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ne million miles. Its like 9x1 55708_Citgo_NOLN_1inch_banners driving

10,000 miles a yearfor 100 years straight. Its like driving around the earths equator40 times. Its like taking a round trip to the moontwice. Its so far, in fact, that it takes light a little more than 5.3 seconds to cross one million miles.

In other words, one million miles is, in the human scale of things, a loooooong way. Yet more and more vehicles these days are turning up with that magic number on their odometers. And Im not talking about over-the-road trucks, either, since those big-rigs are built to endure such long distances. Im talking about the very same passenger vehicles most of us drive every single day.

a mark bested only by the $9.23 billion sold in 2008, a time when the average lube shop was servicing nearly four more cars per day than this year. In 2011, we estimate the industry will perform nearly 161 million oil changes, an average of nearly six oil changes every second of every day! We know these statistics because of our annual Fast Lube Operators Survey, a comprehensive study of the fast oil change industry. Every year for the past 24 years, weve asked fast lube owners, operators, managers and corporate chiefs to anonymously share information about their operations. Once again, the response has been

(henceforth known as LT30 operations) and those operating more than 30 stores (henceforth known as MT30 operations). The data from the LT30 category provide a real-world glimpse of the per-store averages for a typical independent fast lube, while data from the MT30 category provide a unique perspective into how larger corporations are faring in their own attempts to speed ahead of the competition. Taken together, the data yield a clear picture about the state of the industry. We have to note, too, the contribution of CITGO in presenting this survey. In some years past we have only presented a portion of the data collected, distributing the

ICE WORTH SERV LLION MILES a MI

by Garrett McKinnon NO LN Staff Writer garrett.m ckinnon@noln.net

So how does an individual amass one million miles on a single vehicle, especially when a typical vehicles lifespan is around 145,000 miles? Obviously you have to drive. A lot. But beyond that, most of the people who have accumulated seven figures on their vehicles odometer insist that regular maintenance is the key to making a car or light truck last and last. Thats where fast lubes come in, providing a valuable service to millions of vehicle owners some of whom may very well have their own million-mile car or truck someday. Despite what could at best be described as a challenging past half-decade, the lube industry continues to enjoy strong, albeit flat, overall sales. This year, the approximately 16,700 shops that make up the quick lube category (which we define as any business that earns more than half its revenue from automotive maintenance) will sell an estimated $9.04 billion in automotive services,
22 www.noln.net

overwhelming, as nearly 300 companies representing an astounding 4,451 facilities responded to our survey, either via mail or online. We know it isnt the easiest questionnaire in the world to complete, but the data it contains is vital for the industry, and we offer our most sincere thanks to those who gave of their time and effort in order to make this survey as complete as possible. Before we analyze the results and attempt to interpret any trends apparent in the data, we have to discuss how the survey is sorted. Each year, we receive responses from more than a dozen companies that operate, on average, hundreds of individual facilities. If you combine data from these questionnaires into the survey at large and then weigh the data (as is our surveys typical methodology on select questions), it can create rather sharp statistical swings. Thats why we divide the results of our survey into two categories. The first represents those lube companies operating less than 30 stores

rest solely to our paid subscribers and others willing to pay a premium for the survey. Thanks to CITGOs sponsorship of this years survey, however, were able to present all the results from this industry study. Read on to find out how the industry is faring this year, along with taking a glimpse at some notable vehicles whose odometers have turned past that magic million-mile mark.

OPERATIONS

The Car: 1990 Honda Accord The Driver: Joe LoCicero; Norway, ME

The most recent vehicle to join the millionmile club is this Honda Accord, which was

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expected to hit that magical mark as 9x1 55708_Citgo_NOLN_1inch_banners this is-

sue went to press. LoCicero purchased the Accord in 1996 when it already had 74,000 miles on it and averages 4,700 miles per month in his job as an insurance adjuster. He credits religiously following the cars recommended fluid maintenance schedule for the cars longevity. The only parts hes ever replaced on the car are the fuel pump, both cooling fans and the radiator (twice). As we look into how the typical lube shop is faring in 2011, it becomes clear that the fast lube industry could use a few more drivers like Joe LoCicero. LT30 lube operators reported performing an average of 30.5 oil change services per day, down nearly a full car from last years figure of 31.7 cars per day and continuing a decline that first began in 1995, when car counts peaked at 47.9 cars per day. (MT30 operators reported servicing 34.6 cars per day, a slight increase from last years figure of 33.2.) The saving grace for lube shops has been ticket averages, which continued to climb into uncharted territory. LT30 operators, in fact, reported an average ticket of $56.29 per vehicle, up more than $2 per car from last year. As recently as 2007, average ticket was $47.18, which means in a four-year span the average ticket has increased nearly 20 percent. That increased ticket average comes partly as a result of lube shops offering more automotive services. As this has occurred, the percentage of business that is comprised of oil changes at a lube shop has dropped, from 72 percent in 2007 to 67 percent last year and all the way to 63 percent this year. That means that nearly two of every five dollars a lube shop earns in sales comes from services beyond oil changes, a metric that is significant any way you slice it. Clearly the lube shop of today is much more than the simple oil change shop of two decades ago. Fortunately, the increase in ticket average has offset the decline in car count to keep estimated sales stable. To estimate annual sales at a lube shop, we take cars per day, multiply by ticket average, then multiply by 315 (the historical, long-term average number of days a lube shop is open each year).

Last year, that estimated annual sales figure was $540,015; this year, the estimated annual sales figure was $540,806, a difference of less than $800. Clearly, by raising prices (something well get to later) and offering more services, lube operators have been able to keep overall sales healthy despite facing significant challenges. One of the most significant of those challenges was a dramatic increase in cost of goods. As crude oil prices skyrocketed earlier in the year, lube operators endured as many as four separate bulk oil price increases. That helped push the average cost of goods for a full-service oil change (or LOF) to $15.33, a 16.8 percent increase and the highest dollar figure ever recorded. (MT30 shops werent immune to the price increases, either, as they saw their average COGS price jump to $12.85 from $10.95 last year, an increase of 17.4 percent.) As well see later, that increase has eaten into profits for lube operators. Finally, just for grins we wanted to find out what percentage of lube shops service hybrid vehicles. The results? Fully 96 percent of LT30 companies reported they service hybrid vehicles, and 100 percent of MT30 companies reported servicing hybrids. Clearly lube shops are not intimidated by these high-tech vehicles.

PRICES

The Car: 1995 Dodge Ram 3500 The Driver: Robert Swan; Arlington, VA

When Swan accomplished his feat in 2006, Chrysler CEO Tom LaSorda gave him a personal phone call and an autographed copy of a Chrysler history book. Swan used the Ram to deliver travel trailers from the manufacturer to dealerships across the country, averaging about 110,000 miles per year.

Faced with rising prices for the fluids and filters they install on customers vehicles, nearly two-thirds of lube operators reported raising prices during the past year, doing so by an average of $2.51 per full-service LOF. That helped push the average full-service LOF price to $35.03, the first time that price has cracked the $35 barrier. (The Fed might think inflation is nonexistent, but those of us in the real world know better!) The average full-service LOF price at MT30 shops was up only slightly, climbing 11 cents to $36.56. Despite that price increase, more operators began offering a basic, low-cost LOF (generally consisting of the oil change only, minus the full-service inspection and fluid top-off that generally accompany the fullservice LOF). This year, nearly four in 10 (38 percent) of LT30 operators reported offering a low-cost LOF, compared to 34 percent last year and 26 percent as recently as 2007. (Contrast that with MT30 companies, where only 8 percent of respondents offer a low-cost LOF.) The average price for that low-cost LOF was up, however, climbing to an average of $28.06 from $26.69 last year. Prices increased for other oil change services, as well. Average price for a specialty/high-mileage motor oil change? Up to $48.71 from $45.86 (and up to $54.86 from $53.60 for MT30 companies). Average price for a synthetic motor oil change? Up to $65.86 from $62.39 (and up to $70.26 from $66.14 for MT30 companies, crossing the $70 threshold). More companies turned to discounting, too, as 92 percent of operators reported that their competition discounts oil changes, an all-time high. Further, nearly three-quarters (74 percent) of LT30 operators reported discounting their own oil changes, doing so to the tune of $5.25 per LOF. (All MT30 companies reported that they discount oil changes, doing so by an average of $6.48.)

Article continues page 36. For survey results, see pages 26-34.

24 www.noln.net

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2011

Fast Lube Operators

Survey Results
2008
LT30
80% 20% 55% 11.7 2.2 3.3 $12.75 $50.80 315 33.9 11.2 n/a 24.0 56% 23% 21% $584,430 $4,619 $64,398 0.3 10% 49% 51% 69% 32% 86% n/a

general
The Fast Lube Operators Survey is one of the most in-depth studies of the fast oil change industry available. Much-requested by both newcomers to the fast lube industry and seasoned operators who use it to evaluate the success of their own operations the survey contains current and historical data for almost every operational metric. Survey data was gathered from questionnaires mailed directly to operators or available online. Survey results for 2011 are presented at the far right in two categories: The first column indicates results from companies operating Less Than 30 Stores (LT30 Stores), i.e. smaller operations representative of the majority of the industry. The second column indicates results from those companies operating More Than 30 Stores (MT30 Stores), i.e. larger corporate lube chains. Results for 2007 through 2010 are for reference only and represent LT30 operations. In all, the responses for 2011 account for 4,451 facilities and include fast lube stores operating in all 50 states.

operations

2007
LT30

2009
LT30
85% 15% 59% 12.4 2.0 3.2 $13.24 $52.04 311 32.4 7.5 n/a 22.4 52% 26% 22% $552,545 $4,472 $60,196 n/a 7% 49% 51% 69% 33% 88% n/a

2010
LT30
81% 19% 69% 13.8 2.3 3.6 $13.12 $54.08 318 31.7 12.1 38.0 23.3 56% 18% 26% $604,372 $4,552 $68,219 0.2 5% 54% 46% 67% 35% 89% n/a

2011
LT30
73% 27% 77% 13.2 2.6 3.4 $15.33 $56.29 317 30.5 10.2 37.3 23.6 40% 30% 30% $634,774 $4,349 $64,485 0.3 5% 52% 48% 63% 33% 81% 96%

MT30
* * 85% 24.3 288 3.1 $12.85 $66.91 346 34.6 * 36.8 22.1 10% 30% 60% $800,000 $6,287 $60,625 11.4 * 25% 75% 58% 27% 83% 100%

Independent/company-owned facilities 79% Franchised facilities 21% Member of fast lube trade association 67% Years in the fast lube business 11.4 Number of facilities per response 2.5 Number of bays per facility 3.1 Cost of goods for standard, full-service LOF $11.55 Average ticket total $47.18 Number of days open per year n/a Number of cars serviced per day 35.4 State inspections per day (by facilities that offer) 15.7 Total number of cars you service per day (including inspections, repair work, etc.) n/a Break-even car count 24.9 Operators who own their building/land 60% Operators who lease their building/land 31% Operators who both own and lease their buildings/land 9% Building/land costs for most recent fast lube (if owned) $578,781 Cost for leasing building/land (per month) $4,817 Equipment costs for fast lube $62,879 Number of stores operator will open in next 12 months 0.3 Operators planning to sell their facilities next year 10% Operators who have customers enter their lube: From the front (street side) 51% Back 49% Percentage of business that is oil change 72% Percentage of operations that refuse to service at least one vehicle 36% Operators who offer a free fluid top-off n/a Operations that service hybrid vehicles n/a
26 www.noln.net

* insufficient data to calculate n/a: question not asked

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prices
Price of standard, full-service LOF/multipoint check Operators who offer basic, low-cost LOF service Price, if offered Operators who offer premium LOF (w/ specialty/high mileage motor oil) Price, if offered Operators who offer premium LOF (w/ synthetic motor oil) Price, if offered Operators increasing LOF price in the past 12 months Amount of increase Competitors discounting their oil change Amount of discount Operators discounting their own oil changes Amount of discount

2007
LT30
$31.12 26% $25.19 79% $42.07 91% $55.49 70% $2.02 89% $5.94 67% $4.12

2008
LT30
$32.37 31% $25.98 92% $44.32 98% $59.42 84% $2.68 89% Best Selling $5.95 $4.40

2009
LT30
$34.38 31% $27.77 84% $45.70 92% $60.93 63% $2.64 85% $5.92 63% $4.70

2010
LT30
$34.14 34% $26.69 90% $45.86 99% $62.39 37% $1.99 89% $6.69 71% $4.68

2011
LT30
$35.03 38% $28.06 89% $48.71 95% $65.86 66% $2.51 92% $7.45 74% $5.25
Others 7%

MT30
$36.56 8% $26.00 92% $54.86 92% $70.26 67% $2.18 100% $6.94 100% $6.48

Motor Oil in66% Lubes Fast

demographics
Oil change facilities within three miles of respondent Population within three-mile radius of best store Daily traffic count in front of best store Customer base that is female Miles customers drive between oil changes Portion of overall sales made up of fleet accounts Average number of vehicles per fleet Operators who mystery shop their own stores Operators who mystery shop their competition Customers who drive domestic vehicles Customers who drive foreign vehicles Customers who drive luxury vehicles Customers who drive light trucks Vehicles equipped with oil monitors Miles driven between oil changes by those vehicles n/a 32,287 21,081 52% 4,352 12% 8.8 53% 32% 56% 44% 19% n/a 46% 4,685 n/a 29,296 21,207 51% 4,318 12% 10.0 59% 46% 56% 44% 20% 33% 51% 4,695 n/a 20,837 20,077 52% 4,364 10% 7.8 57% 53% 58% 42% 18% 35% 52% 4,783 8.5 24,798 23,381 52% 4,419 11% 14.5 62% 47% 58% 42% 19% 35% 57% 4,831

Private Label 8%

Pennzo 18%

8.6 Other Name Brands 26,288 15%

22,625 52% Castrol 4,520 7% 11% Chevron 9.1 7% 59% 53% 55% 45% 18% 35% 54% 4,895

* 40,282 19,143 56% 4,626 * Shell * 75% 8% 42% 53% 47% 20% 25% 53% 5,350

Valvoline 14%

ing l ubes

* insufficient data toBest Selling Synthetic motor oil in calculate n/a: question not asked fast lubes

(Percentage of LT30 operators that listed each brand as their house oil, 2011)

Best Selling Motor Oil in Fast Lubes

Private Label 8% Other Name Brands 15% Castrol 7% Chevron 7%

Others 7%

Pennzoil 18%

Best Selling Synthetic Motor Oil in Fast Lubes

(Percentage of LT30 operators that listed each brand as their top selling synthetic oil, 2011)

Others 15% Amsoil 3% Castrol 6% Valvoline 8% Pennzoil 12% Mobil 56%

Mobil 16%

Shell 8%

Valvoline 14%

September 2011 27

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Bene ts O ered 55708_Citgo_NOLN_1inch_banners 9x1 Bene ts O ered

employees

2007
LT30
5.5 yrs 2.3 yrs n/a $8.70 $39,020 $52,976 6.0 53% 52% 47% 53% 52% 28 42% 39% 38% 39% 38% 64% 36%
30%

2008
LT30
6.2 yrs 2.5 yrs $7.89 $9.22 $39,587 $55,155 5.9 40% 35 57% 69%
30%

2009
LT30
6.7 yrs 2.9 yrs $8.15 $9.30 $37,925 $58,719 retirement 5.5 retirement 59% non-sales bonus 30 non-sales bonus 47% paid sick leave paid sick leave 73%
health/life insurance health/life insurance commission

2010
LT30
7.0 yrs 3.1 yrs $8.26 $9.47 $39,456 $62,676 6.2 63% 32 63% 72% 28%

2011
LT30
6.8 yrs 3.4 yrs $8.28 $9.75 $40,650 $51,700 6.0 66% 28 50% 65% 35%

MT30
4.6 yrs 1.5 yrs $8.33 $9.42 $36,760 * 7.5 80% 48 92% * *

Length of employment for managers Length of employment for technicians Starting rate paid to lube techs Hourly rate paid to lube techs Annual salary paid to managers Annual salary paid to owners (if full-time employee) Average number of employees per store Operators testing employees for drugs Hours of formal training employees receive per year Operations that use surveillance cameras Owners who work: On site From remote location

31%
commission

27%

sales
Yearly sales per store: Portion of gross sales used for: Payroll Lease/Mortgage COGS2 Net Profit Operations3 Other4
1

13% 12%

13% 12% 11%

11%

paid holidays paid holidays

$551,377 27.0% 11.5% 29.8% 13.0% 15.6% 3.1%

$535,803 28.3% 12.2% 30.5% 10.0% 15.8% 3.3%

$558,395 27.9% paid vacation paid vacation 11.5% 29.4% 12.5% 15.8% 2.9%
uniforms

uniforms

$575,422 26.5% 11.6% 28.3% 13.3% 17.2% 3.1%

$601,164 27.1% 11.8% 30.5% 11.3% 16.4% 2.9%

$723,083 28.7% 11.7% 26.0% 13.2% 16.6% 3.8%

Includes all payroll (taxes included), salary of owner (if hands-on employee), unemployment taxes, Workers Compensation, health insurance, bonuses, etc. Includes materials andSales Breakdown LT30 supplies necessary to perform services. 3 Includes utilities, maintenance, company insurance, advertising, franchise fees, uniforms, freight, postage, administrative costs, office supplies, non-income taxes, training, company vehicle, etc. used to operate business on a Sales Breakdown LT30 day-to-day basis. 4 Dues, subscriptions, warranties, travel/entertainment, etc.
1 2

(Percentage of LT30 operators who offer the following benefits)

Benefits Offered

60% 50% 40% 30% 20%

53% 52%

* insufficient data to calculate n/a: question not asked Other Net Pro t 2.9% Other Sales Breakdown COGS 11.3% Net Pro t 2.9% 30.5% COGS (Percentage of gross sales dedicated 11.3% to costs for LT30 operators) 30.5% retirement Lease/Mortgage Lease/Mortgage 11.8% 11.8% non-sales bonus
Operations paid sick leave 16.4% Operations 16.4% Payroll 27.1% Payroll 27.1%

39% 38% 30%

health/life insurance

commission

(Percentage of gross sales dedicated to costs for MT30 operators)

Sales Breakdown

13% 12%

10%

11%

paid holidays

uniforms

Other Net Pro t 3.8% Other 13.2% Net Pro t 3.8% COGS 13.2% 26.0% Lease/Mortgage Lease/Mortgage 11.7% 11.7% Operations 16.6% Operations 16.6% Payroll 28.7%

COGS 26.0%

s n Ins. ave ses ent s tion rm day sio u aca nifo oli mis Life k Le on rem id V U Paid H Com ealth/ id Sic ales B Reti Pa a n-S H P o N

paid vacation

Payroll 28.7%

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55708_Citgo_NOLN_1inch_banners 9x1 oil & equipment

Total sales represented by house motor oil brand Customers committed to a specific brand of motor oil Operations that implement used oil for heating purposes Operations that accept used oil from DIYers Operations that accept used oil filters from DIYers Operations being paid for their used oil Amount per gallon Operations being paid for their used oil filters Operations offering dexos-licensed motor oil Operators offering a product that meets dexos-licensed specs Operations invoicing customers for environmental fees Average amount Per-gallon cost of highest volume bulk oil Quarts included in standard lube, oil and filter Average charge per quart for additional motor oil Overall breakdown of motor oil sales: Conventional/synthetic blend High mileage Full synthetic Diesel Other Operations that sell re-refined motor oil Percent of customers who purchase Overall breakdown of motor oil sales by weight/grade: 5W-20 5W-30 10W-30 5W-40 15W-40 Other Operations that sell premium air filters Average charge Operations that use lifts for oil changes Operations that use pits for oil changes Operations that use pit lifts for tire rotation Percent of operator sales comprised of beam blade wipers Price charged, per pair Percent of operator sales comprised of conventional wipers Price charged, per pair

2007
LT30
77% 39% 27% 84% 65% 94% $0.54 3% n/a n/a 30% $1.89 $6.45 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
* insufficient data to calculate
Best Selling Air Filters Pennzoil

2008
LT30
79% 40% 31% 85% 66% 95% $0.76 4% n/a n/a 22% $1.82 $7.68 n/a n/a 74% 9% 10% 7% 0% n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
n/a: question not asked

2009
LT30
81% 45% 31% 85% 72% 96% $0.51 8% n/a n/a 28% $1.91 $7.96 n/a n/a 72% 8% 10% 8% 2% 5% n/a 21% 49% 19% 2% 8% 1% n/a n/a n/a n/a n/a n/a n/a n/a n/a
Mighty 15%

2010
LT30
76% 37% 27% 87% 73% 91% $0.53 4% n/a n/a 19% $1.79 $7.66 5.0 $3.56 68% 10% 12% 8% 2% 22% 4% 24% 46% 17% 2% 9% 2% 38% $23.89 15% 85% 59% n/a n/a n/a n/a

2011
LT30
77% 29% 29% 91% 70% 96% $0.94 5% 77% 61% 28% $1.88 $8.65 5.0 $3.85 70% 10% 11% 8% 1% 38% 5% 27% 48% 15% 2% 7% 1% 36% $18.69 12% 88% 54% 21% $31.27 79% $18.33

MT30
87% 38% 45% 90% 55% 100% $0.86 9% 57% 63% 18% $1.18 $7.78 5.0 $4.05 60% 18% 15% 3% 5% 50% 16% 31% 44% 14% 3% 6% 2% 27% $37.99 * * 67% 14% $25.33 86% $15.42

st Selling Filters

Best Selling Oil Filters

(Percentage of LT30 operators who listed each brand as their standard oil filter, 2011)

Others 27%

16%

Others 37%

Performax 5% Prime Guard 7% Purolator 8%

Mighty 16% Service Champ 11%

Service Champ 14% Pennzoil 12% Purolator 8% Valvoline 9%

Best Selling Air Filters

(Percentage of LT30 operators who listed each brand as their standard air filter, 2011)

Valvoline 10%

Performax 5%

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a new opportunity for a changing marketplace

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55708_Mystik_NOLN_1inch_spread_banner 18x1 2007

services

2008
LT30
89%

2009
LT30
86%

2010
LT30
88%

2011
LT30
84%
Percentage of Customers Average Who Charge Purchase

Additive sales ATF supplement Chemical engine flush/oil system cleaner Coolant treatment Coolant stop leak Diesel fuel supplement/cleaner Gear oil supplement Oil stop leak Pour-in fuel injection cleaner Power steering treatment Transmission stop leak Air conditioner recharge Air conditioner odor removal service Air filter replacement Brake pads/shoes Brake fluid flush Breather replacement Cabin air filter replacement Check batteries Diesel exhaust fluid fill up Differential service Fuel filter replacement Fuel injector cleaning (multi-stage) Headlight restoration Light replacement Manual drain and refill of radiators Mechanical full-block coolant flushes Mechanical ATF exchange Mechanized engine flush/cleaning Minor mechanical repairs Nitrogen-based tire inflation Oil changes on Class 4 or larger commercial vehicles Oil changes on motorcycles Oil changes on RVs PCV replacement Power steering flushes Radiator, heater, A/C hose replacement Repair rock chips in windshields Sell batteries Serpentine belt replacement Shock and strut replacement Smog checks/emission testing Spark plugs Tire rotation Tire sales Transmission service (drain/refill manually) Water-repellent glass treatments Wheel balancing

Percentage of survey respondents offering following services

LT30
89%

n/a 82% n/a n/a n/a n/a n/a n/a n/a n/a
46%

n/a 85% n/a n/a n/a n/a n/a n/a n/a n/a
46%

n/a 83% n/a n/a n/a n/a n/a n/a n/a n/a
47%

68%
87% 47% 30% 46% 51% 41% 78% 41% 39% 61% 29% 100% 43% 29% 70% 92% 75%

65%
91% 43% 27% 41% 40% 28% 83% 28% 20% 35% 20% 100% 34% 23% 63% 91% 78%

$17.22 2.8% $29.78 5.3%

$25.36 $14.91 $20.13 $13.47 $12.63 $16.03 $26.19 $13.79 $92.60 $41.35 $19.16 $136.96 $70.53 $10.32 $32.89 n/a $53.13 $47.23 $71.55 $49.76 n/a $62.30 $84.41 $113.24 * $91.96 $35.32 $137.19 $59.00 $68.23 $9.54 $61.09 n/a $36.16 n/a $67.56 $117.00 * $87.85 $19.15 $267.51 $92.10 $12.91 $37.30 1.4% 1.2% 0.9% 1.4% 1.7% 3.6% 1.4% 1.1% 2.3% 1.0% 12.0% 2.4% 1.5% 1.3% 3.6% n/a 2.4% 3.3% 2.4% 1.2% 5.8% 1.3% 1.7% 2.6% * 4.9% 3.0% * * * 1.7% 1.8% 1.9% 2.4% 2.1% 1.5% 1.2% * 2.0% 5.6% * 1.3% 1.9% 2.9%

n/a
100% 26% n/a 73% 90% n/a

n/a
100% 39% n/a 78% 83% n/a

n/a
100% 40% 34% 70% 88% n/a

n/a
92% 76% 76% n/a 83% 31% 88% 90% 8% 34% 6% 21% 6% 67% 78% 45% 30% 24% 56% 84% 22% 20% 28% 64% n/a 57% 30% 24%
* insufficient data to calculate

n/a
84% 83% 88% n/a 87% 40% 91% 90% 16% 45% 10% 31% 11% 68% 72% 60% 41% 27% 65% 86% 24% 15% 38% 70% n/a 61% 27% 23%
n/a: question not asked

n/a
96% 79% 87% 43% 85% 49% 92% 87% 28% 43% 22% 34% 20% 81% 78% 67% 47% 15% 69% 86% 33% 13% 43% 78% 16% 77% 35% 30%
average from small sampling

n/a
94% 86% 81% 52% 90% 36% 90% 94% 23% 53% 27% 28% 13% 74% 75% 68% 44% 18% 70% 89% 31% 24% 37% 76% 21% 58% 30% 27%

53%
93% 87% 84% 44% 84% 40% 89% 89% 25% 48% 27% 21% 16% 71% 68% 68% 36% 19% 66% 85% 21% 19% 33% 76% 13% 63% 41% 26%

$22.32 1.3%

32 www.noln.net

insurance
Annual cost of insuring a fast lube facility Average amount of per-store warranty work performed during preceding 12 months

2007
LT30
$5,356
$1,444

2008
LT30
$5,220
$1,053

2009

2010
LT30
$5,882 $1,047

2011
MT30
* $1,087

BEST ADVERTISING METHOD LT30 LT30

$5,636
$971

$6,341
$1,155

keys to success
Factors that will determine future success of fast lube industry: Customer service Quality employees Economy Car counts Cost of goods Competition Location Extended oil change intervals 70% 16% 0% 10% 2% 2% 0% 0% 64% 16% 0% 10% 5% 1% 0% 4%

Radio TV Newspaper Internet 1% 1% 1% 4% Coupons 7% Direct 21% Mail 16% 0%

72%

3% 3% 1% 0% 0%

63% 15% 4% 9% 3% 3% 2% 1%

Word of Mouth 70%

46% 15% 10% 6% 5% 3% 3% 1%

* * * * * * * *

advertising
Operators who send reminder cards to customers Operators offering discounted reminder cards Response rate Percentage of customers who redeem coupons Operators who advertise on the Internet Operators who collect customer email addresses Operators who collect cell phone numbers for text message marketing purposes Operators who have a company website Operators who have a company Facebook page 48% 69% 26% 17% 44% n/a n/a n/a n/a 47% 77% 28% 21% 44% n/a n/a n/a n/a 47% 61% 25% 19% 38% n/a n/a n/a n/a 51% 72% 23% 23% 54% n/a n/a n/a n/a 53% 68% 29% 21% 62% 54% 29% 80% 52% 75% 82% 45% 40% 100% 83% 33% 100% 58%

BEST ADVERTISING METHOD

* insufficient data to calculate n/a: question not asked

(Percentage of LT30 operators who listed each type of advertising as their most effective)

Best Advertising Method for Fast Lubes

Radio TV Newspaper Internet 1% 1% 1% 4% Coupons 7% Direct Mail 16%

60 60% 50 50% 40 40% 30 30% 20 20% 10 10% 0

58%

Best Selling Add-on Services in Fast Lubes

(Percentage of LT30 operators who listed each add-on service as their best-selling)

tire rotation transmission cleaning additives wiper blades

Word of Mouth 70%

14% 8% 5% 5% 3%

er ades ng sh sh ation l Filt Flu ani Flu t Air iper B rans. j. Cle olant re Ro T l In Ti o W C Fue

September 2011 33

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did you know?

37% of fast lube operators report July as the busiest month of the year 42% of fast lube operators report Friday as the busiest day of the week 26% of fast lube operators plan to add glass repair to their service menu; 19% plan to add tire rotation; 19% plan to add air conditioning service 19% of fast lube operations have customers wait inside their car during an oil change; 74% of operations have customers wait inside their waiting room during an oil change; and 7% of operations have customers wait inside their car or in their waiting room during an oil change 52% of fast lube operations have technicians drive vehicles into the bay; 48% of operations have customers drive vehicles into the bay Fast lube operators take an average of 14 minutes to change a customers oil On average, 71% of fast lube business is from repeat customers 90% of fast lube operators mention 3,000-mile oil change intervals to their customers 85% of fast lube facilities are equipped with pits; 15% of facilities are equipped with lifts 71% of fast lube facilities pits are equipped with safety covers 14% of lube shops are co-located with an on-site carwash Fast lube operators describe their customers as 80% average income, 13% high income and 7% low income About two-thirds of lube shops offer bundled service packages on their service menus 15% of lube shops are equipped with underground oil storage tanks; 85% are equipped with aboveground tanks (including basement-mounted tanks) In 1988, the year the first Operators Survey was conducted, average car count was 43.5 cars per day, average ticket was $23.52 and the average price for a full-service LOF was $19.98 Industry-wide car count peaked in 1995 at 47.9 cars per day Industry standards compiled from previous Fast Lube Operators Surveys.

McKinzie, Manasselia and Standley Win Great Prizes

To thank lube operators and managers for spending the time it takes to complete our annual fast lube operators survey questionnaire, we enter everyone who responds into a drawing for three great prizes. This year, an air-operated fluid handling gun (MSRP $390) from RTI Technologies; a 180-gallon stackable HDPE liquid storage tank (MSRP $350) from Rhino-Tuff Tanks; and a windshield repair starter kit (MSRP $300) from Liquid Resins were given away. Congratulations to Lance McKinzie, owner of London Express Care in London, Kentucky; Jason Manasselia, region five manager of Oil Changer in Belmont, California; and Clint Standley, owner of Kwik Kar in Grand Prairie, Texas, this years winners. And a big thanks to everyone else who participated in this years survey. Without your help, this in-depth study of the lube industry would not be possible. S

$390 MSRP $300 MSRP

$350 MSRP

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DEMOGRAPHICS

The Car: 1995 Chevrolet Silverado The Driver: William White; Lawrenceville, GA

serviced at lube shops (54 percent for LT30 operations and 53 percent for MT30 operations) are equipped with oil life monitoring systems. These vehicles are reportedly driven an average of 4,895 miles (5,350 at MT30 operations) between oil changes. Both figures represent increases from last year, and are clear evidence that drivers continue to extend their oil change intervals, especially in the face of the high fuel prices endured by drivers this summer.

We featured Whites truck in our April 2002 issue, just after it had gotten an oil change at Lube 3000 in Lawrenceville and a mere 909 miles before turning over the odometer to one million miles. White put 800 miles a day on his truck picking up newspapers from South Carolina and delivering them to Nashville and other locales before returning home. After he hit the million-mile mark, Pennzoil, which supplied motor oil for Lube 3000, replaced Whites truck with a brandnew one in order to study the engine in his old one. Not much has changed in recent years as far as fast lube customer demographics is concerned. Slightly more than half of all lube customers are female. Just more than 10 percent of business at a typical shop is from fleets. Population within a three-mile radius of really successful shops is around 26,000 people. Daily traffic count in front of those same stores is around 22,000 cars. About five percent more lube customers drive domestic makes than drive foreign makes. Less than 20 percent of lube customers drive luxury vehicles. More than one-third drive light trucks. What is trending in the wrong direction, however, are oil change intervals. This year, lube operators reported that customers are driving an average of 4,520 miles between oil changes, a record high and an increase of more than 100 miles (or 2.3 percent) from last year. (MT30 companies reported an average customer oil change interval of 4,626 miles, an increase of 62 miles, or 1.4 percent, from last year.) Currently, just more than half of vehicles
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EMPLOYEES

to lube techs is $9.75, an increase of 28 cents per hour from last year, and a record high. (MT30 companies pay lube techs an average of $9.42 per hour, an increase of 66 cents per hour from last year.) Lube managers, too, saw their annual salaries increase, with the typical lube manager now earning a salary of $40,650 per year, an increase of nearly $1,200 from last year. What has not increased, however, are owner salaries. In those facilities where the owner takes a salary, the average salary declined dramatically, falling to $51,700 from last years total of $62,676. It is difficult to determine at this point if this is a one-year statistical fluke, or whether hard-pressed lube owners are forsaking their personal income in an effort to keep their businesses profitable, but either way it is clear that operators are making deep sacrifices.

The Car: 1989 Saab 900 The Driver: Peter Gilbert, Glendale, WI

SALES

Travelling salesman Gilbert was featured in multiple media outlets back in 2006 when his Saabs odometer hit 1,001,285 miles and was retired to a Wisconsin auto museum. He had purchased the car new, followed the recommended maintenance schedule diligently and only used synthetic motor oil. Gilbert told MSNBC that the only mechanical work he had ever had performed on the car was a transmission rebuild at 200,000 miles. The old saw insists theres a silver lining to every dark cloud. For lube operators facing an economy wracked by persistent high unemployment, that silver lining may be in the fact that employee turnover is at a historic low. Lube operators reported that the average tenure for lube technicians a statistic once measured in months rather than years is now at 3.4 years. That means the typical lube tech stays on the job for nearly 41 months. Clearly, employees in todays economy view almost any job as a good one, and lube operators are having more success hanging on to their employees. Part of that success comes with higher wages, too. The average hourly wage paid

The Car: 1965 Ford Mustang The Driver: Bob Lucas; Santa Ana, CA

The 79-year-old Lucas is the original owner of this classic Mustang, which saw its odometer hit 1,050,000 miles last December. Though its been through three engines, the rest of the car remains in perfect shape thanks to lots of TLC from Lucas, who averages about 24,000 miles per year in his Stang. The difference between what a lube shop earns with oil changes and other fluid maintenance and the shops total revenue is becoming larger and larger, a statistic weve already discussed. What makes that even more clear is when we take a look at the yearly sales per store. Unlike the annual sales totals estimated above, the yearly sales per store figures are reported by lube operators and include income from all areas

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of the business, not just oil change/fluid maintenance. This year, LT30 operators reported average annual sales of $601,164, an increase of more than $25,000 (4.5 percent) from last year. MT30 companies reported samestore annual sales of $723,083, an increase of nearly $100,000 (15.8 percent). Unfortunately, those higher sales have been largely offset by higher costs. The percentage of gross annual sales used for COGS, for instance, grew to 30.5 percent from 28.3 percent for LT30 operations (and increased to 26.0 percent from 24.1 percent for MT30 operations, as well). Expenses like lease/mortgage and payroll were up, as well, and even though operators were able to squeeze a bit of savings from categories like operations (which declined to 16.4 percent of annual gross sales from 17.2 percent) and miscellaneous items, pretax profit fell two percentage points, dropping to 11.3 percent from 13.3 percent. MT30 companies fared a little better, but still saw profit drop to 13.2 percent from 14.0 percent last year.
To receive an information packet, please contact info@mystiklubes.com or call 855.4.MYSTIK.

OIL & EQUIPMENT

The Car: 1991 Chevrolet Silverado The Driver: Frank Oresnik; Gresham, WI

Oresnik bought his Silverado in 1996 when it already had 41,000 miles on it. Since then, hes driven and driven and driven some more on his business route distributing seafood and steaks in the upper Midwest. At last count, the pickup had more than 1.2 million miles on the odometer, and Oresnik reports the valve cover has never been off the truck, and hes had no engine work performed. His secret? Oil changes every 3,000 miles. Several things stand out in this section of
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our survey. First, operators report that an all-time low percentage of customers (29 percent, to be exact) are committed to a specific brand of oil. Thats down from 37 percent last year and 45 percent in 2009, a significant decline that could be brought on at least in part by the next item on our list: rising prices. Lube operators reported that their average per-gallon cost for bulk oil rose nearly $1 to $8.65, an increase of nearly 13 percent. Fortunately, more operators are getting paid for their used oil, and paid more, as well. Operators reported that the average per-gallon price paid for used oil grew to 94 cents, up from 53 cents last year, another all-time record. We discovered last year that operators typically offer five quarts of motor oil with their standard LOF, a number that was unchanged this year. What did change was the per-quart price charged for additional motor oil, which rose nearly 30 cents to $3.85 per quart. We also noted a fairly significant disparity in the motor oil sales between LT30 and MT30 facilities. While LT30 operators reported that 70 percent of their overall motor oil sales was comprised of conventional/ synthetic blend (we combine these categories because several companies marked their conventional oil as a synthetic blend), while MT30 companies reported only 60 percent of their overall sales are conventional. That disparity grows even further when you look at high mileage and synthetic: 10 percent of motor oil sold at LT30 operations is high mileage, compared to 18 percent at MT30 operations; wile 11 percent of motor oil sold at LT30 operations is synthetic, compared to 15 percent at MT30 companies. Speaking of synthetic motor oil, this year we asked about GMs dexos specification, which typically calls for a synthetic motor oil, for the first time. We found that 77 percent of LT30 operations and 57 percent of MT30 operations offer a dexos-licensed motor oil. We further found that 61 percent of LT30 operations and 63 percent of MT30 operations offer a motor oil that meets the

dexos specification, but is not licensed. More operators are going green with re-refined motor oil, as 38 percent of LT30 operations and 50 percent of MT30 companies now offer this recycled product. We know from past surveys that virtually all lube shops offer wiper blades, but we were curious about the breakdown between conventional wiper blades and newer beam blades. We found that conventional blades account for 79 percent of wiper sales at LT30 operations (86 percent at MT30 companies), while beam blades account for 21 percent of wiper sales (14 percent at MT30 companies). Lube shops charge an average of $18.33 for conventional blades and $31.27 for beam blades. Finally, we typically list market share of various motor oil brands among LT30 shops. What we found is that 18 percent of LT30 operations listed Pennzoil as their house brand, followed by Mobil (16 percent), Valvoline (14 percent), Shell (8 percent), Castrol (7 percent) and Chevron (7 percent). Other name brands made up 15 percent, while 8 percent of operations have their motor oil private labeled. Another 7 percent purchase motor oil from independent lubricant blenders.

SERVICES

The Car: 1983 Lincoln Town Car The Driver: Chet Belisle; Topeka, KS

Belisle paid $2,200 for a brand-new Lincoln Town Car that has certainly been worth the price. Belisle likes to drive, and hes taken the Lincoln on numerous cross-country trips so much so the Lincoln has more than 1.3 million miles on the odometer. Hes had to rebuild the engine and transmission a couple of times each, but the Town Car keeps running thanks, Belisle says, to frequent maintenance.

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Lube shops continue to offer a wider and wider array of services. In most cases, operators have done a good job of raising prices to keep up with the market, as well. Of the 40-odd services for which our survey tracks prices, 26 had seen price increases during the past year. And while few services had seen a dramatic increase in the number of LT30 operations offering them, a new service proved how quick lube shops are to jump on the bandwagon. The service is diesel exhaust fluid (DEF) fill-up, and despite being on the market for only a couple of years, 53 percent of shops report offering this service, charging an average of $22.32 for a DEF tank fill-up.
To receive an information packet, please contact info@mystiklubes.com or call 855.4.MYSTIK.

determining factor by 5 percent of operators). Other operators listed topics as varied as work quality, honesty and even the weather as having the biggest overall impact on a lube business.

Morethanhalf(52percent)ofoperators have a company Facebook page.

THE FUTURE

ADVERTISING

The Car: 1966 Volvo P1800S The Driver: Irv Gordon; Long Island, NY The Car: 1976 Mercedes 240D The Driver: Gregorios Sachinidis; Thessalonica, Greece

KEYS TO SUCCESS

Sachinidis drove his diesel-powered Mercedes taxi 2,858,307 miles before retiring and donating his Benz to a museum in 2004. He purchased the car used in Germany in 1981 when it already had more than 135,000 miles on it. He often drove the taxi around the clock, and in all used three engines in rotation, rebuilding them and replacing them a total of 11 times. When we surveyed lube operators about their advertising habits, a couple of things stood out. First of all, most operators insist word-of-mouth is still their best form of advertising. More than one in five lube customers redeems a coupon or discount of some sort. And nearly two-thirds of lube operators now advertise their business on the Internet, up from just 44 percent in 2008. We took the opportunity to ask a few new questions regarding advertising as well. We found: Slightlymorethanhalf(54percent)ofoperators collect customer email addresses to send reminders. (Fully 83 percent of MT30 companies collect email addresses for this purpose.) More than a quarter (29 percent) of operators collect customer cell phone numbers for text message marketing purposes. (One-third of MT30 companies do this.) Four in five operators have a company website.

The Car: 1963 Volkswagen Beetle The Driver: Albert Klein; Pasadena, CA

As of June, Gordon and his beloved Volvo had amassed 2.9 million miles together, and were well on their way to hitting three million miles sometime next year. A longtime teacher, Gordon bought the car brand-new in 1966 and put 1,500 miles on it the first two days he owned it. Since that time, hes driven an average of nearly 65,000 miles per year, even shipping the car overseas to drive in Europe on occasion. A longtime Castrol user, Gordon credits what else excellent routine maintenance for his cars incredibly long life. (The Volvo didnt have its first overhaul until 675,000 miles!) Much like Irv Gordons Volvo, the lube industry keeps on rolling. By carefully walking a tightrope and balancing convenient maintenance services on one end of the pole and a growing number of additional services (like tires, batteries, light repair, etc.) on the other, lube operators are reporting steady sales and respectable profits during unsteady economic times. To be sure, pressures abound on the industry falling car counts, extended oil change intervals and rising cost of goods are all impacting the way lube operators do business. Fortunately, the very fact that lube operators have been able to maintain and even grow average per-store sales in recent years, despite an economy that has been challenging in most locales, speaks volumes about the success the industry should enjoy once the economy does regain solid footing. S

Architect Klein bought his Beetle brand new in 1963 for $1,897.71 (spending an extra $5 for the optional outside mirror). By 1994 when it was listed in the Guinness Book of World Records, he had put 1,442,044 miles on it, going through seven engines, three transmissions, 150 tires and more than $40,000 in maintenance costs. Were always on the lookout for what issues seem to be driving the lube industry, and this year what we found was surprising. In years past, a solid majority of operators listed customer service as the key to success in the lube business. However, this year only 46 percent listed customer service as the biggest key to success. The categories that correspondingly increased the most were the economy (listed as the determining factor by 10 percent of operators) and cost of goods (listed as the
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