Rethinking the Oil Change Business Company

Quick Lubrication Annual Survey, Is It Still Viable?

I wish to comment on Fast Lube Business and the annual survey conducted by Auto Laundry News, one of the few industry magazines for the car wash industry. In this 2001 survey, we see an increase in the number of available locations. However, the industry leader is by far Jiffy Lube. We see variations on the theme, but we can safely say that Jiffy Lube has been better suited to the American public and their desires when it comes to oil changes.

This survey showed that the average customer would drive 5.7 miles to change their oil. If 50% of customers drive 5.7 miles and 80% of customers typically come from within a three mile radius to wash their car, I see additional synergy. These car washes with oil lube centers are reaching a greater reach than the industry average. This is great news for car washes adding oil lube bays, but it also takes up space, and if not marketed correctly, it won’t work. The survey quickly showed that oil change facilities work best in middle-class areas, not high-end areas. They do poorly in low-income areas. This all makes sense. Independent car washes were the most likely to have oil lubrication facilities on their properties. It is also interesting that the minimum wage was not prevailing, normally companies pay $8.00-10.00 per hour. It makes realistic sense and I think good help in this country starts at $10.00 an hour in most metropolitan areas and $8.00 an hour in rural areas.

Only 23% of quick lubes had a website. Only half had internet access in the towns. The average employees were 5 full-time and 3 part-time. Luckily for the image of this industry, 74% had specific uniforms. The average store had 3 bays, not enough to do the volume if you were doing proper flash marketing and community based marketing. Median income was $32.00 per car. That’s a lot of upsell since the average advertised price I’ve noticed is around $19.99. Less than 30% were open on Sundays? Bad mistake as there is no time to change the oil and stand in line for most Americans. The gross monthly average was $2,400.00 per month per bay?

This is bullshit, this is not even a viable business, these people are wasting their time. Think about it, do you have oil and filter cost as well and labor? Forget about that news. I question the viability of the entire oil change industry. The largest Jiffy Lube franchisee in the country with 180 units was recently delisted from NASDAQ, as was another prominent car care and lubrication company recently. I like the Kwik-Lube Company and feel they are doing well, but I also question the return on investment of such an effort seeing these results and the cost to build the building and the time to build it. One good thing that oil lube bays have going for them is upselling, but as the consumer dollar gets tighter and credit card debt rises and rates drop, where will this extra boost revenue and extra sales cash come from?

The industry is still expanding and new entrants to the market are hurting existing units and I question the saturation point, not out of necessity, but out of desire. Nobody wants to spend money on oil changes, it is necessary. People buy what they want, satellite TV and beer. It’s not what they need, so I see a frequency issue brewing and people are expecting 5-6-7 thousand miles between changes. So I think if an oil lube bay isn’t already tied to another reason to frequent the facility, you’re in trouble soon. The survey also showed that 93% OF LUBRICATION OIL BAYS USE ADVERTISING TO GET CUSTOMERS? BECAUSE? We do not advertise, word of mouth and happy customers advertise for us. There you go again plus cost.

Also 60% of those surveyed said that the competition was discounting. HMM? Do you have labor costs that are high, frequency is low, new car technology on the horizon, the cost of oil going big and sparking a price war? I see a problem as non-expert traders leave the facilities for sale and go out of the market. By removing the facility and going mobile with the existing customer base of, say, a mobile truck repair business that can share the band and available fleet services, you could beat these other companies out, as they run red lines on mail coupon clutter and phone book ads and not websites. Many businesses are not watching the changing demographics at their locations and leasing or property costs and are unable to sell or borrow more due to dismal profit margins. And what can an oil change bay turn into? Cover the hole for a tire shop? What happens when the Hydrogen battery arrives and nobody changes the oil. Can it be converted to filter type operation? Not really, as often the tires and wheels are offset and will land the modular car in the lube bay hole. We have the solution and we can beat them on almost every aspect. Some consultants have said; “Lots of chumps copying each other.”

Listen to this part of the survey, where advertising dollars were spent, this is where respondents said they advertised; TV 15%, direct mail 51%, radio 38%, newspaper 35%, billboards 18%, yellow pages 53%, other only 13%. It’s scary, all of that costs money and everyone is copying each other. This is what happens when people can’t think anymore and can’t adapt and do business at the speed of thought.

[http://www.speedofthought.com]

81% of respondents said they would accept competitor coupons. Whatever, why print them then? Let everyone else spend the money and take theirs? 80% said they have tried to use discounts to attract customers from other lube places to theirs. Boy, does this sound like the carpet cleaning industry to me.

Cost breakdown by job position. 10% rent or ownership, 3% facilities maintenance, 26% labor, 30% materials, 4% utilities and many reported expecting it to double and some have already experienced a tripling in the West. Insurance 4% and that is expected to continue rising and some said 8%, Customer claims for damages 1%, this is inexcusable, Advertising 10%. He wants to add those for me. Why do they do it?

The average costs of the new installations were; Land $206,000, Improvements $505,000, New Equipment $36,000. WOW all that for little or no return? Average number of competitors within a 10 mile radius? 36% said 3, 19% said two, 19% said 5, 7% said 5 or more. How can anyone invest this amount of money per location when we can build a couple of units for a total of $65,000 and almost equal the number of potential vehicles to service? Plus, with AAA building oil change facilities and Wal-Mart participating, the competition will be bloody, and that’s a lot of money to invest in a business with an uncertain future. Not a good bet, if you were a gambler.

We are liking this industry a lot because we know things that the industry doesn’t know and we can criticize them because they have missed the boat. We have seen some companies that are looking for ways to change the oil on the yacht water. What’s even better is that they all lost the boat at the same time and are fighting on the shore for some little boats to get to the ship that is leaving the port. Who will survive this oil change war. The one that best serves the customer, the way the customer wishes to be served.