Alan Feldman, president and CEO of Midas Inc., may not share the ability of his company’s fabled literary counterpart, King Midas, to turn whatever he touches to gold. But much of what Feldman has touched in his 18-month tenure at the automotive aftermarket giant has had a golden effect on the company’s bottom line.
Feldman joined the franchiser — an enterprise in financial crisis — in January 2003. Midas was over-leveraged. It owed money on a loan that was set to expire. And sales and profits had been in a steady decline for two straight years.
As a result, Midas’ stock price had been battered and the company’s 2,000 franchisee owners were not only unhappy, they didn’t trust its corporate leadership team.
“Part of it was the challenge I was looking for,” says Feldman, who had tackled franchisee-related issues for McDonald’s as president and COO of McDonald’s Americas. “I had a good sense of some of it before I walked in the door the first day, but not all of it. It became clear as I got deeper into the circumstances of the business.”
The circumstances, however, did not dampen Feldman’s optimism.
“I’ve never had a day when I had second thoughts,” he says. “I think the brand, the franchisees and the opportunity were always there. They needed to be dug out a little harder than I may have originally anticipated, but they’ve all begun to bear fruit.”
Feldman’s approach to turning around Midas included looking past its troubles and staring directly at the organization’s key assets.
“The reason I came to Midas is because of the quality of the brand, the quality of the franchisees and what I thought was a great opportunity to make a difference for both of those elements,” he says. “I couldn’t be more proud about how the franchisees have embraced me and what we’re doing.”
Righting the ship required quick action, and Feldman immediately enlisted the help of the untrusting franchisees.
“We have not made a major decision that (affects) Midas without involving the IMDA — International Midas Dealers Association,” Feldman says proudly. “They are an integral part of our management process today.”
Feldman’s stints at McDonald’s — where he also served as president of McDonald’s USA — and PepsiCo — where he held operations and financial positions at Frito-Lay and Pizza Hut — provided a strong background in the franchise business that has served him well at Midas.
“It stretches any executive’s leadership qualities and qualifications in ways that are different than if you’re running a company-owned organization,” he says. “You very much have to have a servant-leadership attitude and recognize the franchisees are, in many ways, the channel of distribution that your company has.
“So whether it’s a restaurant company or an automotive service company, when you’re dealing with franchisees, that’s how you go to market. That’s your channel of distribution, and you have to nurture that channel. And you lead from a standpoint of commitment, influence and direction rather than any type of command-and-control attitude.”
It was this vision that won over the franchisees and convinced them to buy into Feldman’s vision of rebranding Midas.
“We certainly brought strength back to the Midas brand over the last 15 months by refocusing our marketing efforts on our core business,” he says. “And that’s our brake business, which has been really the focus of our advertising. Finally, we brought back a great old campaign, ‘Trust the Midas touch,’ which re-enforces the brand and sets us apart in the minds of our customers as it relates to trust.”
Focusing on the core business meant divesting operations that didn’t fit the new look. In 2003, Feldman completed a major restructuring initiative that included outsourcing distribution of Midas brand and other automotive parts to AutoZone in the United States and Uni-Select Inc. in Canada. The company closed 11 of its 12 regional distribution centers and all 77 Parts Warehouse Inc., the quick-delivery parts distribution locations the company launched in 2000.
Feldman reduced the number of company-operated shops from 111 to 73 and reduced employment at Midas’ headquarters and in the field from 1,900 to 900.
“You have to go back a number of years to truly understand the scope of the changes in the business environment, how Midas had responded to those changes and some of the effects those changes had on the company,” Feldman says. “To make a long story short, the distribution business, the wholesale parts business that traditionally had been very profitable for Midas, had become very unprofitable and caused the company to become significantly overleveraged.
“Our financial position had gotten fairly week. We needed to unburden ourselves from the losses and the debt that the distribution business had put on the company.”
Similarly, closing some company-owned stores was an effort to focus the company on its core strengths.
“Reducing the number of company-operated shops really was a strategic decision to focus our efforts in four core markets,” Feldman says. “We had stores scattered around the U.S., which made it very difficult for us to manage those effectively. So we sharpened our focus in Florida, in Colorado, here in Illinois and the Connecticut area, so we could get better leverage and control.”
The reduction in staff was a function of the other changes. But, Feldman stresses, it wasn’t simply a move to save money.
“Many of those people were affiliated with our distribution/logistics/merchandising group that was outsourced to AutoZone,” he says. “But at the same time we were doing that, we were staffing up in other areas, which is reflective of our focus on the retail side. We’ve added staff in marketing, we’ve added staff in training, we’ve added staff in franchise support, to better reflect the direction we’re moving the company.”
And Feldman has moved Midas quite a distance in a very short period of time.
“In the first 100 days I was here, we created our mission to become our customers’ most trusted professional and first choice, and we defined what success between now and the end of the decade would be,” he says. “We built a plan around that. We have teams of franchisees, company people and suppliers working to deliver against that plan, and we’re committed to it. We hold ourselves accountable.”
The mission Feldman and his team created includes a plan called Vision 4-3-2-1. Each of the numbers represents a specific goal. The “4” stands for a 40 percent increase in same-store sales. The “3” targets the organization’s three core service areas — brakes, exhaust and maintenance. The “2” represents the goal of doubling dealer profits. And “1” is for executing in a “1-Midas-way,” which means one brand and one team delivering a consistent experience in all the company’s locations, Feldman says.
Once Feldman convinced those in the Midas family, the investment community followed. Since January 2003, Midas’ stock price has risen from less than $7 per share to the $17 range in August.
“Wall Street clearly sees the direction that we’re trying to move Midas,” Feldman says. “The value of the rising stock is a reflection of what we’re doing to strengthen the brand and create a business that is focused on providing a solid return to our shareholders, strengthening our balance sheet, reducing our debt load, increasing our cash flow, reducing our capital requirements — all serve to provide an investment vehicle for Wall Street, which is very attractive.
“We started with a clear vision of what had to be done. Part of that vision allowed our banks to refinance us. We refinanced the company twice based on the strength of our plan and the results we have delivered. That gives us tremendous credibility and financial security. We’ve made tremendous progress on improving our balance sheet and our debt management capabilities. We’ve restored sales and profit growth by focusing on our core business — brakes — and have now posted four quarters in a row of positive comparable sales. I see no reason why the trend is not going to continue.
And, Feldman says, he’s rebuilt the trust of franchisees, who ultimately are the company’s economic success drivers.
“We’ve embraced the franchisees in everything we do, and they know that,” he says. “They are our constant partners in how we make decisions. We don’t always agree, but we’ve learned to respect and trust each other in terms of how we have to move this business forward. And we have an attitude of win-win, meaning whatever we do has to benefit both of us.”
While the company may rededicate itself to its core service offerings to reach the “4” and “2” of the Vision plan, the company, Feldman realized, needs to offer more than just brakes, exhaust and maintenance.
“We’re the market leader in brakes and exhaust, and we want every one of those jobs in North America that we can get,” he says. “But we’re also launching into new categories. We’ve just completed announcing our relationship with Bridgestone/Firestone. We can become a viable supplier to our customers out there.”
Midas is also getting into the maintenance business and the commercial fleet business.
“Those three categories, overall, represent, in today’s dollars, over $50 billion in sales that will take place in 2004,” Feldman says. “And we have just a very small piece of those businesses. So, we’re strengthening our businesses and our businesses are growing, the brake business in particular, which is a $6 billion category and growing. We’re the market leader. And we’re moving into other categories where we know we can be successful.”
Midas has leapt into the fleet management business, where it can service the thousands of companies that own hundreds or even thousands of vehicles. According to Feldman, this is a $6 billion category with serious growth potential for Midas.
“We’re just beginning testing on some proprietary data collection, credit cost management tools that we’ll be bringing to the marketplace the end of this year and early next, which we think will offer fleet administrators a terrific way to have increased visibility and cost management, and should give us a great advantage in selling in the marketplace,” Feldman says. “We don’t want to be a ‘me, too’ and say we’re Midas and we can do this. We want to provide the fleet managers some added benefits. I’m very excited about this initiative, and so are our dealers.”
All of which has Feldman looking ahead with the same unbridled optimism he came to his job with.
“We’ve told Wall Street that we’ll return to profitability this year as a result of all the changes,” he says. “And I’m a big believer in promises made and promises kept. I believe, in the not too distant future, you’ll see the results of these efforts. But in a very tangible way, we’ve already seen the results of the focus on the retail side of our business as we’ve reversed what was more than a two-year decline in same-store sales.
“For the last four quarters, we’ve reported positive increases in comparable sales. That makes our franchisees and our shareholders very happy.” HOW TO REACH: Midas Inc., (630) 438-3000 or www.midas.com
