Competing in the Growing Quick Lube Market
Your shop shouldn’t be above oil changes, says Greg Sands.
Because if it is? You might just fall behind.
For proof, take a look at the quickly growing quick lube segment. According to the Auto Care Association’s (ACA) Auto Care Factbook, “automotive oil and lubrication shops” showed sales increasing year over year in 2017, from $5.8 billion to $6 billion.
“Successful quick lube franchises are finding opportunities to test their pricing power as the number of vehicles on the road and miles driven increase without the commensurate growth in service locations, driving revenue growth in the market,” says Behzad Rassuli, senior vice president of strategic development, ACA.
Then look at the major players: Take 5 Oil Change, which sits at 300 locations throughout 17 U.S. states, is perfect for a rapid expansion, says Ted Rippey, vice president of franchising for Take 5. In early June, the company announced extensive plans to franchise in the Southeast and beyond, and has the capacity to support 2,000-3,000 units nationwide, Rippey says.
Valvoline, the second-largest franchised quick lube brand in the United States, is also expanding rapidly, with plans to open 20 stores between June 2018 and August 2018. Valvoline currently has over 1,100 locations throughout the United States, with plans to continually increase its hold on the quick lube market, says Valvoline vice president of real estate Greg Armbruster.
This expansion scares Sands, who has opened more than 90 independent shops with his company SRS & Co. and founded the industry marketing firm Mudlick Mail. He believes shops need to stop neglecting oil changes and implement them as part of their routine services. And as traditional quick lube-only shops expand their offerings into more light service, independent shops will need to focus their value propositions, says Rassuli.
Ratchet+Wrench takes a look at the expansion efforts of Take 5 and Valvoline and how independent shops can stand out and capture those customers.
Take 5’s expansion plans:
As Rippey puts it, Take 5’s expansion plans are an effort from Driven Brands to increase its vertical reach in the automotive industry. Meineke, CARSTAR and Maaco cover the maintenance and collision vertical, while 1-800-Radiator delivers parts to the these brands. Then Take 5 covers the quick lube market.
Over the next four years, Rippey is looking for multi-unit developers to bring the brand to around 200 franchised stores, with a pipeline of 300-400 committed units.
Rippey says Take 5 already has commitments for about 55-60 stores throughout North and South Carolina, but everything throughout the rest of the Southeast is open. Dallas, Houston, all of Louisiana, Tampa, Fla., and St. Petersburg, Fla., will be developed corporately, with 30-40 stores opened a year in those locations.
However, there needs to be space to build these units, Rippey says, and this rapid and extended expansion effort requires a sharp focus on real estate. He says that about one third of Take 5’s total locations were converted from preexisting businesses, like other quick lube shops, but most of these businesses are built from the ground up once an ideal location is found.
“If they’re on a hard corner, have the right demographics and there happens to be a quick lube store there, then we’ll do everything we can to acquire and convert it,” Rippey says.
Valvoline’s expansion plans:
Valvoline offers full service oil changes along with instant, drive thru oil changes. It also does antifreeze changes, along with basic part changes. Additionally, Valvoline owns and licenses the Valvoline Express Care Brand, which licenses independent quick lube and preventative maintenance owner-operators to use the Valvoline brand.
Armbruster says the brand will be adding approximately 23-25 new construction stores in 2018. For 2019 and the next few years, Valvoline expects company stores to grow at 25 per year, and franchise stores at 25-35 per year.
To reach its projection of adding 50-55 stores each year, Valvoline says it has active broker representation for its targeted growth areas. Additionally, Armbruster says Valvoline is very interested in company acquisitions, and this will be a major focus of its store growth.
The quick lube market share for independents:
Sands says independent shop owners need to be concerned about this rapid quick lube growth, especially those that don’t offer oil changes, or neglect them as part of their services. He believes independent shops who are being told to turn away oil changes are getting the wrong advice.
“What you’re seeing with these quick lube centers, they’re executing on what shop owners aren’t doing,” Sands says. “We have people telling shop owners they shouldn’t do oil changes, should turn them away or slow them down. But speed sells in every industry, it always wins.”
Sands says that oil changes are where shops can get an introduction to possible long-term customers. His advice is to not turn away oil changes, and offer additional services with them that the quick lube centers can’t offer. This may mean offering services like a more in-depth summertime checkup, or a tire rotation with oil change services.
“If you have a shop, you should never give a customer a reason to go to a fast lube center,” Sands says. “Once they do that, they may not come back to you.