Car Toys, Inc. History

Address:

20 West Galer Street
Seattle, Washington 98119
U.S.A.

Telephone: (206) 443-0980
Fax: (206) 443-2525

Private Company
Incorporated: 1987
Employees: 1,200
Sales: $150 million (2003 est.)
NAIC: 443112 Radio, Television, and Other Electronics Stores

Company Perspectives:

Your satisfaction is our number one priority. That's why from selection to service to prices to installation; you're always assured to get the best. Every purchase. Every time. That's the Car Toys Advantage ... and our promise to you.

Key Dates:

1987:: The first Car Toys store opens in Bellevue, Washington.
1991:: Car Toys invests heavily in an employee-training program.
1999:: TA Associates takes a minority equity position in Car Toys.
2000:: One year after entering the Denver market, Car Toys expands into Dallas.
2004:: Car Toys ranks as the fifth largest mobile electronics retailer in the country.

Company History:

Car Toys, Inc. ranks as the fifth largest mobile electronics retailer in the United States. The company operates more than 50 stores in Washington, Oregon, Colorado, and Texas, selling cellular phones and service, car audio systems, car alarm systems, radar detectors, and a variety of car accessories. A substantial portion of the company's business is derived from the installation of the products sold at its stores. Car Toys places an emphasis on training its salespeople in customer service and product knowledge, presenting itself as an expert in the field of mobile electronics. The company is led by its founder, chairman, chief executive officer, and president, Daniel Brettler.

Origins

Daniel Brettler's drive to found Car Toys was motivated by a belief common among entrepreneurs. He believed he could do a better job than his employer could. Brettler began developing his conviction, and the experience that would help him manage Car Toys, during his first job. In 1981, after earning a college degree, Brettler started working for an electronics retailer, Pacific Stereo, based in Tacoma, Washington. Brettler was hired as a salesman, earning $4.25 an hour selling car stereos, home stereos, and video equipment. His disillusionment with working within the hierarchy of a corporate retailer started building almost immediately. "I was a young kid who had nothing to lose and everything to prove," he reflected in a September 15, 2002 interview with the Seattle Times. "I quickly became one of the top salesman on the floor, but I was on an hourly wage and not on commission like the rest of the guys. They had a limit on the number of salespeople they could put on commission, so I left."

Brettler, a proven, albeit young, salesperson, had little trouble finding another job. He spent a year at Pacific Stereo before leaving to join Northwest Auto Sound in 1982. Brettler distinguished himself at Northwest Auto, rising to the post of vice-president of sales and marketing within a few years, but his dissatisfaction persisted. At Pacific Stereo, he experienced an organization that was unwilling to reward his efforts. At Northwest Auto, his success was acknowledged by a series of promotions, but he grew frustrated at the way the business was run. "I just felt I could do it better," he remarked in a July 16, 1993 interview with Puget Sound Business Journal. "I wanted to put my own identity on a project and see if I could deliver a better product," he added. His decision to leave Northwest Auto was well timed. The retailer expanded too quickly, jumping into other product categories such as home audio and cellular installation. The company went out of business in 1987, the same year the 28-year-old Brettler opened his own store.

Brettler had left Northwest Auto the previous year and had begun planning for the start of his entrepreneurial career. He, like his employers, planned to sell car audio equipment, radar detectors, car alarms, and other electronic accessories designed for cars. He planned to name his store "Mobile Electronics World," but his wife suggested an alternative, "Car Toys." "It (the name of the store) was very instrumental to his success," one of Brettler's business associates explained in a July 16, 1993 interview with Puget Sound Business Journal. "Everybody wants that trick name that describes exactly what the business does." Brettler opened his first store east of Seattle, in Bellevue, Washington, in 1987. The store, which focused on installing the products it sold, performed remarkably well during its first year, collecting $1.5 million in sales.

Brettler's confidence in his abilities to succeed in the car electronics field was demonstrated in the expansion of the Car Toys concept. Within four years of its inception, the company opened two more stores, one in Seattle and another in Lynnwood, a suburb of Seattle. Together, these stores generated $9 million in sales in 1991, the year Brettler redoubled his efforts to make Car Toys a leader in customer service. Nearly every company espoused a great emphasis on customer service, but not every company succeeded in turning words into reality. Brettler succeeded, shaping Car Toys into a retailer renowned for a high level of customer service. Brettler's increased commitment to customer service was well timed, occurring before the expected wave of mass merchandisers flooded the Pacific Northwest and, as industry pundits projected, forever changed the way regional chains operated. Aware that some other retailer could always offer merchandise at a lower price, Brettler focused on employee training, "the biggest thing we do," he said in an August 3, 1992 interview with HFD-The Weekly Home Furnishings Newspaper. "We decided about a year ago to make a huge, huge investment in training our people, so as our growth continued there would still be a high quality of expertise," he explained. Attention to customer service, Brettler believed, would help the company compete against the approaching major retailers. "We've been lucky," he said in his August 3, 1992 interview, "because we haven't had a real strong mass merchandiser like Circuit City or Good Guys come into town yet, but we will. It's only a matter of time," he added.

Expansion of the Concept in the 1990s

Brettler succeeded in establishing an identity for Car Toys, creating a retail brand that could be expanded. Brettler's winning formula was a combination of aggressive marketing, attractive pricing, and attention to customer service. Salespeople were given four to five weeks of training, including two days at Cellular One, the leading provider of cellular communication services in the Pacific Northwest. (Car Toys was a Cellular One authorized agent, signing customers up for service when they purchased a cellular phone.) Installation staff, whose work was responsible for a fifth of the company's sales, were tested and certified on a three-level scale based on a national certification program. The company's well-trained staff sold and installed just four categories of merchandise--cellular phones, car audio systems, car alarms, and radar detectors--giving Car Toys a limited yet distinct product line. "He's carved out a niche as a specialist," one of Brettler's vendors noted in a July 16, 1993 interview with Puget Sound Business Journal. "But he also advertises the best deals. He's been the best at combining the two--great value to the customer and a lot of training and testing of salespeople."

Brettler steadily expanded his concept during the 1990s, building Car Toys into a regional chain. The company's 5,500-square-foot format, featuring neon décor and large windows overlooking the installation area, proved to be a successful blueprint for other stores. Between 1991 and 1993, Brettler doubled the size of his company, giving him six stores, including two in Portland, Oregon, the first units established outside Washington. Brettler opened new stores at a pace of nearly three stores a year during the mid-1990s, making Car Toys a 20-store, $65 million regional chain by 1998. At this point, after a decade of guiding the company, Brettler was contemplating a major move on the financial side of the company's operation. "I felt it was a good time to diversify my own assets and find another way to finance Car Toys' growth," he explained in an April 2, 1999 interview with Puget Sound Business Journal.

Taking on an Investment Partner: 1999

The decision Brettler made in the late 1990s fueled Car Toys' expansion, making the period one of fast-paced growth for the company. Brettler wanted to obtain capital to accelerate Car Toys' expansion, while, at the same time, take some of his own cash out of the company. He also wanted to give nine principal managers an equity position in the company. Initially, Brettler thought about taking Car Toys public to achieve his three objectives, but he was advised to eclipse the $100-million-sales mark and to prove to Wall Street that the concept worked outside the Pacific Northwest before completing an initial public offering (IPO) of stock. Brettler heeded the advice and took another approach, hiring a Seattle-based investment banking firm, Windswept LLC, to locate an investment partner. Ideally, Brettler wanted an investor to acquire a stake in the company, but not interfere in the company's operation. Windswept found a perfect match to Brettler's criteria, a Boston, Massachusetts-based investment firm, TA Associates.

Car Toys' recapitalization program was announced in early 1999. The deal involved selling 45 percent of the company, with most of the equity stake taken on by TA Associates. New York-based First Dominion Capital, which offered a revolving credit line, and the group of Car Toys managers secured smaller equity positions. The infusion of capital--an undisclosed amount--gave Brettler the financial resources to expand the chain aggressively, something that already was underway when the recapitalization package was made public. Car Toys made its first move outside the Pacific Northwest in 1999, opening a store in Denver, Colorado, in March. Brettler's ambitions had grown, and a new approach to the company's expansion emerged. The company had determined that the Denver area was capable of supporting nine Car Toys stores, enabling it to expand in a burst, with a cluster of stores targeted for the area. By the time the first Denver store opened, seven additional stores were in the process of receiving building permits or already under construction.

Brettler did not wait long before expanding Car Toys into its fourth major market, leading industry pundits to wonder whether the company's chairman, chief executive officer, and president was trying to prove to the financial community that Car Toys was worthy of an IPO. In September 2000, the 30-store chain entered the Dallas market, an area chosen because of its substantial population and the absence of a major competitor. The company's expansion came in a burst, following the pattern established by its foray into the Denver area. Three stores were opened in the Dallas suburbs of Hurst, Irving, and McKinney at the end of September, followed by the establishment of stores in Lewisville and Duncanville by the end of the year. "Our advertising plan is built around radio and television ads," Brettler explained in a September 15, 2000 interview with Puget Sound Business Journal. "So we like markets where we can put a cluster or set of stores, with 10 to 20 in a single ad umbrella. We want to get our brand going extremely strong, and to do that we've got to spend some ad dollars."

Car Toys stretched the parameters defining a regional chain during the early years of the century's first decade. With a model of expansion established, the company likely could export its concept to additional major markets, eventually becoming a national chain. With more than 50 stores dotting the landscape between Washington and Texas midway through the decade, the company already had outgrown the definition of a regional chain. In the years ahead, the company's conversion to public ownership seemed likely, as Brettler set his sights on making Car Toys a retail brand with national appeal.

Principal Competitors: Circuit City Stores, Inc.; Magnolia Hi-Fi Inc.; Good Guys, Inc.

Car Toys, Inc. History

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Key Dates:

Company History:

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