Jim:     Mr. Gross, welcome back to Mad Money....

Robert:     Booyah, Jim, thanks for having us.

Jim:     Booyah chief. Okay, we know and one of the reasons that we are insisting that you buy Monro Muffler, is frankly, that we are just at the beginning of the dealerships closing. You did 11% comp store without many dealerships closing around this country, didn’t you?

Robert:     Yes, we did. We had a great quarter.

Jim:     Now, isn’t it true… of the dealerships that have been announced to be closed, how many have actually closed so far, do you think?

Robert:     Very few. Hundreds have closed over the last 6 months. The lions share of the Chrysler’s closing start June 9th. And GM has not announced their total closing list. But that will obviously be very big numbers in the future.

Jim:     What will be the overlap between a closing and a store that you may have within 5 or 10 minutes from one of those dealerships closing?

Robert:     Well, the Chrysler stores that have been specifically delineated. 65 of those locations that are closing are within 5 miles of Monro or Mr. Tire, and 88 of them are within 10 miles of Monro or Mr. Tire.

Jim:     Mr. Gross, why are you given the fact that dealerships nation wide are closing, why have you taken your time to expand. Because I know you just moved into St. Louis. Aren’t there lots of areas that Monro Muffler are not in right now?

Robert:     There are lots of areas. We are only in, now with Missouri, we will be in 19 states with only what will be 740 stores. The opportunity for us, and that current geography, is that we can get 3 times bigger. Stay within that geography, and has we have always stated, our number one goal is store density and market share. So we want to fill in the markets because it makes our business model and operating margins better. And it makes it more convenient to the customer where the dealers are going the other way.

Jim:     It is nice to do these fill ins. Why can’t you take advantage, with your good balance sheet getting better, paying down debt. And make the big move, and take over somebody who is struggling and is in debt and really can’t make it thru this period?

Robert:     Well, a lot of the deals that we have done, this is the 10th deal in the last seven years, have been fill ins. We did 70 stores in ’06 with the pro-care chain. And with our operating model good and getting better, and already being a low cost operator, in this kind of environment it is not the time to risk the company with a transformational deal. When we can, for as long as the eye can see especially with what is going on with the dealers, look at a 20% bottom line growth on a consistent basis without taking a significant risk.

Jim:     I know a lot of people think of muffler, I think now of tire. Tire costs are going down. Will you be able to capture some of the gross margin of tires coming down and price increases that you put on last year?

Robert:     Sure, I mean we raised our prices 5% in September and up 3% recently. And both tire costs and oil costs are both going down for us. Albeit, remember we had a 60% cost to goods increase in 60% of our products over the last 3 years. So we are just starting to get back the gross margin that we gave up. And that is why we commented that we would expect our gross margin to improve 100 basis points this year alone, just on cost of goods.

Jim:     Have you ever thought about buying an auto parts kind of company. For instance, just to go back to the transformational… but I am from Philadelphia, Pep Boys used to be a great company… now they are just kind of hanging on… would that kind of publicly traded company be good for a big regional buyer. Or again is that just too transformational?

Robert:     It is transformational and it is very risky. Pep Boys has two pieces of the business, the service business which we compete against them with. But they also have the parts business, which they have some very stiff competition from the O’Reilly’s, the Advance, the Auto Zones. And it is going to be very difficult for them to do well on the parts side of the business. Certainly the service side of the business has the opportunity. The risk and the question is, do what you gain from that kind of deal on the service side make up for all of the risk that you are incurring from the parts business. Where there are bigger, stronger competitor on the parts side of the business. And the parts side is really a commodity business, where if you do not have the buying power and the infrastructure like many always do, it is difficult to compete. I would much rather play in a service business where commodity is just a piece of the costs of goods, but people are really looking for service and value in an industry where trust is long and hard to come buy. And get a fair price for what we do.

Jim:     Alright, Robert Gross, Monro Muffler’s Chairman and CEO. Thank you very much.

Robert:     Thank you, Jim.