So you want to start a quick lube? We great and in doing so you have been asked by the SBA assisted loan to make a business plan, ‘tally hoe’ and away you go! Right? Well wait a one second, every good business plan discusses market share, competition, market areas, etc.
So have you figured out who your competitors area? You maybe surprised at the real answer. For instance as Midas Muffler started to lose their market base since new cars were being often leased and therefore did not need mufflers as often, what did they do, they started changing oil and doing braked. Well what did the brake shops do, they started doing smog checks, changing oil and rotating tires. What did the tire shops do? They started changing oil too. Wal-Mart and Kmart saw their sales lagging a little and unable to keep up with growth rates and feared a bad quarter and knew they had a captured audience so what did they do, started offering auto services, oil changes at Wal-Mart and fuel card gasoline stations at Sam’s Club. Kmart made a deal with Penske Auto Centers then later closed stores that were not profitable, even when Penske Auto Centers were. Pep Boys also sold auto parts and then started services, meanwhile jiffy lube could not grow fast enough, AAMCO same thing. Car Washes wanted to become a destination place and started offer Java, oil changes and small gift shops too.
So really the original core business, that the HBR editors love to BS about is really a questionable event. Since even Michael Dell, Microsoft, GE, 3M, etc will tell you it is a never-ending evolution such that books like Built to Last, by the Stanford Professor simply reported with biased what he perceived to be his reality. So then as long as you are still with me on this subject realize we did not digress from the subject at all, we evolved this conversation about a reality that you should be thinking about in your business as well.
Many in the industry are reporting in Metro Area as many as 21 competitors which a pure competitors, quick lubes that is within what they believed to be their exclusive trading area of 20 miles. In actuality that number is quite irrelevant because your trading area is probably only 10-12 miles. Car Washes trade area is generally 5 miles sometimes 10, they add oil change facilities on their properties due to no interest loans and incentives on the buildings by oil companies and to increase the draw to a larger trade radius. Does it work? Well it worked for a while and it makes sense to the customer, although it is not true that car washes mix all that well, despite what you are told. Both industries use the synergy theory to promote equipment sales to their potential customer base to improve their sales quotas and give them extra people to call on and more sales to close.
Now then with these added competitors in the market place some have said they are still making money and profits through efficiencies of synergy in other things, such as adding air filters, wiper blades, car washes, detailing, tire rotations, brakes, belts, etc. More money per customer per visit but fewer cars per day. Declining vehicle counts. So, what the heck do you do when you price yourself out of the market? Speedway for truck oil changes is doing this now, but realize fewer truck stops are changing oil and none can get all the jobs done on time and few have the labor to run 24/7.
To top it off the car dealerships like Audi, BMW and others want you to use their oil and oil changes so they offer them free and then hit you up for their prescribed over redundant service mileage check ups costing you even more, otherwise warranty is voided. So they take away those brands of cars for you. Also United Auto, Auto One, and many large Ford and GM dealers are learning this, many from Carl Suell in Dallas, who wrote an excellent book on customer service you should read called: “customers for life” and while you are at it pick up the History of Enterprise rent-a-car; “Exceeding Customer Expectations” by the founder, I will tell you Jack was not only a good fighter pilot, he is a great entrepreneur with one hell of a young and aggressive team. You could learn a lot from these folks.
Now we see Wal-Mart cutting price to $12.99 barely breaking even, but for them it is a loss leader anyhow, they just want those shoppers in their store shopping for an hour or more, did you know that the average oil change customer spends $87.90 while shopping during the time it takes to get the oil changed? You think they do not know what they are doing, it works for them, but this may not be so good for your business plan? So we are now reading articles that perhaps you need to expand into more fleet business since those companies are eliminating garage personal and you could pick up their business. AH HA you say, yes I will build larger bays to take on School Buses, Boom Trucks from the Cable Company, Ambulances and other vehicles? Yes but there are mobile oil and lube companies and on-site re-fuelers who do this world already as well as the cars of employees of all the construction companies.
And I doubt they want to spend the time to drive all those vehicles over to you, and even wager to bet you do not want to spend the extra labor or increased liability to have your employees drive them over to your bays do you? AIG is hoping otherwise, but why bid low to get the account and pay it all in insurance to AIG, Farmers, Fireman’s fund, American States or State Farm Commercial? Good question, some might say now is the time to be focused, but staying focused means keeping your eye on the ball, weaving and jagging and running like hell for that end zone.
The more vehicles such as fleets you do the more filters and larger air cleaners you must stock and if you lose the account exactly what were you planning to do with all those extra fuel, air and oil filters? Use them as Christmas Tree ornaments? Hey better in your inventory than mine? How can a quick lube expect to compete against a mobile lube service even for an account as simple as a Limo Company? There is no way, and it is only a matter of time until they move back to mobile or move to mobile for the first time and never change back.