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QUICK LUBE - LOSS LEADER OR PROFIT CENTER?
Article provided by: Brad Bowers, Terry and Company, P.C.

In a tough economy, dealers should look to their lube racks.  Are you managing your lube rack as the profit center it should be?  If not, sales are missed, and the independent fast lube operators are provided with a huge opportunity.

The annual survey of fast lube operators by National Oil Lube & News revealed a decline in the average number of vehicles serviced for the third straight year.  How are fast lube operators responding?  By expanding their repair business!  Forty Five percent (45%) of fast lube operators now offer minor mechanical repair service, up from thirty-two percent (32%) just two years ago.  The average ticket is now $50.80, up thirteen percent (13%) from 2006.

Do you manage your quick lube operations as well as you manage your sales department?  Do you know how many “ups” your lube rack had yesterday?  What about “be backs” – those customers who had services recommended but declined?  How are they followed up?  What is the closing ratio of your service advisors – when a tech recommends additional service, how well do the advisors close? 

You should receive a daily report from your lube rack operations.  The report should include the number of vehicles, the average year and mileage, and the number recommended and sold for the most common maintenance items.  According to National Oil Lube & News, oil change customers purchase additional items at the following rates:

• Air filters                                16%
• Wiper blades                          9%
• Light bulbs                              6%
• Tire rotation                            6%
• Fuel filters                               4%

We created an Excel spreadsheet to help dealers record and monitor their quick lube operations.  If you would like a free copy, email me at bbowers@terryandcompany.com

Monitoring performance is a great first step, but you also need to increase vehicle count.  Instead of looking outside for new customers, look inside first.  The old saying “You get what you inspect, not what you expect” was never more true than with vehicle inspections.  Most dealerships today offer a free multi-point inspection.  The sad truth, however, is that the inspection is often “offered” but not always “provided.” 

When we perform Service Studies for our clients, we usually find results like these:

• Percent of repair orders with completed vehicle inspections       36%
• Inspections with additional service recommended                      44%
• Closing rate of additional services recommended                       75%

In other words, for every 1,000 repair orders, 640 vehicle inspections are NOT DONE.  More importantly, based on the vehicle inspections performed, 282 additional service opportunities (640 x 44%) were missed!  Based on the closing rate, the service advisors would have sold 212 of those opportunities (282 x 75%).  The average recommended service is 1.1 hours.  So for every 1,000 repair orders, 233 potential labor hours are NOT SOLD!  You can rest assured that someone will be getting that business – make sure it’s you.

In summary, monitor your lube rack operations as close as you monitor sales and you’ll be sure to see results.  If nothing else, have the service advisors ask the customer at write-up if they can change the air filter if needed, and be ready to sell a lot more air filters!  Second, take a look at last week’s closed repair orders and see how many have a completed vehicle inspection.  Make sure you get a good sampling of warranty repairs.  Our experience is that barely 10% of warranty repairs will have a completed vehicle inspection.  Inspect and expect more sales!

Brad Bowers is a Senior Consultant with Terry & Company, with over 20 years’ automotive experience.  Terry & Company is a Denver-based CPA and Automotive Consulting firm who, together with its subsidiary, Bob Pearson Enterprises, has consulted with over 400 dealerships in the US and Canada.