I really enjoy watching the CBC program Dragons Den. I like to pretend I’m the investor, and I watch closely to figure out how I’d react to the various pitches they hear.
Some pitches are pathetic and the decision to turn them down is easy. Others, however, are more polished. The idea is well presented, and the decision is not so easy.
As smart as the dragons are about business, I have noticed that they sometimes bite on a good presentation that might not make for a great business.
Last week one of the pitches was for a mobile tire franchise. Now my gears were really turning because this was up my alley! You can watch the pitch below.
Here are a dozen reasons why I decided I wouldn’t want to invest in such a business.
1) The tire business is highly competitive with low margins.
2) It is a seasonal business and difficult to predict.
3) Liability is a serious concern, and would require significant insurance.
4) The cost of fuel and travel time
5) The cost of comebacks or return visits for vibration complaints, broken wheel studs, or wheel locks. (Believe me, this will be a frequent headache!)
6) The cost of cell-internet (mobile) information to retrieve correct wheel torque and and tire pressure specifications, as well as to operate Internet-based POS systems.
7) The cost of trained and qualified staff who are willing to work in outdoor conditions. I think you’ll find that’s not an easy sell in winter time!
8) The cost of tools required to reset tire monitor systems and diagnostics when needed.
9) Potential for noise complaints in urban areas.
10) It is very questionable whether a high-end wheel balancer that is designed for stationary installation will overcome day-to-day road vibrations without frequent calibration issues.
11) The cost of all truck and equipment maintenance.
12) Finally, I would be concerned that a business like this would caters mostly to a specific kind of consumer — one who bases everything on cost, not value. These are the hardest clients to satisfy, as we all know.
Although I like the idea in principle, the mobile tire business is not new and has many flaws. In my opinion, it is just not sustainable in the long run.
To my surprise, however, two of the dragons wanted to invest. I guess our business looks that easy!
Bruce Eccles is the owner of Eccles Auto Service in Dundas, Ont.