Midas International Corporation

Midas International Corporation

225 N. Michigan Ave.
Chicago, Illinois 60601
U.S.A.
(312) 565-7500
Fax: (800) 621-4562

Wholly Owned Subsidiary of Whitman Corporation
Founded: 1956
Employees: 2,000
Operating Revenues: $485.6 million
SICs: 3714 Motor Vehicle Parts and Accessories

A private subsidiary of the Whitman Corporation, Midas International is the leader in the automotive service industry. In 1993 Midas accounted for 20 percent of Whitman Corporation’s total sales. The company has nearly 1,900 Muffler and Brake Shops located in the United States and over 700 outlets in Australia, Austria, The Bahamas, Belgium, Canada, France, Honduras, Mexico, New Zealand, Panama, Spain, and Switzerland. Over 300 stores are operated by Midas; the rest of the shops are part of the company’s extensive franchising network.

In the early 1950s, the founder of Midas International Corporation, Nate H. Sherman, operated a family business in Chicago that manufactured car mufflers. As president of International Parts Corporation, Sherman was well aware of the developments in the automotive industry during the 1950s: The American economy was expanding rapidly, making the average person more prosperous than ever before. This prosperity translated into increased consumer demand for cars, and between 1950 and 1956 almost 40 million new automobiles were purchased. Technological innovations, such as 18-month mufflers and dual exhaust systems, were also changing the way cars were serviced. Sherman recognized that the independent service stations—the “mom and pop” corner gas stations—would no longer be able to meet the growing demand for automotive services. These developments convinced Sherman that he could develop a new type of service station where he could sell his mufflers directly to consumers and eliminate the need for distributors.

Sherman correctly predicted that consumers would prefer fast, efficient automotive service to the slower “mom and pop” service station. He felt that the best way to take advantage of the dramatic changes in the automotive market was to create a network of independent businesses that would be supported by a central company—in short, to begin franchising. In 1956, the entrepreneur formed the Muffler Installation Dealers’ Association (M.I.D.A.S.) and convinced long-time friend Hugh Landrum to open the first Midas Muffler franchise shop. Located in Macon, Georgia, the shop installed and replaced mufflers as quickly and as efficiently as possible. In order to differentiate Midas from other service stations and to encourage return business, Sherman guaranteed to replace any muffler his shop had installed in a domestic car for as long as the motorist owned it. By the end of 1957, there were 100 Midas Muffler franchise shops independently operated in 40 states.

With his flair for marketing, Sherman began to revolutionize the automotive service industry. Consumer surveys taken throughout the 1950s indicated that most people didn’t understand how their own cars worked; because of their lack of mechanical knowledge, many of these people believed that they were overcharged or charged for unnecessary repairs at service stations. In addition, a large number of people were angry with the inadequate service or poor workmanship evident in fixing their cars. Sherman’s marketing strategy was to directly involve the customer in making decisions about repairing the car. He instructed Midas Muffler shop owners to invite the motorists into the service bays to educate them about their cars and what needed repair. A written estimate that included an itemization of the repair work was given to each customer before the repairs were begun. Finally, Sherman suggested that all Midas shops install large windows to an area where customers could watch the repairs made on their cars.

The accuracy of Sherman’s predictions about the automotive industry and his marketing savvy helped Midas become one of the fastest growing franchises in the United States. By 1960, there were 319 Midas Muffler Shops in operation and a growing number of competitors both locally and regionally. In order to protect and increase its share of the automotive services market, Midas introduced shock absorber service in 1960. The company continued to grow, and in 1968 Midas purchased Huth Manufacturing Corporation, a firm that produced made-to-order bender machines. The benders provided automation to cut and weld tubing for a car’s exhaust system. The Huth machines proved to be time savers, and, as muffler installers increased their demand for the benders, Midas’ marketing network grew both in the United States and in foreign countries. The first Midas Muffler “Silencer” Shop opened in 1968 in Harlesden, England. By 1970, there were 577 Midas Muffler Shops operating throughout the United States, England, and Canada.

In 1972, Midas International was purchased by IC Industries, Inc., which subsequently renamed itself the Whitman Corporation. At that time, under the leadership of William Johnson, IC Industries divested most of its railroad holdings and began the transformation into a multinational conglomerate. Diversification into consumer goods and services was indicated by three major acquisitions: Pepsi-Cola General Bottlers, a soft-drink bottler located in the Midwest; Midas International; and Pet Inc., an evaporated milk company operating out of St. Louis.

As a wholly owned subsidiary operating within 1C Industries’ consumer products division, Midas benefited from the financial resources of its parent company. In 1974, Midas created the Midas Institute of Technology in Palatine, Illinois. This facility was designed to serve as a training center for new franchisees, managers, and automotive mechanics. In order to ensure the best service throughout its franchise network, emphasis was placed on developing good consumer relations and improving the technical skills of Midas employees. In 1978, Midas opened its 1,000th shop in the United States; during the same year, Midas also extended its muffler guarantee to customers with foreign cars. In 1979, Midas announced that it would provide brake service in all its shops. By 1980 there were 1,350 Midas Muffler and Brake Shops, with franchises in Australia, Belgium, Canada, England, France, Mexico, and Puerto Rico.

Midas continued to grow during the 1980s. The company manufactured its 50 millionth muffler in 1983 largely due to improvements in production. The company initiated a major expansion at its manufacturing facilities in Bedford Park, Illinois, and Hartford, Wisconsin, where it produces exhaust systems and other automotive parts for domestic and foreign cars, vans, light trucks, and even antique autos. With over 1,400 franchise outlets in the United States by 1985 and over 400 shops in foreign countries, Midas was three times larger than its closest competitor. Record revenues of $298 million were reported in 1984, an increase of 10 percent over the previous year. Also in the same year, Midas opened 74 shops in the United States alone. In the exhaust replacement market, Midas accounted for approximately 12 percent of the outlets but garnered about 25 percent of the business.

Near the end of 1984, Entrepreneur ranked Midas as one of the top-ten franchisers in the country. Although the automotive products and services market was growing at an annual rate of over 10 percent, the market was far from saturated. Research had shown that as consumers kept their cars longer and as traditional service stations provided fewer automotive repairs, the demand for special repair stores continued to increase. Midas’ own marketing research indicated that the company had the highest profile and best name recognition of all the competitors in the exhaust replacement industry. By taking advantage of these trends, Midas opened its 2,000th shop in 1986. In contrast, Car-X and Speedy Muffler King (both franchises are controlled by Toronto-based Tenneco), Midas¹ closest competitors in the automotive services franchise business, operated 434 shops combined. Meinecke Muffler Company, with 400 shops located primarily in the southern and midwestern parts of the United States, ranked third.

In 1986 Midas opened its New England Training Center in Taunton, Massachusetts. Because of the large number of appli-cations for Midas franchises in the eastern part of the United States, the company duplicated the training services it had established in 1974 at the Midas Institute of Technology in Palatine. At the company’s Hartford and Bedford Park manufacturing facilities, highly automated and computerized assembly lines were producing more than 1,000 mufflers per hour for both the domestic and foreign markets. In 1989, Midas manufactured its 100th million muffler. Midas also introduced computerized suspension and alignment services in all its shops during this time. With the increasing popularity of four-wheel-drive vehicles, the addition of smart suspension systems, and the use of four-corner struts by most car makers, Midas anticipated that the suspension market would ultimately grow larger and more financially rewarding than either the exhaust or brake markets.

In 1991, Midas celebrated its 35th year of operation by continuing to expand its franchise network. During the early 1990s Whitman Corporation began acquiring muffler shops in Europe for Midas to operate and increased its name recognition in the United States through a major advertising campaign. By continuing to expand both in the United States and in such countries as England, Switzerland, and Austria, sales for the company grew rapidly. In 1992, sales and services provided by Midas shops accounted for 20 percent of Whitman Corporation’s total sales.

Spurred by its franchising success, in 1993 Midas initiated an expansion campaign in Mexico. Under a franchise contract with Interamericana de Talleras SA de CV, Midas began opening retail and service outlets in major metropolitan areas. Management expected these outlets to grow at a rate of 10 shops per year for the first few years and then increase rapidly. The goal was to open over 140 shops to service the nearly 10 million registered automobiles and light trucks in the country.

The most recognized name in the muffler service and repair business, Midas is poised to take advantage of the growing used car market. The unpredictable state of the world’s economy has resulted in people holding onto their cars longer than at any time in the past, and Midas plans to provide the repairs and services necessary to keep these cars on the road. With its continually expanding franchise operation and its ready access to the financial resources of its parent company, Midas seems positioned to remain the industry leader for many years to come.

Further Reading:

Strazewski, Len, “Muffler Shops Search for Golden Touch,” Advertising Age, May 16, 1985, p. 15.

—Thomas Derdak