Interview with: Robert R. Falconi, President and CEO - featuring: their automotive maintenance services through franchised Precision Tune Auto Care centers throughout the United States and in 8 countries.

Precision Auto Care, Inc. (PACI-NASDAQ)

wpe3.jpg (15694 bytes)


-Members Login

Become A Member!

This is a printer friendly page!

Robert R. Falconi’s ascension to CEO of Precision Auto Care has been an evolution and a smooth transition

wpe5E.jpg (10008 bytes)

Business Services

Precision Auto Care, Inc.

748 Miller Drive, SE, Suite G-1
Leesburg, VA 20175
Phone: 703-777-9095

wpe63.jpg (3722 bytes)

Robert R. Falconi
President and CEO

Interview conducted by:
Walter Banks, Publisher
August 3, 2006

Robert R. Falconi
President and CEO

Robert R. Falconi was promoted on May 18, 2006 to CEO of Precision Auto Care, Inc. Falconi joined PACI in September, 2000, as Chief Financial Officer. In March 2002, he was named Executive Vice President and Chief Operating Officer. The former CFO of Intellisys Technology Corp. also served as CFO/Vice President of Finance & Administration for several government contracting firms in the Washington, DC area. Falconi holds several professional designations and earned an MBA from George Mason University (Fairfax, VA), after receiving his BBA from the University of Texas (Austin).

Company Profile:
Precision Auto Care, Inc. (NASD: PACI) provides automotive maintenance services through franchised Precision Tune Auto Care centers. Precision Tune Auto Care has been a national leader for 30 years in providing car owners with a one-stop-shop for diagnostics, factory scheduled maintenance service and repairs for autos, SUVs and MiniVans. The centers offer certified technicians who can perform the same services a dealer can, only at a much greater value.

What began in 1976 as a tune-up specialist is today an advanced auto care system with a modern focus on complex auto systems. Servicing over a million vehicles each year and providing the driving public with education of car care for personal safety and the health of the environment, PTAC is a global player with more than 440 computerized service centers throughout the United States and in 8 countries.

CEOCFO: Mr. Falconi, you recently became CEO, could you tell us when and how that occurred?
Mr. Falconi: “I became CEO in June of this year (2006), although I had been serving as President since November of 2004. My promotion to CEO was a natural evolution of events. As time has gone along, Lou Brown, who was serving as CEO has turned over more and more of the management of the company even as he stays involved as Chairman of the Board. Lou has been very gracious and supportive of putting me into this role. I want to point out that Lou has a tremendous amount of experience as CEO of a number of other companies and has been a wonderful mentor and invaluable resource to me and the company.”

CEOCFO: Have you brought in a new CFO from the outside or promoted from within?
Mr. Falconi: “We promoted from within. Our new CFO was working here as Controller and he has evolved into the CFO role, which was critical in my becoming CEO in that we had someone who could step-up into the CFO position. Neither of the moves was a surprise to anyone.”

CEOCFO: Has there been any major changes since you have taken over as CEO or are you continuing a strategy that was in place?
Mr. Falconi: “It has been a slow transition and we are basically continuing the same game plan in that we are going to focus on generating positive cash flow and profitability. On June 30, we completed FY06, and although we don’t have our final results and can’t talk about the earnings yet; the earnings through March 31st (2006) were profitable. While we have been operating at a very steady pace for the last 4 years, I will say that we are ready to do some things a little bit differently in terms of trying to generate the pace at which we grow. One of the things that we will do going forward is to look at acquisitions. We also might even look at running company owned stores. This is the first time that we have been open to that kind of idea since I’ve been here, but now we are operating smoothly and we are ready to do some variations on this smooth operation to make it grow a little more rapidly than we have been.”

CEOCFO: Do you get very involved with your franchises or are you just farming out your name and concept?
Mr. Falconi: “The franchisors run the stores, but I can tell you that our involvement is much more than just farming out the name and the concept. Corporate has a very interactive relationship with the franchisees. At corporate, we lead the way in terms of training and getting our franchisees to add on new services. For example, we are now encouraging our stores to sell tires and provide tire related services. I think that ultimately the overwhelming majority of our stores will be involved selling tires; so we are doing research and working with people in the tire industry. One of our stores in Minnesota is doing a trial in terms of selling tires and although I say it is a trial, there is no question that when the trial period is over he will continue to sell tires. We believe that it adds a lot to the center in terms of attracting new customers, as well as keeping customers coming back. With regard to our training, we have developed computer based training modules that we’ve disseminated to the franchisee community which allows them to train at their own pace and in a schedule that suits them. In the marketing arena we lead the way there as well through the marketing entity which works closely with corporate, Precision Marketing Fund. Through Precision Marketing Fund, we’ve gotten involved with NASCAR for the first time in the company’s history through a relationship with a company called The Championship Group. They have introduced us to Bill Lester, who is the first African American to drive at the NEXTEL Cup Series in NASCAR. We’ve done some promotions with Bill, so we are very proud of the association and affiliation with Bill and NASCAR. I have just given you three recent initiatives that we have taken. There are many, many more. Therefore, corporate is doing a lot more than just farming out our name.”

CEOCFO: You mentioned tires; are these major brands?
Mr. Falconi: “At this specific center, we are selling some of the major brands as well as some of the minor brands. We are new to the game and we are learning as we go, but I do feel that we will ultimately be into it in a much bigger way. We are never going to compete on price basis with some of the bigger chains, but on the other hand, we can offer the tires at a competitive price. Further, the thing that we can do is offer convenience to the consumer, because when the consumer comes into one of our stores, they will be able to take care of all of their automotive maintenance and repair needs. Let’s face it. The number one commodity that none of us have enough of is time. People don’t want to go to one store to have their oil changed and another to have some one look at their brakes and then another to get their tires. You want to go to one spot and get everything taken care of at once because it is inconvenient enough to have to get these things done in the first place, you don’t want to have to do it at three or four different places.”

CEOCFO: Tell us about the revenue model, both at the store level and corporate.
Mr. Falconi: “At the store level, more of the revenue is generated through the sale of services rather than the products as the products are becoming more of a commodity. Therefore, our stores can differentiate us from the competition by offering a superior customer service experience coupled with a high level of technical expertise. At corporate, we live primarily off of royalties; we get income from sales of new licenses, but the overwhelming majority of our income comes from royalties paid by our franchisee. Therefore, it is important to us that the individual stores do well. ”

CEOCFO: Tell us about the locations of your stores and the states that you are in and where future growth will come from.
Mr. Falconi: “We have roughly 325 locations here in the United States and another 100 or so internationally. Talking about where we have a number of locations; the Atlanta market where we have 27 or 28 stores, is a market where we are very strong. Throughout North Carolina, where we have about another 28 stores, we are also strong along with South Carolina and Florida, where we have a number of stores. Overall, we are relatively strong in the southeastern part of the United States. However, there is a lot of room for growth there. We also have a number of stores on the west coast, in the San Diego, San Francisco and Seattle markets and a strong presence in Minneapolis. We are a national firm but we are scattered and we have plenty of room for growth. For example, in Texas, we have a good presence in the Austin market; we have a few stores in Dallas, but no stores in San Antonio and only 2 stores in Houston and none in El Paso. Hence, we have room for growth in every market. You asked where we can expect future growth. I think one of the places where we expect to grow is in Arizona where we have just added a new area developer, Dick Lippert, who has Al Unser Jr. as his partner. Al Unser Jr. is the former Indy Racecar driver who has won the Indianapolis 500, two or three times and his family has won it 9 times. We are hoping that with that affiliation, the two of them will be able to grow the Arizona markets and so I see that as a market where we are going to have some immediate growth. In addition, as I mentioned earlier, we are looking at acquisitions and where we can do an acquisition, we will do our best to make it happen.”

CEOCFO: What about the northeast?
Mr. Falconi: “In the northeast we do not have a strong presence; it is interesting however, that we have 2 stores in Massachusetts and the one that is in Billerica, near Boston, has been the number one store in our system for three of the last four years. That store has an outstanding operator and is a wonderful example for the rest of the system, but we haven’t grown in that market they way that I would like. That could be a market where we do an acquisition.”

CEOCFO: How do you attract new franchise prospects?
Mr. Falconi: “There is a number of ways that you can do it; one of the vehicles that we use is by working through some of the strong broker organizations in the United States. We have relationships with at least 5 different broker organizations and they are a good source for leads. They do a lot of pre-screening; therefore, the leads that we get from brokers tend to be relatively well qualified. Another source is through franchise trade shows and those are particularly effective in markets where we already have a presence. When we attend a show in a new market, where we don’t have a presence, it is harder to sell a license. We have an affiliation with an organization called VetFran that attracts veterans. In fact, we have several veterans in the system and veterans get a discount off the price of the franchise license as well as off the royalties in the first year. Of course, we have a website and we do get leads from some of the advertising that we do on the internet. There is also word of mouth and often you will get friends and relatives of existing franchisees to become new franchisees.”

CEOCFO: Do you get involved in promoting the new franchisees?
Mr. Falconi: “The short answer is “yes.” We are a three-tiered system and between us and the franchisees are Area Developers and the area developers will work very hard to help promote new franchisees. The Area Developers almost always have stores themselves and understand what it takes to operate a new store. Therefore, they will work closely with the franchisees in terms of getting the store off on the right foot. Corporate also provides a Grand Opening kit to new franchisees and we work closely with them in the early days.”

CEOCFO: Could you elaborate on the company’s financial picture?
Mr. Falconi: “I can tell you that we’ve been a very stable organization; you can look at our top line and bottom line and see that they have been very stable for the last four years. That’s good news, but just looking at it by itself is not all that exciting; what is exciting is the fact that we have an organization that is tightly run and it will be relatively easy I believe, to grow the top line without adding a lot of cost. Therefore, we will be able to do a lot to increase our net profit once we can get this growth engine moving. The other exciting news is the fact that we have had more and more international interest in the Precision Tune brand over the past year. We are currently talking with an individual about developing the Precision Tune brand in Ireland and we are talking to another group about Malaysia. Our master franchisee in Portugal has actually grown and expanded into Spain. They have put up 27 stores in Portugal and Spain over the last 3 years, and they have very aggressive growth plans for the next 3 years. We have a strong presence in Taiwan, where we have 50 stores and a master franchise in mainland China, who is getting the ball rolling there. Therefore, I’m excited about that. It usually doesn’t require a lot of expense on our end to help support international franchisees. We obviously have to provide some support, but the point that I’m making is that we can grow the top line without having to spend a lot in additional operating cost to make that happen and much of that growth should go to the bottom line. We have a strong infrastructure and over the last couple of years, we have developed a point-of-sales system that is unique for Precision Tune Auto Care franchisees. It has been well received by the Precision Tune Auto Care community and I think that it will help them to grow as it provides better marketing data. It will also help them improve their bottom line by offering the tools to help them better analyze their finances from week to week and month to month.”

CEOCFO: You are showing movement into new products and your international franchisees have increased since we last spoke to you in 2003; in closing, is there anything that you would like to say to the investment community?
Mr. Falconi: “I would only say that the financial results indicate that we are a well run and stable company. We will stay focused on remaining profitable but we are also going to make the investment in growth. We are very determined to make growth happen. Time will tell if we are able to do it. Having said, I feel very confident about our future and I would like to say that the trend in the world bodes well for Precision Tune in that there are fewer bays out there to service cars even as there are more cars on the road. On top of that, the cars on the road are getting older. The average age of cars continues to increase and the average age of cars is now pushing 10 years. These trends tell us that there is virtually an unlimited opportunity for Precision Tune Auto Care.”


Any reproduction or further distribution of this article without the express written consent of is prohibited.

“While we have been operating at a very steady pace for the last 4 years, I will say that we are ready to do some things a little bit differently in terms of trying to generate the pace at which we grow. One of the things that we will do going forward is to look at acquisitions. We also might even look at running company owned stores. This is the first time that we have been open to that kind of idea since I’ve been here, but now we are operating smoothly and we are ready to do some variations on this smooth operation to make it grow a little more rapidly than we have been.” - Robert R. Falconi does not purchase or make
recommendation on stocks based on the interviews published.