Oil It Up

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Oil It Up

By Alison Embrey - 05/03/2004
The quick-lube industry has a distinct slice all its own in the automotive industry, but c-store operators may want to grab a piece of the pie. The lube industry has been on a consecutive-year growth trend for half a decade, and looks to continue increasing in the coming years. As car owners continue searching for one-stop convenience destinations, quick lubes have begun popping up adjacent to some c-stores as valuable profit centers aiding on-the-go drivers.

"In general, the fast-lube industry is growing, as far as the facility count. It's been growing for the past three or four years at about 1 to 2 percent a year," said Garrett McKinnon, editor, National Oil & Lube News. "Looking at it another way, the car counts that are going through fast lubes have been declining a little bit. What we're seeing is that as more and more dealerships and places like Meineke and Midas start getting into the oil change business, you're starting to see some erosion of the fast lube market." Fast-lube operators are making up for that, McKinnon added, by offering additional services. Whereas they used restrict themselves to changing oil, now they're out selling wiper blades, doing transmission fluid exchanges, coolant exchanges, etc. "Ticket averages are going up even more so than car counts are coming down, so as a whole the business is getting more profitable," he said.

While c-store operators opening up adjacent to lube centers is not commonplace, some retailers are making forays into this service category. "We do see a lot of lube operators going into the one-stop concept with a gas station, convenience store, car wash, the whole works — kind of an automotive superstore," McKinnon said. "But the expense of building those is oftentimes out of the realm for many. Some can't afford to build a $3-million facility like that, whereas you can build a fast lube for half a million."

Maximizing Real Estate

Chevron Alto's LubeXpress in Sherwood, Ore., is a family-owned facility that includes gas pumps, a food mart, a car wash and a three-bay quick lube center on site. Owner John Alto, president of Alto Automotive Inc., purchased the station in 1973, when it was nothing more than a conventional Chevron station with two gas pumps and two bays. In 1988, the company tore the entire station down and rebuilt it into a high-volume, 12-pump gas station with a Chevron Food Mart, a separate repair facility with four bays and a towing lot, which was later converted to a car wash in 1994. In 1997, the current Alto site was reborn, the four-bay repair shop converting into a three-bay quick lube center.

Sherwood is a small town that has experienced tremendous growth in the past five years. Alto's station is located on a stretch of highway that has transformed from a quiet highway to a major commuter route, as the town's population multiplied from 3,000 to almost 15,000. With more traffic and more consumers on a daily basis, making the most of station's prime real estate was key.

The station's repair shop was converted into a quick lube, because "it offered an opportunity for more gross profit and to increase our revenue on the site," Alto said. The repair business had taken up a tremendous amount of room with vehicles being left on site. "It helped maximize the business at our location. The cost of real estate keeps going up, so the more we can do on the site obviously is a great benefit to us. It's pretty easy to get spread too thin in this industry."

Alto felt the quick-lube center would be more appealing to his time-pressed customers on the go. "Lubes are successful, because they're convenient," Alto said. "The customer has a shrinking amount of time to do basic duties — get fuel, get a couple bags of ice, get a quick lube, a complimentary wash, get your groceries and leave. That's the concept that caught our eye and that has worked well for us. Being able to do multiple things at the same location, rather than going down the street to do one thing, back over on the other side of town to do another, we can save them time."

The compatibility of combining a quick lube center and convenience store seems natural to Alto, who says he cannot emphasize enough how much the two work hand in hand for him.

"It's really quite different from selling a bag of Frito's to changing somebody's oil filter on a $45,000 Dodge Ram pickup," Alto said. "It's two different businesses, but the thing that makes them relate well is the real estate and the convenience."

For retailers thinking about adding a quick lube, the first thing to consider is whether or not a c-store site would easily accommodate a fast-lube center. Alto believes the biggest site criteria lie in the demographics of the area. In other words, is it in a location where there are newer vehicles? Is it in a location where income levels allow people to take care of their vehicles? Or is it in a location where people are changing their own oil? Taking these factors into consideration is key in order to avoid an oversaturation in the market.

Alto, whose lot sits on nearly two acres, emphasizes that the size of the site is another imperative factor. "You've got to carefully evaluate your site so you don't get it so jammed up that no one can move around," he said. "It has to be well planned. Go out and look at what others have done and avoid that danger."

The next step would be to contact an association to get as much knowledge as possible on what resources will be required to start up. The Automotive Oil Change Association (AOCA) is a valuable organization in the initiation process. It offers specific programs designed to help the person just getting into the business, or even those just thinking about getting into the business. AOCA analyzes whether the site is a good one, what it's going to take in resources and what it's going to take in training. It also helped Alto find the right software package: "We cannot emphasize enough how important it is to find the proper software package to help you service the vehicles," Alto said.

Startup costs can be heavy, including the building, software, insurance, employee training and equipment. "The best part about it is the oil suppliers are willing to help you with those up-front costs," Alto said. "You just sign a contract with them for payback programs and signage programs. They're interested in seeing you be successful, because you're helping their business as much as they're helping yours."

Ramping Up

Once the lube center is up and fully operational, attracting customers in those first weeks and months can be a daunting task. "It's not going to turn on like a convenience store in a prime location does as soon as you open the door," Alto said. "A ramp-up is a whole different ball game as far as the quick lube."

The danger is that most people want to offer deep discounts at the opening to draw customers, but that is not always the best tactic when starting a fast lube. Alto recommends launching with a soft opening to get all your systems in line before the traffic hits. "Until the team has gelled and has training and experience together, you don't want to be doing excessive promotions," he said. "The best promotion we've found is doing a great job with a customer, and that customer telling 10 other customers. You just kind of let the business grow itself through quality service."

Alto's LubeXpress prides itself on offering additional services that some of the standard branded lube centers do not typically do. While they won't repair anything, work on brakes or perform tune-ups, they will change any fluids, service transmissions and even flush radiators. And every oil change includes a complimentary car wash and vacuum. According to National Oil & Lube News's McKinnon, it's those lube centers that are willing to include those additional services that are likely to achieve success.

"We do a lot of things that other quick lubes do not do," said Alto, "like servicing transmissions and flushing radiators, things that normally customers would have to go back to the dealer for but find us a lot more convenient."

Alto stresses the importance of customer service in both the quick lube and convenience store aspects of his business. Being a family-operated business helps his cause, he said. "My phrase is 'things always go better when the chief's in the teepee.' My wife is very involved in the business, my son is very involved in the business — we like to think that our footprint in the business helps us maintain a higher level of customer service," Alto said.

All of Alto's lube-center employees — he currently has seven full-timers — are professionally trained through the AOCA, which offers complete basic and advanced training packages. "Because that's the key to the business: having friendly, well-trained individuals," Alto said.

The quick-lube center is a "significant" part of Alto's profits, especially in the summer season when people are putting the most mileage on their vehicles and need more oil changes. He encourages c-store operators to think about opening a quick lube on site, as it has brought nothing but success to his business. "'There's always room for a good man,' my dad always said," Alto noted. "If you have a convenience store and gasoline facility, and there's not other lubes right around you, and the demographics are good, then do it."

The result might bring more competition, but for Alto, that's a healthy aspect of improving the industry as a whole. "A lot of people worry about competition, they lie awake nights worrying about someone coming in and opening a convenience store next door," he said. "We can't say we never worry, but we try to focus on things that we can control and that we can do better than the rest."