Monro Muffler Brake has acquired the Car-X brand, a chain of 146 franchised locations operating in 10 states, three of which are new states for Monro. Specifically, the Car-X chain is located in Monro’s current markets of Illinois, Indiana, Kentucky, Missouri, Ohio, Tennessee and Wisconsin, and in the new markets of Iowa, Minnesota and Texas.
Car-X shops are owned and operated by 32 independent Car-X franchisees. Monro will operate as the franchisor, while Car-X remains a separate and independent brand and business as compared to company-operated locations. Monro is retaining the Car-X office in the Chicago area, as well as the employees there and in the field.
“We will provide Car-X franchisees the benefit of Monro’s scale, resources and experience, which will drive higher profits for franchisees and allow Monro to grow the Car-X brand,” said John Van Heel, Monro’s president and CEO, on a May 21 conference call. “As a franchisor, we will report the royalty income we have received as sales revenue in line with a standard royalty rate of 4 percent to 5 percent, but we will not report the gross store sales themselves.”
For fiscal year 2016, management expects Car-X to be slightly accretive to earnings per share, adding roughly $2 million in earnings before interest, taxes, depreciation and amortization.
“As this transaction indicates, our approach to acquisitions remains flexible and opportunistic,” Van Heel told analysts on the call, “and our view of increasing market share is broad.”
