Monro Muffler Brake: Absorbing the Shock of Store Closings

The Challenge

Monro, one of the fastest-growing independent vehicle-service-center chains in North America, was about to grow even faster.

Its planned purchase of 200 rival Speedy Muffler King stores would increase its footprint by 60%. Unfortunately, several of these new stores would be redundant with existing Monro points. Historically, Monro closed or sold stores so rarely it lacked a corporate department to handle real-estate dispositions.

On the surface, its choices were simple – and equally distasteful: Maintain duplicate retail holdings in individual markets until local buyers could be found or hire an investment bank or broker to “make the problem go away” – for a healthy commission.

How ICON Uncovered Value

ICON presented a third, more attractive, option. In exchange for receiving full book valueThe value of something as shown on bookkeeping records and as distinguished from market value; the value of an asset equal to cost less depreciation. for problem properties – far more than Monro could get on the open market – Monro agreed to buy a regular stream of advertising from ICON over the next three years.

The proposal had its skeptics at Monro, most of whom expressed concern about whether Monro could actually redeem the advertising credit within the allotted time. Thus began the pilot phase of the engagement. The deal with Speedy progressed slowly, allowing ICON to purchase just a few stores at a time. Less than a year later, as the acquisition came to a close, Monro had already spent nearly all of its trade creditAn alternative currency used in the corporate barter industry; one of ICON's financial options. (Note that this term is properly used only in the singular, i.e., never trade credits.) – faster than either side had anticipated!

During this time, Monro installed a new CEO. Intrigued at the promise shown by corporate-barter but not yet ready to commit long term to a single partner, he issued a unique challenge. After personally interviewing several corporate barterThe creation of value by exchanging a client's unwanted or undervalued asset for the promise to purchase over a period of time from the corporate-barter company a defined set of goods and/or services, called fulfillment. (Sometimes mistakenly referred to as Corporate Trade.) firms, he issued a request for a proposal. According to Monro CFO Cathy d’Amico, “ICON beat them all hands down.”

Result

Ultimately, ICON helped Monro successfully close several Monro/Speedy service centers. And, in a particularly innovative move, ICON structured a deal to allow some Monro vendorsAny company that delivers goods or services to another company through a business transaction. to use the client’s trade credits when Monro could not absorb any more. Since then, Monro has also engaged ICON to dispose of slow-moving inventoryWhile this can refer to a client's physical inventory of merchandise (which, if it represents an undervalued asset, could form the basis of a corporate barter transaction), in the corporate barter world, inventory more commonly refers to a supply of advertising time/space purchased in advance by the barter company, which client companies use as fulfillment to complete their side of a corporate barter agreement.. The relationship continues to this day.