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A Love-Hate Relationship


11/14/2006
By Gary Goms

Most repair shops both love and loathe good old lube, oil and filter service. It’s a necessary service to offer, but very often they are loss leaders that don’t bring in any real profit.
 

A friend who operates an undercar and maintenance shop often makes the statement, “There’ll be no money made today; all we have scheduled are oil changes.”

That observation characterizes the love-hate relationship many shop owners have with oil change and lube services. A shop may love oil changes because they increase customer loyalty and provide an opportunity to sell needed repairs and maintenance. On the other hand, a shop may hate oil changes because, in today’s competitive market, they have become a “loss-leader” service that can quickly devour bottom-line profits.

THE UPSIDE OF QUICK-LUBES
Years ago, pumping full-service gasoline, fixing flat tiresand doing “grease jobs” commonly fell into the domain of the mom-and-pop service station. Even then, changing oil and lubricating the multitude of fittings on early automobiles had become a questionable source of income because early chassis grease had a tendency to harden. That made it difficult and time consuming to service vehicles with dozens of hard-to-lubricate grease fittings. In the same breath, the messy, old-style canister oil filters required cleaning and careful sealing of the new gasket to prevent damage to the engine. In addition, the oil-bath air filters of the day often needed a thorough cleaning and oiling and the sediment filter bowl on the carburetor had to be emptied before the job was completed — all for about a buck-fifty, circa 1957!

Today, the short-term maintenance schedules on most vehicles require only that the oil and oil filter are replaced every 5,000 to 7,500 miles and that the fluid levels be inspected and topped off if needed. Grease fittings are few to non-existent. Air and fuel filters are typically scheduled for replacement at 30,000-mile intervals. In most cases, this service can be performed by semi-skilled people who have nothing but a very basic mechanical knowledge of the automobile.

With the rise of self-service gasoline outlets in the 1980s, franchise and chain operations immediately began filling the maintenance void by offering “ten-minute, while you wait” lube, oil and filter services. To help sweeten the bottom line, most quick-lubes aggressively promote low-skill services such as wiper blade replacements and fluid “flushes.” Here again, modern vehicle technology, voluminous car counts, and low-skill labor requirements have revolutionized the oil change and lubrication market and have made the modern, high-volume quick lube an economically viable business.

THE UNFORTUNATE DOWNSIDE
Because quick-lubes normally use mechanically inexperienced help and focus only on short-term maintenance needs, the vehicle owners who frequent the quick-service lube shops tend to forget the long-term maintenance needs of their vehicles. As a result, most repair shops began seeing vehicles for catastrophic repairs like broken timing belts, metal-to-metal brakes and shredded serpentine belts, not to mention dead batteries, clogged fuel filters and worn-out spark plugs.

As odd as it may seem, performing catastrophic repairs often tends to erode an independent shop’s customer base. Since vehicle owners have become accustomed to choosing service providers on a short-term, as needed basis rather than on a long-term, preventive basis, many often experience mechanical breakdowns away from home.
In addition, as routine services have become more “commoditized,” many vehicle owners have also become conscientious price-shoppers who have lost their sense of loyalty to their local repair shop. Consequently, many independent shops have seen their bottom-line profits erode during the past decade along with the long-term loyalty of their customer bases.

MODERN LUBE MARKETING
Offering a competitive quick-lube service is as much of an art as it is a science. All too often, independent shops have discovered, to their dismay, that the cost of changing oil in an engine has drastically accelerated during the past decade. Twenty years ago, many waste oil recovery firms actually paid a token amount for a drum of used oil. Today, the process of recovering and transporting oil has become very costly, primarily due to the standards and liabilities imposed by EPA regulations.

Most shops in northern areas now save waste oil for heating during the winter. At the least, the oil must be contained in approved tanks surrounded by containing walls. At worst, some localities require expensive double-wall tanks equipped with leak detectors. In addition, EPA-approved waste oil shop heaters have an initial cost and require frequent maintenance to remove the residue left by sludge and contaminants contained in used oil.

Staffing also becomes an issue because many shops are reluctant to employ master technicians to perform oil changes. On the other hand, mechanically inexperienced oil changers often overlook vital repair needs like worn universal joints, leaking steering gears, loose steering linkage, unusual engine noises and poor brake performance. In other cases, a shop may distribute oil changes evenly among the shop’s master techs, with the shop essentially operating at a loss to pay the tech his hourly rate to perform this badly needed customer service.

WINNING STRATEGIES
The quick-service lube bay is a marketing reality for any independent shop that specializes in undercar and maintenance services. The key issue, of course, is how to make a quick-lube bay efficient and profitable by screening the price-shopper customer from the potential service purchaser.

Some smaller shops of one to five technicians are doing so by limiting how many lube services are scheduled each day. In other words, quick-lubes may only make up a specific percentage of the service mix. In this scenario, regular customers take priority over walk-ins. Appointments are made for new customers as time allows.

Other shops separate the profitability wheat from the loss-leader chaff by selling lubrication services as part of an overall scheduled maintenance package. This strategy not only increases profitability, but also strengthens long-term customer relationships. In this scenario, most shops align oil changes with auto manufacturer’s recommended service intervals. Most shop management systems, of course, allow service advisors to estimate service intervals based upon customer use and use direct-mail service to remind customers of needed service.

The downside of the scheduled maintenance strategy is that many auto manufacturers are attempting to reduce maintenance costs by installing oil change monitors that measure oil quality or computer various operating conditions that indicate when an oil change is needed. Consequently, more vehicles are arriving at more unpredictable intervals for oil changes and lubrication.

Lastly, many shops are breaking lubrication services into multiple categories of cost and need. One shop may, for example, offer a price-competitive “basic” oil change that will fit the needs of many new-car customers. The basic lube may consist of the required oil and filter change followed by a visual inspection and top-off of reservoir fluids. At the other end of the price spectrum, a shop may offer an oil change accompanied by, for example, a full fluid level, battery, belt and hose, lighting and mechanical inspection.

PHYSICAL PLANT
The key to successfully exploiting the quick-lube market is to install one or more service bays dedicated to lubrication service and inspections. Obviously, most franchised quick-lubes use well-equipped open pits to service vehicles. In most cases, one person drains the oil and inspects the gearboxes on the bottom side while another fills the oil and inspects fluids on the topside.

The next best step for a shop is to use a drive-on lift equipped with frame jacks that allow the vehicle weight to be taken off the wheels in order to inspect brakes, ball joints and steering linkage. The drive-on lift allows the most flexible utilization of floor space while still allowing the mechanic to perform fast, in-and-out oil change and inspection services.
Shops using conventional frame lifts are more limited in the quick-lube market simply because of the set-up time needed to lift a vehicle for oil change and inspection. In most cases, frame lifts substantially add to the cost of doing oil change and lube services.

THE PROFIT OUTLOOK
The reliability and reduced maintenance needs of the modern automobile are changing the face of the aftermarket. Many general repair shops are finding that the mix of undercar, light repair and scheduled maintenance services is producing a higher return on investment (ROI) than diagnostics or major repairs. Consequently, more independent auto repair shops are looking at using quick-lube services to boost profits more than ever before.















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