Annual rapid lube survey, is it still viable?
I want 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 by far is Jiffy Lube. We see variations on the theme, but we can safely say that Jiffy Lube has best suited the American public and their wants when it comes to oil changes.
This survey showed that the average customer would drive 5.7 miles for an oil change. If 50% of the customers drive 5.7 miles and 80% of the customers usually come from a three mile radius to get their car washed, I see additional synergy. These car washes with oil lube centers are achieving 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. All of this 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 did not prevail, normally companies pay $8.00-10.00 per hour. It makes realistic sense and I think good help starts in this country 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 localities. 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 proper marketing blitz and community based marketing were going on. 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 average monthly gross 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, does it cost oil and filter too and labor? Forget that news. I question the viability of the entire oil change industry. The largest Jiffy Lube franchisee in the country with 180 units was delisted from NASDAQ, as was another prominent auto 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 mounts and drop rates rise, where will they be? this extra boost income and extra sales cash? come form?
The industry is still expanding and new market entrants 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 problem 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’ll soon be in trouble. The survey also showed that 93% OF OIL LUBRICATION BAYS USE ADVERTISING TO GET CUSTOMERS? WHY? We do not advertise, word of mouth and happy customers advertise for us. There you go again more 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 to the big ones and sparking a price war? I see a problem as non-expert operators put facilities up for sale and exit the market. By removing installation and going mobile with the existing customer base of, say, a mobile truck repair business that can share the available band and fleet services, you could beat these other companies as they run red lines on saturations of mail-in coupons and phone book ads and not websites Many businesses are not looking at changing demographics in their locations and leasing or ownership costs and are unable to sell or borrow more due to lousy profit margins. And what can an oil change bay become? Cover the hole for a tire shop? What happens when the Hydrogen battery arrives and no one 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 in almost every aspect. Some consultants have said; “Bunch of fools 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.
81% of respondents said they would honor 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 locations to theirs. Boy, this sounds like the carpet cleaning industry to me.
Breakdown of costs by job. 10% rental 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 it is expected to continue to rise and some said 8%, Customer claims for damages 1%, this is inexcusable, Advertising 10%. You want 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 spend this kind of money per location when we can build a couple of units totaling $65,000 and nearly match the number of potential vehicles to service? Plus, with AAA building oil change facilities and Wal-Mart getting involved, 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 really liking this industry because we know things that the industry does not know and we can criticize them because they have missed the boat. We have seen some companies that are looking at ways to change the oil in the water for yachts. What’s even better is that they all missed the boat at the same time and are fighting on the shore for a few little boats to get to the ship that is leaving port. Who will survive this oil change war. The one that best serves the customer, the way the customer wants to be served.