As a company, Rent-A-Wheel's forecasted 2008 revenue of $90 million doubles the per-store revenue of its closest-sized competitor.

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(L-R) Rent A Wheel CFO Matt Seaburn, with Co-Founders John Bowlin and Don Sabino. Download the E-book version of RTO Magazine.

Since 1997, former U. S. Marine Corps buddies John Bowlin and Don Sabino have quietly grown Rent A Wheel from a single store in East LA into the nation's largest independently owned RTO custom wheel and tire chain. Since the addition of current CFO Matt Seaburn in 2006, the company has embarked on an aggressive, coast-to-coast self-financed expansion program that has seen the company nearly double its store count in just two years.

Rent A Wheel has historically declined press coverage, but RTO Magazine was able to gather the three partners together for their first-ever interview as the company continues its quiet ride to success.

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With 60 stores already open, Rent A Wheel has laid a foundation to grow to 150 locations, adding 20-25 new or acquired stores each year. Its largest location does more than $3,500,000 in annual revenue and most stores will reach at least $1,300,000 this year.

As a company, its forecasted 2008 revenue of $90 million doubles the per-store revenue of its closest-sized competitor.

How does Rent A Wheel consistently out-perform the industry?

"That's the keys to the castle," said John Bowlin, Co-Founder and Co-CEO of Rent A Wheel.

That castle is situated in a rental wheel kingdom that currently moves nearly 50,000 wheels and tires each month, a number that continues to rise and has made them an important player in not just the rental business, but also in the overall wheel and tire industry.

"I don't know many companies who buy more wheels than us," said Bowlin.

While the three were hesitant to give too much information away, the partners are understandably proud of what they have built over the past eleven years and were able to provide a glimpse into the corporate culture that should keep their company firmly planted on the road to success.

The Turning Point
"No one was doing it. There was no track record. Everybody in the conventional tire and wheel business thought we were crazy and everybody in the rent-to-own business thought we were crazy."
-Don Sabino, Co-Founder

Bowlin and Sabino took their aptly named Rent A Wheel concept from a single store to nine locations in five years, but were never content with that rate of progress.

"We came at this business originally with a concept as a finance company and that's what intrigued us. All along, we envisioned 50 or more stores," said Bowlin.

Added Co-Founder and Co-CEO Don Sabino, "No one was doing it. There was no track record. Everybody in the conventional tire and wheel business thought we were crazy, and everybody in the RTO business thought we were crazy."

Crazy like a fox, perhaps.

When the duo learned in 2002 that national pawn shop chain Cash America was looking to unload Rent-A-Tire, its 22-store wheel and tire rental concept, Bowlin and Sabino jumped at the opportunity to expand.

"I actually read about it in Tire Business News and called their CFO," said Bowlin. "Don and I spent three weeks literally going from store to store. We quickly realized what we could bring to the table with the model we had in place. There was a glaring, obvious thing where we could flip a few switches and turn it around."

While they declined to say what the ‘glaring, obvious thing' was, Sabino did point to an important reason why he believes their takeover of Rent-A-Tire was met with near-immediate success.

"(Cash America) was trying to make it work along with their pawn shop chain. It's clearly a different business with a different customer base and we recognize that. They didn't. John and I were not historical RTO guys and so unlike Cash America we never had to rely on that (preconceived) model as our expectation."

Sabino says that when the company went from operating nine locations to owning 31, they realized it was time to build some corporate infrastructure.

"We really didn't have any support staff until that point. In the early days, John or I would sell the tires and wheels then go put on a jumpsuit and actually put the wheels on the customers' cars. With the acquisition of Rent-A-Tire we brought accounting in-house, we brought in a marketing team, and for the first time we had a District Manager in the field."

Bowlin added, "We were fortunate to be able to draw upon their long-term employees. At least one of our current District Managers was a garage hand for the former Rent-A-Tire who has since worked his way up to be one of our most successful managers."

Rent-A-Wheel store.

Rent A Wheel by the Numbers
"This is clearly a different business (than traditional RTO) with a different customer base."
-Matt Seaburn, CFO

The partners are quick to dispel the notion that wheel and tire rental customers fit any sort of typical rental demographic.

"18-to-34 year old males are our target demographic. They have a little bit more money than average rental customers and obviously they are very into their cars. We do very well with Hispanic and African American customers, and also with general car enthusiasts," said Bowlin.

With Rent A Wheel, a customer's job is their credit. No AFDC customers are accepted, and renters must submit a pay check stub, local references, and a utility bill as part of their application. Despite the similar-sounding process, Rent A Wheel has succeeded in combining its rental business with an equally strong retail business.

"57% of all customers choose to buy their wheels and tires," said CFO Matt Seaburn. "29% of all customers buy their wheels and tires in 90 days or less and 28% buy them at some point after 90 days. The remaining 43% of customers return their merchandise before acquiring ownership on our rental program."

Those customers who do choose to rent are set up on a predetermined 26 week rental agreement for tires and a 52 week rental agreement for wheels.

"Most customers buy the product out as soon as they can, or they return them. Like traditional RTO there are several purchase options along the way. Not many customers go to full term (on a rental agreement). But the vast majority of customers do come in with the intent to own the merchandise in the end."

Seaburn says their company's pricing model is based on anticipated turns for their merchandise, but says it is less than the historical ‘four turn' sought in some product categories by many RTO dealers.

"Thanks to our purchasing power, although we use the model of using turns, we can still offer some pretty unbelievable prices to our customers."

What about those wheels and tires that get returned by 43% of customers?

"We evaluate the condition of the returns on the spot to determine if the tires and wheels are re-rentable or not. We mark everything as used, and either sell it or re-rent it," said Seaburn.

There is some seasonality to Rent A Wheel's business. "When the new wheels come out in November and our vendors begin promoting next year's models, we'll see a bit of a bump usually during February and March. But the rest of the year is pretty consistent," said Seaburn.

As far as generating revenue from various fees, Seaburn says, "We're not fee heavy."

"We do have a $5 weekly club program, but it's not insurance and we do not offer it to our customers in the state of California. It's basically a flat tire club that covers running over a nail and provides our customers with a host of discounts on other services."

Rent A Wheel does not sell roadside assistance and they do not charge fees for installation, weights, lug nuts or stems like other wheel and tire stores might do. Although there is a late fee charged when a customer goes past due on a rental agreement, Seaburn says it's the minimum charge allowable by each state and accounts for less than one percent of their total overall revenue.

Despite the extreme portability of its merchandise, Rent A Wheel does not consider theft to be a major concern.

"Crime does happen, and so part of our program is including a free set of locks with the wheels we rent. We go with pretty high-end locks because we view it as protecting our merchandise," stated Bowlin.

What's in a Name?

Industry watchers are likely familiar with the trend of removing the word ‘rent' from the name of a wheel and tire rental store. So what does Rent A Wheel plan to do with its name?

"Currently we operate under dual brands with the names Rent-A-Tire and Rent A Wheel. One day we will likely change to one name and image but we have not selected that brand yet. But I can tell you we've talked about it openly with marketing firms," said Seaburn. "It's a very important decision for us, and one reason why we haven't done it yet is that we're growing so fast it hasn't been necessary. Our customers aren't dictating that a name change is necessary and we've certainly got a lot of capital invested in the current brands. In short, we know we need to do it and we will make a change eventually."

Inside a Rent A Wheel Store
"We have our finger on the pulse of wheels."
-John Bowlin, Co-Founder

A typical Rent A Wheel store is a 4,000 square foot area that features just 1,000 square feet of showroom space. The remainder is set aside for offices and includes a large area for work bays to install the tires and wheels. The company typically spends between $400,000 and $500,000 to build out and stock a new location.

Despite a customer mix that skews male, Rent A Wheel aims to make its 1,000 square-foot showrooms female-friendly, and also has females working at all levels within their stores.

A typical Rent A Wheel store will consist of six employees – a store manager, an assistant manager, a sales rep, two collectors and a shop technician. Each employee is cross-trained so that they can perform multiple roles within the stores, including installation. And great emphasis is placed on sales training so that customers feel comfortable they are receiving educated advice with their wheel and tire purchase.

"We keep a good mix of product on the showroom floor, but the tricky part is that there are so many different bolt patterns. We might have the style the customer is looking for, but the bolt pattern on our inventory wheels won't fit their existing car. Not just any rim fits any car and you have literally thousands of variations to consider," said Bowlin.

To aid customers' decision-making process, Rent A Wheel uses a software package that allows customers to view how different styles of wheels will look on their vehicles. They also extensively train their store staff to know which wheels best fit which cars.

Customers primarily come in shopping for new wheels. But because a new wheel often requires a new size of tire to achieve the proper fit, most customers end up purchasing or renting tires and wheels at once.

"We have designed our merchandising to give our customers the feeling that this is a rim shop first. We don't want it to feel like a rental store. There are no catch phrases or slogans or jingles playing. For us, we are a rim shop that happens to have this (rental) payment program," said Sabino. "Our employees as well as our customers respond to that. Our stores feel like cool places to be in."

When asked what the coolest wheel shop is renting these days, Sabino responded, "Big, chrome rims. 24-inch chrome is definitely the most popular thing."

Added Bowlin, "We have our finger on the pulse of wheels. We know what we're doing in that arena. We buy the right wheels and we offer great service and a nice atmosphere in our stores. We bend over backwards to serve the customers well and it has paid off for us."

"We're also very proud of the talent we've been able to hire," said Seaburn. "Since October 2007, our District Managers have reported to our Vice President of Operations Kirk Smithee, formerly an executive with RentWay. Bringing on someone like Kirk allows us to continue to effectively communicate our brand and our culture as we grow. There's no one better at that than Kirk."

Seaburn also points to the hiring of Delana Turner as Controller in July 2006 as another important personnel milestone that he believes will allow Rent A Wheel to achieve scalable growth in its corporate support structure.

The Marketing Mix

Rent A Wheel knows its customer sweet spot, and recently hired Alloy Marketing, a large national firm that focuses on reaching urban youth.

"We do a lot of radio," said Seaburn. "We look at the biggest and best station in each market that reaches our target and that's who we advertise with."

Seaburn says the company has never used television advertising, nor have they participated in the type of ADVO shared mailings heavily relied upon by more traditional RTO.

"We're fine-tuning our internet marketing program as we speak and we are also developing texting as a medium. By the end of this summer we will be rolling out a more comprehensive marketing campaign."

Grand openings are one aspect of the marketing mix that Rent A Wheel coordinates with vendors for maximum impact.

"We always do live radio remotes, and we will also arrange for the appearance of a local celebrity – either an athlete or an artist of some type – someone from that hometown who really resonates with our customers. We do your typical merchandising with lots of banners, and we also try to sponsor a car show that fits the demographic of the marketplace. The type of show we hold in the Texas valley is different than in Los Cruces and that's different than from Houston. Vendors will co-brand a car show with us and when the store site can handle the size of the show, we always prefer to host it right at the location itself."

The company's grand opening formula must work well, because new stores take off quickly. Seaburn says revenue at a typical Rent A Wheel location will reach a breakeven point within the first four to six months of being open.

Rent A Wheel Today

Earlier this year, the company acquired Rent A Wheel of Florida, a chain of 10 locations with eight stores in Florida and two in Georgia. Bowlin calls the move a "launching pad to the Southeast that brings us one step closer to our plan of developing every major market from coast to coast."

Getting them closer to that goal, Rent A Wheel opened stores on August 1st in San Antonio, TX and Las Cruces, NM. They will also open locations mid-to-late August in North Houston and South Austin. The partners decline to say where they may be heading next, but it's a safe bet they've already mapped it all out.

The Rent A Wheel team did say that they frequently field calls about franchising their concept. All three partners were quick to mention that franchising Rent A Wheel is not an option for growth. Instead, Rent A Wheel plans to continue its aggressive expansion program through store openings and strategic store acquisitions, like the Rent A Wheel of Florida purchase.

"We're just a very quiet company. After all, this is the first time we've even allowed ourselves to be interviewed. John and Don were not about going out and bragging about what they've built. But we are an aggressive company, and a very fast-growing company. We want to be as big as we can be while still being very profitable," said Seaburn.