Each year the bible of the quick service industry National Oil & Lube News, now 25 years young, conducts a comprehensive survey of quick service centers across the country. The survey is conducted using both mailed and online data collection, and this year some 4,200 centers were polled.
Questions relating to operations, pricing, demographics, employees, sales, equipment, lubricants, services, insurance, advertising, and more are featured. The survey results indicate a vast difference in business modeling within the industry, especially between smaller independent owners and large corporate entities with 30 or more locations.
NOLN recognized this phenomenon and began dividing up the survey based on the number of locations some years ago. A perfect example of this is demonstrated by only 19% of the independent owners connected to a franchise, while 60% of the locations are franchised on the corporate side.
One of the most important numbers gleaned is the daily car count — independents 31.7, breakeven 23; corporate 33.2, breakeven 24. Compare these counts to the industry high in 1995 of 47.5 vehicles a day, even though the vehicle population has grown substantially in this period. In 1988, the first year of this study, the daily car count was 43.5, 26% higher than today. During the same period the price of a basic oil change rose from $19.98 to today’s $35 range, and the average ticket leaped from $23.52 to $54.08 for independents and $65.31 for corporate, 129% and 177% increases respectively.
Predictably the average time in business has continued to grow with corporate over 21 years currently, and 13.8 years for independents. The power of size is demonstrated by the cost of goods for an oil change — corporate only $10.95, independents $13.12. Of course oil filters are featured in the same issue for as little as $1.19 (and a common GM air filter $1.79 — yes, no kidding) — featuring the wording “meets or exceeds new car warranty requirement.” Size is further emphasized when the 2006 cost of goods figure was higher than it is today!
Even though the ticket count has been dropping for years, corporate entities are planning on growing the number of locations, but the angle is likely related to a dramatic drop in the percentage of business related to the oil change operation. In 2006, 74% of the volume was derived from an oil change, but by this survey that figure had dropped to just 56% only four years later (for corporate).
The biggest add-on services are air filters ($17.76), battery checks (no charge), wipers ($20.55), and smog checks ($34.14). Over 75% of the quick service locations offered air filters, additives, cabin filters, battery checks, differential service, fuel filter replacement, fuel injection cleaning, light replacement, coolant services, transmission services, engine flushes, power steering flushes, belt replacement, tires, and wipers.
There is a massive gap between independents and corporate in advertising expenditures. Reminder cards are sent by 51% of the independents, while corporate increases that amount to 83%. 100% of corporate are discounted reminder cards with a response rate of a hefty 34%. The independent operators are getting a 23% return on their reminders. A majority advertises on the Internet also.
By a landslide the industry agrees that ???customer service??? is the key to success, with “quality employees” coming in a far off second place. Lube techs earn an average of $9.47 per hour and managers are in the $40k range. The average store employs 6.2 with annual sales of $575k for independents and $624k for corporate. Net Profit continues to rise at 13.3% of sales for independents and 14% for corporate.
Payroll is the largest expense after the cost of goods at 26.5% and 28.7% of sales respectively.
Regarding employee benefits, uniforms, paid vacations and holidays top the list. Few offer health insurance, retirement, or paid sick leave.
Sixty-eight percent of oil sales are conventional and of that almost half is 5W-30. Almost one-fourth of the independent operators also sell re-refined oils. Per gallon cost for oil is $7.66 for independents and $6.30 for corporate, while the charge per quart is $3.56 to $3.86. Mileage between oil changes continues to rise at over 5000 miles for corporate.
Overall, fewer owners than ever (5%) plan to sell their businesses and net profits are up. The keys have been a multitude of add-on services (over 50% are now doing headlamp reconditioning for example), and the surprising ability to keep lowering the cost of goods, something no dealer I have encountered has been able to do in recent years. The bottom line is that the quick service industry is changing to meet the market and remaining quite stable.