UPDATE: Sears Begins Franchising Of Its Auto Centers
February 18 2010 - 4:31PM
Dow Jones News
For the second time in a week, Sears Holdings Corp. (SHLD) said
it is turning to outsiders to help expand its business as the
company said Thursday that it is allowing franchisees to open Sears
Auto Centers.
Sears said it is offering auto dealers that recently lost their
new-car franchises a new use for their space: Sears Auto Centers
offering parts and services; over-the-counter merchandise; and
previously owned vehicle sales.
The franchises will have the same products and services
available at about 850 company-owned Sears Auto Centers, including
DieHard batteries. They will offer similar services as other
auto-repair chains, such as Pep Boys-Manny Moe & Jack (PBY),
Meineke Car Care Centers and Monro Muffler Brake Inc. (MNRO).
In some cases, Sears Auto Center franchises will be allowed to
carry other Sears products, such as Craftsman tools, said Bill
Jackson, senior vice president of Sears Holdings Corp. and
president of Sears Authorized Independent Auto Centers LLC. Sears
will help line up financing for car purchases, and it hopes
eventually to offer Sears-backed warranties on the vehicles,
Jackson said in an interview.
Last week, Sears's brand-management business announced a
trademark licensing deal with a manufacturer of battery accessories
to sell DieHard brand battery chargers, jump starters and other
accessories to outside retailers. That agreement with Schumacher
Electric Corp. didn't include DieHard batteries themselves.
While the two deals are unrelated and structured very
differently, they show the company is seeking efficient ways to
grow, Jackson said.
"Sears has a lot of spectacular assets, the auto business being
one of them and the brands being another," Jackson said. "What
we're looking for is smart ways to expand them."
Department-store sales at Sears' namesake stores have continued
to struggle, despite strong brand names in Craftsman, Kenmore and
other products. Sears will report its fiscal fourth-quarter results
on Tuesday.
The first auto center franchise, in East Windsor, N.J., is
targeting an April 1 opening, and Jackson said Sears has several
other new centers in the works. "We're looking right now,
initially, for 20," he said. "Once we define the model and get it
to work perfectly, we think it could be hundreds.
"Sears has got a great auto business today," he said, declining
to offer specific financial details. "This was a great opportunity
to expand our model."
Franchises must pay an initial fee of $30,000 for the franchise
and $3,000 a month in brand license fees for the first year and
$2,000 monthly thereafter. A service license fee of 2% of prior
year revenue is charged after the first year, and franchisees
contribute 3% of net revenue to a marketing fund to support
national advertising and activities.
Several thousand auto dealerships in the U.S. have lost their
franchises as auto makers have consolidated amid efforts to become
profitable.
"There is a lot of very good talent in rejected Jeep, Chrysler,
Dodge, Saturn, Pontiac and Saab dealers that already have the
facilities in place, the manpower and years of experience to help
Sears sell their products," said Bruce Coleman, president of the
Coleman Auto Group dealership in East Windsor, N.J., and a partner
in what will be the first Sears Auto Center franchise.
Coleman Auto Group will turn its former Chrysler and Jeep store
into the Sears Auto Center, converting the former new-car showroom
into a shop selling Sears auto accessories, rooftop carriers,
battery chargers and other items.
Shares recently traded down 1.2% at $94.20. The stock has more
than doubled in value in the past year.
-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145;
maryellen.lloyd@dowjones.com
(Nathan Becker contributed to this article.)
Prospect Capital Corpora... (NYSE:PBY)
Historical Stock Chart
From Jun 2024 to Jul 2024
Prospect Capital Corpora... (NYSE:PBY)
Historical Stock Chart
From Jul 2023 to Jul 2024