Kwik-Fit Holdings plc

17 Corstorphine Road, Murrayfield
Edinburgh EH12 6DD
United Kingdom
Telephone: +44-131-337-9200
Fax: +44-131-337-0062
Website: http://www.kwik-fit.com

Private Company (81% Owned by CVC Capital Partners
Limited)
Founded: 1971
Employees: 11,500
Sales: $1 billion (2002 est.)
NAIC: 811112 Automotive Exhaust System Repair

Kwik-Fit Holdings plc, based in Edinburgh, Scotland, is the largest auto repair chain in Europe, as well as a major broker for automobile insurance in the United Kingdom. Most of its 2,400 shops are operated under the Kwik-Fit name, but the company also owns lesser-known chains such as Speedy, Pit Stop, Apples Car Clinic, and Silver Shield, in addition to an assortment of small U.K. shops operated under its Tyre Plus Autoservice unit. After starting in the business of repairing and selling exhaust systems, Kwik-Fit has expanded to the sale and repair of tires, brakes, and other components and has also offered inspection services. Other Kwik-Fit businesses include USN and Centuri, which import and distribute auto parts in Europe; Kwik-Fit Fleet, which maintains company cars; and Kwik-Fit Mobile and Hometune, which provides on-location servicing.

Tom Farmer: Learning the Tire Business

Kwik-Fit was founded by its longtime chairman and chief executive, Tom Farmer. He was born in 1940 in the Scottish port of Leith, the youngest of seven children, his father a ship’s agent. Farmer did not fare well in school, although he displayed an early entrepreneurial spirit and a rudimentary sense of marketing. At the age of 14, he cleaned ovens at night, employing the catchy slogan: “Kookers Kleened as New.” Also at 14, he gave up on formal education and dropped out of school. At the suggestion of his mother, Farmer went to work for a local tire company, Tyres Scotland. Once old enough to drive, he supple mented his income by collecting used tires and selling them to a remolding plant. His first employers would also leave a lasting impression on Farmer, teaching him the value of good staff relations. He realized that aside from the pay, he worked hard to please his bosses because they cared for him. When he eventually went into business for himself, Farmer never referred to his employees as staff: they were always his “people.” In 1960, he went to work as a salesman for a Goodyear subsidiary, which did not engender the same degree of loyalty. By 1963, when he was 23 years old, Farmer decided to strike out on his own. “I had a strong desire to work for myself and be able to control my own destiny,” he wrote almost 40 years later.

In April 1964, Farmer rented a former greengrocer’s shop in Edinburgh and opened a discount tire store, one of the first of its kind in Europe, called Tyre & Accessories Supplies. What started out as a one-man operation grew into a five-store chain, aided by the passage of new laws requiring more regular tire changes. Along the way Farmer discovered the importance of publicity when he was interviewed by a newspaper about the difficulties of the discount tire business. In 1968, he was approached by Albany Tyres in London, who offered him over £450,000 for his business, as well as a directorship and a territory to supervise. Farmer accepted but did not enjoy working for a larger company. Within two years he decided to cash in his shares of Albany stock for £1 million and retire. In 1970, he moved his wife and children to San Francisco, where one of his sisters lived, with the intention of using the city as a base from which to travel the world. He soon discovered, however, that he had too much drive and energy to be comfortable with unlimited leisure time. Years later, he liked to quote the famous Hoagy Carmichael assessment of retirement: ’’the only problem with it is that you can’t take a day off.” In the United States, he took notice of the auto repair chains devoted to installing mufflers. When he decided to end his early retirement and move back to Edinburgh, he approached some of his ex-employees about starting up a new business. Having given his word to Albany not to compete in the tire business, he decided to give the exhaust business a try. According to Farmer, the name of his new venture, Kwik-Fit, came to him during a moment of inspiration while lying in bed.

In 1971, Farmer opened his first Kwik-Fit center in Edinburgh, and quickly added three more shops, taking in many of the employees who had previously worked with him fitting tires. Kwik-Fit soon added tires to the mix and proved so popular with customers that within three years Farmer had a total of 14 outlets in the chain. As he had done with his former tire business, Farmer sold the new venture, this time to publicly traded GA Robinson. In addition to £750,000 pounds he received a seat on the corporation’s board. Only several months later, however, Robinson was in trouble. Farmer bought out the other directors, paying less than what he had received a few months earlier, and regained control of the company. He unloaded losing operations and changed the name back to Kwik-Fit. Once again he was in charge, but as a result of the company’s brief connection with GA Robinson he now had a few shops in the Netherlands and, more importantly, a stock market listing for the business.

Rapid Expansion in 1979

Farmer opened new Kwik-Fit centers at a steady clip, so that by 1979 there were 52 outlets located in Scotland and northern England, in addition to the small Dutch operation. In 1979, he began a period of rapid expansion, spurred to some degree by fear of the possibility of American competition entering the market. Farmer paid £10 million for Euro Exhausts, increasing the total number of Kwik-Fit outlets to 136. A few months later, in 1980, he paid £3.2 million to acquire 180 Firestone depots, then sold off the 82 truck tire depots, which did not fit in with the Kwik-Fit business, essentially turning a profit on the deal when Dunlop agreed to pay £3.25 million for these unwanted assets.

Growing from 52 to more than 200 centers in such a short period of time proved difficult and profits fell off as Kwik-Fit digested its purchases. The company soon regained its momentum, aided in large part by a £2 million investment in a computer system installed in 1981. One of the first retailers to use an integrated computer system, Kwik-Fit was now able to monitor inventory, handle customer quotations and sales receipts, do banking and cash reconciliation, as well as keep track of employee time and attendance records. Also in 1981, the company added 17 new centers in Holland. Of at least equal importance that year, Kwik-Fit introduced its “Code of Practice” manual, which formally listed what a customer had a right to expect from a Kwik-Fit center. Farmer, who was still known to service a car while visiting one of his centers, was well aware of the poor reputation auto repair shops had with the public. He promised customers that his shops would be honest and instituted a profit-sharing program to encourage his employees to share that attitude. He also established a Training and Development Centre in Newcastle-under-Lyme.

Farmer was prominently displayed in Kwik-Fit’s advertising, helping to associate the company with the concept of integrity. Brand recognition was greatly enhanced by a television campaign launched in 1984, which established several signature elements that were repeated for many years. The “You Can’t Get Better Than a Kwik-Fit Fitter” commercials featured workers dancing to catchy tunes. The advertisements became a staple of British television and made Kwik-Fit a household name. To take advantage of the connection of Kwik-Fit with value and quality, the company introduced the Centaur Supreme label to a variety of products, including tires, exhaust systems, shock absorbers, and batteries.

The dynamics of Kwik-Fit’s exhaust business had changed because modern mufflers simply lasted longer, making it necessary for the company to branch out into different areas. Aside from creating the Centaur product line, Kwik-Fit began servicing brakes and entered the quick oil change business with its Kwik-Lube outlets. In addition, the company introduced Kwik-Fit Fleet, which serviced company cars. An attempt to break into the French market did not fare as well, due to cultural differences Farmer had not anticipated. Nevertheless, by the end of the 1980s, Kwik-Fit numbered more than 600 outlets and was generating close to £200 million in annual revenues.

Kwik-Fit continued to advertise heavily in the 1990s, emphasizing its belief in customer satisfaction, in fact changing its “100% Customer Satisfaction” pledge to “100% Customer Delight” in 1991. That reputation would soon suffer, however, when a watchdog group, Consumer’s Association, announced the results of a survey that indicated a number of Kwik-Fit outlets had recommended unnecessary repairs. Farmer vowed an immediate effort to rid the company of disreputable employees and to improve training. Kwik-Fit’s reputation was so strong that the adverse publicity had no effect on its stock price, which actually rose following the incident. Investors were especially optimistic about the future of Kwik-Fit after new tire tread depth legislation went into effect in January 1992. Following an initial increase in business, sales soon dropped off, as economics worldwide slipped into recession. A large portion of British motorists simply opted to drive on worn, illegal tires. By the fall of 1992, Kwik-Fit, which had thought itself immune to poor economic conditions, was forced to report a significant drop in sales.

To address the drop-off in profits, Farmer focused on improving efficiencies and other cost-saving measures, including cutting his own salary. By 1994, the company had recovered and was in a position to renew a pattern of impressive growth. It spent £21.5 million to acquire 125 Superdrive Motoring Centres from Shell Oil, then leased some of the units to Apples Car Clinic, in which Kwik-Fit also acquired a 25 percent stake (the balance of shares purchased in 1998). For the fiscal year, pretax profits were up 15 percent over the previous year to £29.2 million, with the company posting gains in its three main sectors of tires, exhausts, and brakes.

Company Perspectives:

The first Kwik-Fit Centre was opened on McDonald Road in Edinburgh in 1971 by Sir Tom Farmer. Today, the Kwik-Fit Group is one of the largest automotive parts repair and replacement specialists in the world.

Car Insurance Added in 1995

In 1995, Farmer took Kwik-Fit into an entirely new area of business: car insurance. He had been approached by a number of insurers about licensing the Kwik-Fit name but in the end decided to launch an insurance business himself, turning to the U.S. financial services company Alexander & Alexander to provide the product. The key to the endeavor was Kwik-Fit’s computer database that contained information on the company’s four million annual customers. After years of aggressively gathering as much information as possible on its customers, Kwik-Fit was now in a position to realize a significant payoff. The dynamics of the automobile insurance business had changed dramatically in recent years, with brokers now directly approaching potential customers. A Kwik-Fit telemarketing operation could also leverage the company’s name recognition and reputation for honesty. Within two years, Kwik-Fit Insurance Services was Britain’s sixth largest seller of auto insurance.

With business success came personal honors for Farmer. In 1997, he became Sir Tom, knighted for his services to the automotive industry. Accolades did not, however, lessen his drive, as Farmer set a goal of growing his chain to 2,000 units by the year 2000. In January 1999, the company all but met that challenge with the completion of a single acquisition, the £105 million purchase of the Speedy Europe subsidiary of Canada-based Speedy Mufflers, which operated under both the Speedy and Pit Stop names. While increasing Kwik-Fit’s total units to 1,860, Speedy greatly enhanced the company’s presence across Europe, adding 568 units in France, Spain, Germany, and Belgium. In all, Kwik-Fit now boasted more than 700 outlets on the continent. The company also acquired the 57-store Silver Shield chain, an auto glass replacement company. An even greater goal than reaching 2,000 units for Farmer was to be able to offer customers a wide range of services that could extend from “showroom to scrapyard.” To help him meet this aim, as well as to extend Kwik-Fit’s reach into Eastern Europe, and possibly Asia, he agreed in June 1999 to sell the business to the Ford Motor Company for approximately $1.6 billion, a deal that resulted in nearly $125 million for Farmer.

The Ford transaction promised to be mutually beneficial to both parties. Kwik-Fit maintained its independence and Farmer stayed on as chairman and CEO, but the company now gained the financial backing of its parent corporation and an entry into new markets where Ford was already doing business. For Ford and its new CEO, Jacques Nasser, the Kwik-Fit acquisition, coming on the heels of a $6.5 billion purchase of AB Volvo, was part of a larger plan to position Ford as a more diversified company, one that did not sell just cars but the entire “driving experience.” In addition to the European auto repair business, Kwik-Fit gave Ford access to a large number of new customers. It was estimated that in the United Kingdom, only 20 percent of Kwik-Fit customers drove Fords. Moreover, Ford only accounted for 27 percent of after-sales parts and servicing for its own brand. Vehicles more than three years old simply disappeared from the Ford system. Kwik-Fit, therefore, was seen as a conduit to potential new car buyers as well as a way to recapture servicing revenues that left the Ford system.

Under Ford, Kwik-Fit showed some initial growth. In 2000, it acquired Holland’s ten-unit AutoFit chain, and also opened its first outlet in Poland. The company announced an ambitious goal of growing to 5,000 repair centers by 2005 by an aggressive expansion across Europe as well as sections of Asia. These hopes were severely jeopardized by a disastrous 2001 for Ford, due to disappointing results in its European operations, an overall recession, and the negative publicity surrounding the Bridgestone Tire recall scandal that involved the Ford Explorer. By late October 2001, Nasser was forced out and William Clay Ford took over as chairman and CEO. Kwik-Fit had been Nasser’s acquisition so there was little surprise when the business was put up for sale in January 2002. Instead of the $1.6 billion that it had paid for Kwik-Fit, Ford indicated that it only expected to raise $1 billion for the assets. As he had done 25 years earlier, Farmer was expected to reacquire Kwik-Fit at a price less than the amount he received when he sold it. This speculation was lent credence when Farmer and some associates resigned from the company in February 2002, which was seen by some as a preliminary step to his reacquiring Kwik-Fit. The Bank of Scotland was also rumored to be backing a possible bid. In August, however, it was London-based CVC Capital Partners that took control of the company, purchasing an 81 percent interest for some $505 million, with Ford retaining the remaining 19 percent stake.

Principal Subsidiaries

Apples Limited; Hometune Motoring Services Limited; Kwik-Fit Limited; Pit-Stop Auto Services GmbH; Silver Shield Screens; Speedy Europe A.S.

Principal Competitors

Belron International; The Boots Company PLC; Cooper Tire & Rubber Company; GKN plc.

Key Dates:

1971:

Tom Farmer starts Kwik-Fit.

1974:

Farmer sells the company to GA Robinson, then reacquires it.

1984:

Signature television commercials debut.

1995:

Kwik-Fit begins to sell car insurance.

1997:

Farmer is knighted.

1999:

Ford Motor Company acquires Kwik-Fit for approximately $1.6 billion.

2002:

London-based C VC Capital Partners acquires majority control of Kwik-Fit.

Further Reading

Bainbridge, Jane, “Knight of the Road,” Marketing, June 26, 1997, p. 21.

Bright, Julia, “Tom Farmer Does the Kwik Step,” Director, June 1993, p. 106.

Coleman, Brian, and Gregory L. White, “Ford to Pay $1.6 Billion to Acquire Kwik-Fit, Europe’s Car-Repair Leader,” Wall Street Journal, April 13, 1999, p. A3.

Davidson, Andrew, “Tom Farmer,” Management Today, August 1995, p. 34.

Farmer, Tom, “Fit to Manage,” Management Today, July 1990, p. 5.

——, “The Kwik-Fit Story,” February 2000, pp. 16-18.

Gabb, Annabella, “Making Kwik-Fit Fitter,” Management Today, March 1992, p. 46.

Shirouzu, Norihiko, “Wall Street Hopes CEO Will Crank Up Company in Big Overhaul, Not Quick Fix,” The Wall Street Journal, January 4, 2002, p. CI.

—Ed Dinger