Judd Shader of Leeds West Groups Is Building for the Future
As a junior in college, Judd Shader was facing a common decision among almost-graduates: "What do I do next?"
He was studying history with a focus on ethnic studies at the University of Colorado and long had expected to go to graduate school or law school. Those seemed like the logical paths. Then his parents made him an offer.
They’d pay for grad school or he could take the money they’d spend on tuition and invest it in a business of his own. He could pursue a Master of Business Administration in the classroom or he could go to work and get a “real-life MBA,” as he calls it. He took his parents up on their offer.
His first steps were to find a banker and a broker. That broker represented businesses of all kinds, including a pair of Midas locations in Colorado.
“The business broker was pretty generic, so I was looking at everything,” Shader says. “What attracted me (to Midas) was the old-school brick-and-mortar. Cars were getting harder and harder to work on. The do-it-yourselfer was going away. I loved the retail sector. Combine the retail sector with skilled trades, and I thought it was definitely going to be a win.”
He bought those two Midas stores and in 2009, founded Leeds West Groups. In the 11 years since, Shader has opened 104 more stores and expanded into 18 states, making Leeds West Groups the 13th largest independent tire dealer in the country, according to the 2020 MTD 100.
A franchise opportunity
Shader, 34, didn’t expect it to go this way. He thought he would operate those two Midas stores “for two or three years, then probably sell (and) go into the corporate world.” But within those first couple of years, he noticed a few things.
First, “it’s a great industry to be in.”
Second, “I realized quickly there wasn’t a lot of capital in play. I was starting to see the consolidation happening across the independent and private label brands, but there was really no one in the franchise sector that was rolling them up.”
Shader saw many owners with one or two franchise locations who were “aging out” and searching for an exit strategy.
“So I really started changing the way I looked at it and started changing the way we went to business,” he says.
Leeds West Groups created a board of directors and brought on outside capital. On the board, he says, “we brought in big-time players.”
Joshua Weinreich, the chairman of the firm’s board, had retired after 20 years with Bankers Trust/Deutsche Bank, where he served as global head of hedge funds. Other board members brought similarly impressive backgrounds in finance, real estate and development.
Though Shader refers to his company as “well-capitalized,” he declined to reveal just how much money Leeds West Groups has at its disposal.
“We’re backed by big individuals that would be behind big private equity groups and they’re behind this little franchise group. I think that’s what makes us unique. Yes, we have 106 stores. Yes, we’re playing as a franchisee, but our board of directors is as big - if not bigger - than probably most of the publicly traded companies in our space.”
In addition to the board, Leeds West Groups has invested in a team of 40 to 50 people who work from the company’s headquarters in Greenwood Village, Col., with expertise in everything from legal issues to information technology.
“We set an infrastructure that is much greater than where we currently are. We spent the money to be able to do the things we really wanted to do. So our appetite is as great as we want it to be.”
Leeds West Groups owns 106 stores in 18 stores, with about three-quarters of those locations flying the Midas flag. Judd Shader paid homage to his grandfather who co-founded Leeds Distributors in Florida in the 1940s and named his business Leeds West.
Tools to grow
In case there was any doubt, that appetite for growth is great. One way the company is filling its pipeline is by offering management support to existing automotive repair franchisees.
“The reality is when you have two to five or even 10 stores, you’re a little bit ‘half-pregnant.’ You need certain services, but you can’t afford them. You need a CFO, but you can’t afford it. You need folks in HR, but you can’t afford it. You need an IT person, but you can’t afford it. You have a lot of people wearing a lot of hats.”
Leeds West Groups is using its back-end team to provide those services to others operating Midas, Big O Tires or SpeeDee Oil Change franchises. By doing so, it establishes a working relationship with franchisees and Shader admits it helps the company feed its pipeline for future acquisitions.
“It gives us the ability to make investments. We have a lot of equity at our disposal. You can buy these deals all day long, but if you can’t operate them it doesn’t matter. So having operating partners out there in the country gives us the ability to grow fast and use our scale wisely.”
Using its scale also means investing in other motivated franchisees who want to expand.
Leeds West Groups seeks out franchise owners looking for a silent equity partner. Last summer, the company announced it was investing in a fellow Big O Tires dealer’s plan to open more stores in Texas. Chris Monteverde is a past Franchisee of the Year for Big O Tires, and in 2019 he bought eight stores in San Antonio and Corpus Christi and converted them to the Big O Tires banner. At the time, Monteverde said the partnership with Leeds West Groups gave him the ability to pursue “any growth opportunity nationally.”
Shader says, “Those are the types of deals that we’d love to find more of.”
One more piece of the investment puzzle is real estate. Leeds West Groups is looking for automotive real estate — land with an automotive structure on it — in all 50 states.
“As we continue to grow, automotive real estate is becoming a big play for us.”
And it’s something Shader believes makes his company unique. He says companies backed by private equity usually aren’t interested in property investment “because they’re playing in a short-term game. We expect to be a player in this industry for a very, very long time. We want to have large real estate holdings in our future.”
Adding more tires
Even with growth at the forefront, Shader says he’s not looking to take Leeds West Groups beyond its existing three brands: Midas, Big O Tires and SpeeDee. “We feel like we’re diversified.”
Midas gives the company a presence with traditional automotive repair shops of six to 10 bays. Big O Tires may not be a national brand like Midas, but Shader calls it a “very strong brand” in tires. And SpeeDee Oil competes in the quick-lube space. “We have no interest in going after other brands,” says Shader.
Of those three brands, Big O Tires is best known in the tire space, but nationally and within Leeds West Groups, the Midas brand is emphasizing its tire business.
“All of our East Coast stores have tires in them already.” And more of the company’s Midas locations are stocking tires. “It’s increasing for us quarterly.
“We’re excited about tires at Midas. Midas is never going to become Big O, but Midas is, in my opinion, going to become more of a Firestone model — a full-service repair shop.”
Impact of the virus
Like it has for every tire dealer, 2020 has presented unique challenges. Shader says the company started out the year well, but then came COVID-19. Business took a hit in March and it continued through early-April. But the company reacted quickly and by mid-April was “ready to go.
“I feel like some of our competitors weren’t (ready). They were just reacting in mid-April.”
Leeds West Groups capitalized on that readiness through the end of April, and by “May 1, we came back to pretty much normalized numbers as a company, and actually increased in some parts of the country.”
The company’s stores in the northeast and in Chicago were hit much harder than those elsewhere. Operations in the Midwest were less affected.
Shader says all three retail brands rebounded about the same. Location was the big differentiator. “I think we weathered the storm better because we truly play throughout the country.”
Being a national player
With operations in 18 states, Leeds West Groups is spread from New Mexico in the west to Connecticut in the east. But Shader says there’s not a specific goal of owning stores from coast to coast.
“If we find quality deals in all 50 states, yeah, we’re going to go after them, but it’s not a goal we have to operate in all 50 states. I think it goes back to being a franchisee and not a franchisor. We don’t have to prop up our brand. Midas is in all 50 states.
“We’re truly deal-specific. We want to be as strong as we can in each area. We have clusters of operations. One thing we can’t have is one-to-three stores in scattered areas. We have to have a minimum number of stores to support a field team (in that area.)
“I think we’ve added two or three new states this year. We’re not scared of growing our geographical footprint, but it’s not something we feel like we have to do.”
It goes back to pursuing long-term growth.
“We’re not playing short-term. We’re not looking for the next 24 or 36 months. We’re looking for 20 year increments on the deals we do because we’re funded by the family office. We’re funded through returns. We’re not funded trying to create multiples. We’re not funded through private equity groups. We’re not just worrying about the next quarter or the next 12 or 24 months. We’re building the foundation of a company we feel can create long-term success and can continue to scale for a very long time.”
