the newer stores lack the shag carpeting that gave Store Number One on Stadium Boulevard its special panache, but the fundamentals of the tire business—of retailing in general—haven’t changed much in fifty years. And Halle, the octogenarian founder and sole shareholder of Discount Tire Company, isn’t a big fan of fixing what ain’t broke.

  Halle’s home-building parable is particularly fitting for a man whose family spent many of his formative years under another family’s roof. Halle has little regard for most possessions—he stopped wearing a watch after his older brother, Fred Jr., borrowed and lost the timepiece Bruce had received from their parents. His second wife, Diane, bought him a watch as a wedding gift and he promptly lost it on their honeymoon flight to Hawaii. He has been known to simply leave his car on the street in front of the restaurant where he’s dining—with keys in the ignition.

  “If I lock the car up, a thief might cut his hand while breaking the window to get in,” Halle says, only half joking. “I wouldn’t want that on my conscience.”

  Homes, however, have a different meaning, a meaning that translates to the stores. Each store is home to a Discount Tire family, and the store is where that family will work together to secure the future of each member. Pick the right location for that home, and it will support a large family over a period of decades. Pick the wrong location, and the people inside will suffer.

  “I can move the inventory and the equipment from a bad store, but I can’t move the store,” Halle says simply. “It’s not a mistake that’s easy to correct.”

  While Halle has delegated most of the daily tasks of running the company, finding the right place for Discount Tire’s next home will always be the chairman’s realm. Halle’s site selection performance has been well above average. Of thirty-six stores open at the end of 1979, thirty-five remained in operation in 2010—more than thirty years later.

  This longevity results in large part from the talent and commitment of the people who live in the stores each day. Before the employees get there, however, Bruce Halle walks the property, considering its potential.

  “We haven’t made many real estate mistakes, because we get personally involved in the process,” says General Counsel James Silhasek. “You can get all kinds of data and pictures of a parcel, but that isn’t enough. You have to make a personal visit, see the traffic flow, measure the curb appeal of the property and so on. We recently saw a property in Seattle; it looked great on paper, but a personal visit showed that you needed to take a bridge that doesn’t exist to get to the closest major road.”

  If Halle needed any reinforcement of his commitment to boots on the ground, that endorsement came from longtime friend Karl Eller, onetime chair of Circle K and, later, Clear Channel Outdoor. In building Circle K to more than five thousand convenience/gas stores in the 1980s, Eller allowed his team to sign up for sites on the recommendation of real estate representatives, often without walking the property himself.

  “We wanted to build our penetration of stores in California, so I told my real estate people they would get a bonus for finding good stores. I think there were twelve or thirteen of them, and I tried to look at all of them but I didn’t get to it,” Eller recalls. The company ended up with unprofitable or marginally profitable sites with poor visibility, limited signage opportunities and limited ingress and egress.

  It’s a mistake Eller wouldn’t make again, and neither would Halle. In 2010, Halle and Silhasek journeyed with other members of senior management to visit 141 potential store locations across Discount Tire’s twenty-three regions. Regional vice presidents work with local real estate agents to identify the sites they’ll recommend, but no discussions of details are permitted until after the boss has walked the property.

  On this particular day, the property under consideration is in Florida, a market the company entered in 1989 and struggled to bring to profitability. Well-entrenched competitors limited Discount Tire’s progress for several years, and the company considered cutting its losses and pulling back from the market. Halle refused to give in, arguing that showing weakness in Florida would embolden competitors to move into his stronger markets. Finally, more than a decade later, the ink flowed from red to black.

  “If we let them win on their turf,” Halle says now, “that would encourage them to come after us on our turf. And that would have been more expensive than fighting it out in Florida. If I’m going to have a war, I want it in their backyard, not mine.”

  Greg Smith, regional vice president for Florida, and Assistant Vice President Gary Dunlap are waiting at Pensacola Aviation Center as the fourteen-passenger Falcon—one of three Discount Tire jets—taxis to the terminal. Smith and Dunlap are looking to add at least two more stores in this area, hoping to gain some economies of scale. They ferry the corporate team to the first site, an outlot in a shopping center anchored by a Home Depot. As seven sets of dress shoes alight on the cracked asphalt—Halle insists that all executives wear suits to work—the wisdom of walking the site becomes ap
parent.

  Overall, the general location is attractive. Home Depot customers tend to fit the demographic of Discount Tire customers, and there’s another demographic match, a McDonald’s restaurant, about a quarter mile to the south. There are no other stores in the eastern roadside outlots of this shopping center, though, and the large building across the eight-lane road, once a furniture store, sits empty.

  Gary Van Brunt, who joined Halle at his first store in 1962 and serves as vice chairman today, looks down the road toward the McDonald’s. “Is anything available over there?” he asks. As it turns out, another lot is on the market at a higher asking price. Seven executives pile back into the cars and drive several hundred feet to the south. The second outlot is closer to the McDonald’s restaurant and closer to the corner of North Davis Highway and Brent. Expressway ramps are just west on Brent, and the alternate location offers higher visibility to more traffic. Roughly one thousand feet could make the difference between yes and no.

  The team discusses the seller’s asking price, but any detailed discussions will wait until Smith has shown all the sites and the management team is back in the air. After they leave Florida the next day, they’ll judge the asking price as too high in relation to overall real estate market trends and hold back on making any offers.

  Scouting sites never gets old, Halle says, and there is no point of diminishing returns in his mind as the number of existing stores climbs. Halle is a retail thinker. Each person is unique, each customer is unique and each store is unique—and all are of equal merit in his worldview.

  “The first store went okay, then the second store was pretty good as well,” he says. “The five-hundredth store was a milestone, but it’s no more or less important than any other store.”

  Having built hundreds of stores, Halle has learned that there’s much more to real estate than the oft-cited location, location and location. Buying an existing tire store, he says, is seldom the most inspired choice.

  “When you get somebody else’s store, you are getting their reputation too,” he warns. “You repaint the building and put a different sign on it, but a customer is driving down the street and sees that tire store and thinks, I had a hell of a bad experience there. I’ll never go there again. He doesn’t even know it’s changed its name or ownership, so that hurts. When we pick up somebody else’s store, it takes three times longer to make it profitable.”

  The company will buy those problems when necessary, partly because tire stores aren’t the most sought-after tenants for most shopping center owners. The revenues are low, space needs are high and there’s no fashionable mystique to one more set of automotive bays facing the parking lot. Often, the best space available in a market is already filled by another tire store.

  In the 1980s, Discount Tire bought twenty-five Goodyear tire stores to accelerate its expansion into southern California. The sites represented strong potential, but they also suffered from bad memories among former Goodyear customers. Discount Tire’s signage looks nothing like Goodyear’s, but customers would often look at the building simply as the store they didn’t like. True to Halle’s expectation, the process of building reputation and profitability was slower than is the case for newly built properties.

  Nearly twenty years later, the challenge continues, this time in the context of lease renewals. Shopping center owners want a share of store profits as a component of lease payments, and paying the landlord leaves less money to pay employees—or Halle.

  “That’s one of the disadvantages of leases that we assumed from other people with not much time left,” according to Halle. “It’s actually been twenty years since we did this, but time runs out; twenty years go fast.”

  Discount Tire will lease locations when absolutely essential, but the clear preference is to own, not rent. The company owns approximately 80 percent of the properties that house its stores, and with stores that remain in business twenty, thirty or more years, the long-term benefits are clear.

  Beyond the financial considerations for the individual stores, Halle is determined to build only in areas where his employees—including part-time tire techs—can afford to live. Halle watched with dismay as the cost of living rose sharply after he started building stores in Santa Fe, New Mexico, leading him to raise salaries 25 percent to help his employees keep up.

  Recent expansion has focused on regions like Georgia and Tennessee, where facilities and operating costs are affordable and employees can raise families on the income they earn at Discount Tire. While high-cost regions like the mid-Atlantic states can limit store margins, the economics for employees are even worse, according to Halle.

  “The problem is that the cost of living for our people is terrible. It’s awful,” Halle explains. “You can’t afford to buy a house. Once you get into the northern part of Virginia, approaching the DC, Maryland area, the cost of living is astronomical, so our guys can’t buy a home there. The cost of living is terrible, and you don’t collect any more for your merchandise.”

  Even with his focus on affordable communities, it’s a major challenge to build new homes as quickly as Halle’s managers can fill them. With around eight hundred stores in operation, Discount Tire has the bench strength to open eighty to a hundred stores or more each year. But the company’s strategic plan includes a mandate to “grow responsibly,” and the capital requirements are daunting. At roughly $3 million to build, open, equip and stock a company-owned store, one hundred stores would require an annual investment of $300 million, which is outside Halle’s comfort level for debt and risk.

  Instead, the company is targeting forty to fifty new stores per year, which translates into a $120 million annual fixed investment if the stores are all owned rather than leased, a 5 percent growth rate for stores and a long queue for potential store managers. The management team has learned the lessons of companies that, like armies, moved too far ahead of their supply lines. Halle and his team won’t grow as fast as possible, because they are unwilling to spread capital or manpower across too broad a network. As Halle sees it, employees are better off being well compensated in a stable company than they would be in a risky environment of overly rapid growth.

  Even with a “responsible growth” strategy in place, the target of forty to fifty new stores has Halle walking several times that many sites each year. Once a site is chosen, it can take a year or more to build and open a store, and most of the long-term benefits from those stores will accrue to a company that no longer includes Bruce Halle. While Halle’s father lived to be ninety-two, and the chairman continues to enjoy robust health, most octogenarians would not be placing bets with a thirty-year payoff.

  Halle is aware that his time with the company will come to a close someday, but that’s a decision for The Boss to make. As long as The Boss allows him the opportunity, Halle will keep building the company as if he will always be there to lead it. His wife, Diane, has led him into a more aggressive estate planning process, forcing him to prepare for the needs of both the company and his own family in case he does not live forever. The plan is largely complete, Halle says, with a mechanism to keep the company private, out of the clutches of Wall Streeters and their ilk.

  Within the company, most of the management team is confident that the culture and systems are sustainable, that Discount Tire has the people and drive to continue to thrive without its founder.

  In one sense, Halle is irreplaceable. Someone else can be the chairman, but nobody else can fill his shoes as founder. The question “What would Bruce do?” does not transfer to anyone else in the organization.

  At the same time, the twenty-three regions and more than eight hundred stores are filled with lost boys who swallowed the pill and agreed to follow Halle, as Al Olsen said forty-five years earlier, “’til death do us part.” Maintaining the culture and creating the opportunity for the next generation of Discount Tire families is not the job of Bruce Halle anymore, according to many of his executives. Now, it’s the job of everyone in the company.


  “His philosophy is to treat people like you want to be treated,” says Bruce Halle Jr. of his dad. “He’s a fair, honest, generous guy. That’s been spread down. That’s how everyone else is expected to be. Now, that philosophy is passed down through the vice presidents in the regions and it goes all the way down. That’s the hard part about a business, just keeping that culture.”

  With the culture well established and a strong team behind him, Halle could take much more time off as a non-executive chairman and watch as his people sustain his creation. Most people would give some thought to the pace of his travel schedule and the incremental value of one more store in a company with eight hundred similar outposts. Most people would let somebody else trek across the vacant lots in search of a new store that might not be built within his lifetime.

  Bruce Thomas Halle isn’t most people, though, and, today, he’s made a promise to build someone a house.

  ABOUT THE AUTHOR

  Michael Rosenbaum is a business consultant and former financial journalist who has both studied and advised hundreds of corporate leaders over his career.

  As president of the nation’s largest investor relations agency, Rosenbaum managed operations of a $35 million business with five offices and three hundred employees. At that agency, he advised CEOs and CFOs at more than 150 companies regarding strategic financial and marketing issues. He holds both a bachelor’s degree in communications and a master’s degree in business administration and is an active member of the World Presidents’ Organization.