Becoming a franchisee of the Finnish Nokian Tires is definitely profitable if you already have a business that lacks a brand. If you build everything from scratch, then the payback period is unclear
Tire workshop at the flagship Vianor tire center in the Leningrad region (Photo: RIA Novosti)
Entrepreneur Dmitry Shmatov from St. Petersburg rebuilt his car service center into a tire center under the Vianor brand in 2010. Investment of 10 million rubles. (a third of which was compensated by the franchisor) he recaptured in just over two years. Twice a year, when motorists “change their shoes,” the monthly revenue of his tire center is about 1 million rubles, and out of season it is half as much.
Vianor in numbers
$800 million Nokian Tires has invested in its plant in Russia since 2005
1429 tire centers around the world are part of the Vianor network
411 Vianor centers operate in Russia
26% Nokian Tires sales are in Russia and the CIS
37,4 billion rubles helped out Nokian Tire LLC, which sells Nokian tires in Russia, in 2014
Source: company data, SPARK
Franchisor's view
Finnish tire manufacturer Nokian Tires has one of the largest branded networks for the sale of tire products in Russia, operating under the Vianor brand. According to the company, the network now includes 411 tire centers, of which only two are owned, and the rest are open as franchises. In 2015, 35 points opened, and 15 stopped working.
According to Andrey Pantyukhov, CEO of Nokian Tires Russia, in order to become a franchisee, the company needs to pay a one-time entrance fee of 60 thousand rubles, and then pay annual contributions to the marketing fund - 25 thousand rubles. Franchisees enter into a commercial concession agreement with Nokian Tires for a period of five years. “As a rule, franchise tire centers are opened by people with experience in this business,” explains Pantyukhov in an interview with RBC.
The requirements for the premises of a tire center are quite stringent, since Vianor positions itself as a premium network. “There must be a convenient location for clients, convenient access, there must be parking and a recreation area for clients,” Pantyukhov lists. The area of the sales area must be at least 45 square meters. m, warehouse - from 100 sq. m. The franchisee must agree with the company on the external and internal design of the center. Nokian Tires recommends to its partners several agencies that are familiar with the requirements to carry out finishing work.
“A partner’s investment can be small - within a few hundred thousand rubles - and consist of upgrading an existing tire center,” says Pantyukhov. — If a tire center is built from scratch, investments can range from 40 million to 100 million rubles. — depending on the format, area and number of tire service stations.” To help a partner at the start, the company provides him with free financial support in the amount of 500 thousand rubles. for the first open center and up to 2 million rubles. for subsequent ones. In addition, Nokian Tires, at its own expense, supplies the franchisee with signs, sales and tire fitting equipment (it remains the property of the franchisor, and in the event of termination of the contract, the franchisee must return it or buy it back).
Nokian Tires compensates franchisees for half of the advertising costs for their tires. She provides free uniforms for salespeople and provides free sales training twice a year. In addition, for marketing support of franchisees, for which they pay a nominal 25 thousand rubles, Nokian Tires gives them all sorts of pleasant little things - fountain pens with Vianor symbols, sweets, sun shades for cars, ice scrapers, small bags, key rings, flavors . “Souvenir products are given to customers free of charge and are very popular among them,” Vianor franchisee Dmitry Shmatov from St. Petersburg tells RBC.
The main requirement for Vianor franchisees is to provide a multi-brand product line for the buyer, which will be dominated by Nokian Tires sales. Thus, within five years, new partners must increase the share of both the premium (Nokian Hakkapeliitta, Nokian Hakka) and mid-price segments (Nokian Nordman) to 60% of tire sales in the center. Nokian Tires does not control the selection of other brands in the line of partner tire centers, but they must be in stock. “We can sell tires of any brands, but Nokian tires are our priority,” Alexander Makarov, manager of the Vianor tire center in Mezhdurechensk (Kemerovo region), confirmed to RBC.
In addition, Nokian Tires sets a minimum recommended sales price. The franchisor checks the centers for compliance with the requirements: he sends secret shoppers who monitor the assortment, prices and ensure that Vianor sellers primarily offer the Nokian brand.
Nokian Tires does not track the financial performance of franchisees: it is impossible to bring more than 200 cities across Russia where there are Vianor centers to a single denominator, Pantyukhov explains. But the company proceeds from the fact that any tire center must sell at least 1.5 thousand tires per year, which usually gives sales of about 8 million rubles. “These are minimum levels - a large number of network members, especially in large cities, have turnovers that exceed these figures by an order of magnitude,” says Pantyukhov.
Franchisee's view
Commercial director of the Vianor tire center network in Barnaul, Dmitry Baginsky, believes that working with Nokian Tires is profitable. “They themselves are looking for partners in the regions and offering interesting terms of cooperation,” he told RBC. Baginsky opened the first center under the Vianor brand in Barnaul in 2008, having converted an existing tire shop, and now has four points under his management. Investments in the latter, built from scratch and opened in December 2014, were about 60 million rubles. It has an area of about 1 thousand square meters. m there is not only a tire service, but also a large sales area and a warehouse.
Shmatov from St. Petersburg already owned a car repair shop when he decided to add a tire shop and shop to it in 2010; since he already had land, communications and part of the buildings, investments did not exceed 10 million rubles. He returned them after just over two years of work. Alexander Nakonechny from Novosibirsk says that the refurbishment of the existing center (without significant construction work) will cost 1-2 million rubles, which can be returned in six months.
The revenue of tire centers is subject to seasonality: in the high season (March-April and October-November), when there is a massive “re-shoeing” of cars, it can differ significantly from the low season (the remaining eight months of the year). Shmatov from St. Petersburg talks about 0.5 million in the low season and 1 million rubles. per month in high, and Baginsky from Barnaul - about 2.5-25 million rubles. for a tire center with an area of 1 thousand square meters. m. Such a big difference is explained not only by the surge in tire sales and demand for tire fitting. Oleg Khryashchev from Dmitrov near Moscow says that the conversion of buyers of new tires into tire service clients reaches 90%. “Almost everyone who buys tires prefers to have them installed there,” he tells RBC. “But additional income depends on the number of tire service stands: if you have only one post, then you cannot offer all clients to “change your shoes.” A representative of the Kirov company Regionshina says the average revenue of the Vianor center is 2-3 million rubles. per month, Nakonechny from Novosibirsk - about fluctuations of 1.5-2.5 million rubles. per month. “In the off-season, the tires generally stand, the rest of the goods work,” says Khryashchev from Dmitrov. According to his estimates, in the low season “non-tires” (oil, accessories, spare parts) can bring in up to 40% of revenue - twice as much as in the high season.
Nokian Tires does not control the markup. "IN better times our markup is 10-15% on top of the minimum price,” says Nakonechny from Novosibirsk. — When the season ends and many are left with leftovers, price anarchy begins—a holiday for the client. Traders go down to 5%, and some probably sell at the purchase price.” Shmatov from St. Petersburg says that some tire brands provide retailers with a retrobonus of 10-15% of sales volume. Stores, knowing that they are guaranteed to receive a percentage of sales, sell such tires at the purchase price.
Not a single Vianor franchisee wanted to give absolute profit figures: most talk about an average annual figure of 10-15% of revenue.
Additional discounts from the manufacturer allow you to increase the profitability of your business. According to Baginsky from Barnaul, with a certain sales volume (“several thousand tires per month”) Nokian Tires allows you to buy tires directly from the plant in Vsevolozhsk, bypassing distributors, which significantly reduces costs, since the manufacturer pays for the delivery of tires. “Reducing logistics costs allowed us to save 2.5% of the purchase price, which we paid for delivery to distributors,” says Baginsky. For partners who buy tires directly from the company, other concessions are possible, such as deferred payments.
Only large partners have the opportunity to purchase directly from the manufacturer - from a thousand tires per month, complains Shmatov from St. Petersburg. However, according to Baginsky, with smaller volumes this is not profitable: “The truck assumes a volume of from 800 to 1200 tires, with smaller volumes no manufacturer is interested in this.” There are no restrictions on the volume and frequency of purchases from regional distributors (35 across the country). “During the season - in October-November and March-April - you can purchase tires once a week,” says Shmatov from St. Petersburg. Out of season, he usually makes purchases once a month.
Most franchisees easily comply with the requirement of a 60 percent share of Nokian Tires products in sales. In Mezhdurechensk and Kirov, the share of Finnish tires even reaches 70%, but Nakonechny from Novosibirsk says that in the capital of Siberia even a share of 40% is considered a good indicator. “Other brands, like Bridgestone, have historically thrived in our region,” he explains. According to the entrepreneur, Nokian Tires understands deviations from standards - competition with other brands is quite high, and no one wants to lose a sales channel.
According to Khryashchev from Dmitrov, a big plus of Nokian Tires is the extended warranty on tires. “We change or repair tires for free, regardless of the nature of the damage: a hernia, a rupture, a puncture that cannot be repaired,” he says. The warranty is unlimited as long as the tire is subject to use (tread height not lower than 4 mm). Nokian Tires will reimburse all expenses of the franchisee for warranty work.
There used to be a markup!
Franchisees interviewed by RBC named increased competition from online stores as one of the main difficulties in the tire business, which led to a several-fold drop in the markup on Nokian Tires tires. “Six years ago we had a markup of 40-50%,” admits Baginsky from Barnaul. In addition, branded tire centers began to lose customers due to the fact that products began to be sold in hypermarkets at minimal prices, noted two entrepreneurs interviewed by RBC. “Hypermarkets really “squeeze all the juice” out of entrepreneurs, but in the case of Nokian this effect is less noticeable, since the company controls the minimum price for its products there too,” notes Shmatov from St. Petersburg.
A year in the life of an online store of tires and wheels from the first days: cost of creation, annual budget, cost per click and some figures regarding the company’s turnover.
In March 2014, Pavel Emelyanov, director of the Protector tire shop, approached our studio with a proposal to create a website for them selling tires and wheels.
The tire shop was located in a very good location, in the city center, with convenient access and no traffic jams, which is very rare for our city.
location of the tire service “24shina.rf”
Pavel said that he plans to start selling tires at retail. There are no plans to have our own stock of tires yet; tires will be purchased for the client from suppliers' warehouses (the emphasis is also on finding rare tire models and selling 1 piece at a time). There are 6 main tire suppliers in Krasnoyarsk, which supply tires to almost all stores in the city.
At the time of the site’s launch, 41 online tire stores were already operating in Krasnoyarsk. Therefore, we had to work hard not to remain 42nd.
Scheme of the online store:
- Sales will be organized through the online store.
- After placing an order, the client must pay for the purchase on the website or in the office (in a tire shop).
- After payment, Pavel buys the necessary tires from suppliers and transfers them to the client at the goods distribution center or delivers them to an address convenient for the client. (Basically, clients pick up goods from the distribution center, where they can immediately change shoes with a discount of up to 25%, which is what they do in most cases. This also attracts clients to the tire shop).
The first thing to do was create a website.
To create a website, we considered two options:
- Creation of an exclusive store – 250 – 400 thousand rubles
- Using a template – from 31 to 78 thousand rubles
We settled on a template because the guys at that time couldn’t afford to pay 250–400 thousand rubles for a website, and there was no point in it.
We found a wonderful template on the Bitrix engine: a template for the online store of tires and wheels “Asporo”. This was the highest quality template at that time. You can read about all the features of the template.
The advantage of this template is that it already has a mobile version, which is especially relevant today. According to our statistics, 16.8% of beds access the site from mobile phones and tablets. People visit the site from mobile devices not only to buy goods, but also to in case of emergency when urgent wheel repairs (puncture or cut) are required.
Estimate:
*full list of works and their costs for the period from April 1, 2014 to May 1, 2015, including costs for website promotion and advertising
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