Jiffy Lube International Inc., the nation's largest "fast oil change" company with nearly 2,300 locations, is very good at developing new business models. They seem to have perfected the fast-food approach to oil changes, thanks to a well-designed "fluid installation model," as they refer to it.
That begs the question, "Do they have a tire installation model?" No, says Cindy Landers, director of brand marketing for Jiffy Lube in Houston, Texas. "Those two models are very different and we are focused on a drive through, in-and-out approach to our business plan."
If that sounds like a hedge it might be. "Although there are certain types of work we will never do at a Jiffy Lube location, it doesn't mean we aren't interested in making a new business model work," she says.
To be fair, Landers was answering a question from Modern Tire Dealer about the possibility of one day formulating a Jiffy Lube business model that might include independent tire dealers. "It's always about the customer," Landers says. "If what we do improves the experience for the customer, then we are doing our job."
If that language sounds familiar it should. It has been the rallying cry among independent tire dealers for decades.
Lion's share
In the 1980s, almost 40% of the nation's full-service gas stations closed or converted to self-service, gas-only outlets. By 1988, there were only 110,000 full service gas stations, down from an all-time high of 226,000 reached in 1972, prior to the Arab oil embargo.
According to Express Oil Change, the number of automobiles and light trucks grew from about 159 million in 1986 to 210 million in 1999 and is projected to grow to 216 million by 2003. So who services these time-conscious motorists of the 21st century?
Tire dealers have a share, as do new car dealerships and full service gas stations. But it is the fast oil and lube change business that has captured the lion's share. The industry itself estimates that 43% of American households have their motor oil changed at a fast oil change center.
According to the fast-lube industry, the market continues to shift away from the do-it-yourselfer to the do-it-for-me, under-40 age group. "We outpace the fast oil and lube pack in important categories such as cars-serviced-per-day," says an Express Oil Change spokesman. "We take care of 54 cars (daily, per outlet), the industry takes care of 43. We also lead in the per-ticket average $46.32 per vehicle vs. $37.12 industry wide."
More than 14,803 freestanding stores were offering fast oil change services in this country in 1998. The growth of such service from 1987 to 1998 (the latest figures available) was a startling 565%.
Fast lube leaders
Jiffy Lube combined forces with Q Lube in 1999. Q Lube was the fast lube subsidiary of the former Quaker State Corp., which merged with Pennzoil Co.'s Products Group to form Pennzoil-Quaker State Co. in 1998.
Today, Pennzoil-Quaker State say they have more than a 35% share of the motor oil market in the U.S., with more than 60% of all oil sold to the fast lube industry supplied by Pennzoil.
In second place nationally, according to Jiffy Lube, is Pennzoil 10-Minute Oil Change, also based in Houston, with 871 centers. Texaco Xpress Lube is third with some 750 company-owned stores. More are in the planning stages (Texaco operates as Equilon Enterprises LLC, a joint venture of Texaco Inc. and the Shell Oil Co.). In fourth place is Valvoline Instant Oil Change with 398 stores; 49 more stores are planned in 2001.
What about tire service?
Express Oil Change, with 109 stores throughout the Southeast, performs just about every type of automotive service a customer might need from tune-ups and brakes to water pumps, radiators and heater cores... everything except tires. "We do not want to be in the tire business and we don't see our outlets as being in competition with tire dealerships," says company spokesman Robert Daniel.
Still, the company routinely performs tire rotation and tire balancing. This service, according to Express Oil Change, takes 20 minutes. "But when our customers demand new tires, we send them to the nearest tire dealer with whom we have a partnering arrangement. Only in cases where there are no independent tire dealerships in the market area do we purchase and install tires ourselves."
At Jiffy Lube, technicians will remove a customer's tires to inspect them for damage or abnormal wear. Tire rotation service is offered as well as computerized dynamic tire balancing. The company's ads then say the tires will be re-installed and lug nuts tightened to manufacturer specifications. Unquestionably, the fast oil and lube service industry is doing its homework.
'No competition'
Tire dealers don't seem to be experiencing any adverse effects in their businesses because of the fast-growing express oil and lube industry. To the contrary, the dealers we talked with have noticed an increase in customers.
John Robinson, owner of Robinson Tire & Auto Service in Lafayette, Ind., says lube and oil service always has been a very small part of his overall business. "But because many of the fast oil and lube stop locations don't perform a wide menu of automotive services, some of that business is automatically referred to me."
In Bellingham, Wash., Rick Fowler, co-owner of Meridian Tire Service, says competitive oil and lube service isn't hurting his business because he performs under-car and under-hood automotive services. "I don't even think about the quick service oil and lube guys because we service the whole vehicle. We consider routine oil and lube work as a courtesy to our customers, not as a money maker."
Don Chaney, president of Chaney Tire Service in Darien, Wis., says he doesn't perform oil and lube service at all. "We've been in business since 1963, we operate out of three bays and we're doing just fine, thank you."
In Knoxville, Tenn., Matlock Tire Store Manager Tim keeps close tabs on his 14-bay domain. Unlike the other dealers MTD spoke with, Matlock Tire performs a lot of oil changes.
"But we do this work as a way to bring in new customers and to keep the ones we have," says Williams. "Here at our main store, we do 20 to 25 oil changes a day, but we do not consider this work to be a money maker -- not when you have $7 or $8 worth of material, plus labor in each job."
Williams does the work because his clientele expects it. "They bring their cars to me because they trust me to take care of all their needs, including oil changes. Also, because the fast oil and lube service stops don't perform mechanical repairs, we get the business they can't handle. If anything, our automotive service is up because of them."
Senior Vice President Joe Jackson of Purcell Tire & Rubber Co. in Potosi, Mo., says that fast oil and lube outlets in his market areas are having absolutely no effect on his business. Purcell owns and operates 65 tire outlets in the United States. "In fact, we don't see the fast oil and lube customer as being our customer."
Jackson says the fast lube folks often make mistakes that benefit dealers. "Although many of these places say they will rotate tires and air them up, they sometimes don't. That's a mistake, and when they make them we see their customer coming our way."
According to MTD's 2001 Automotive Service Survey, more than 75% of independent retail tire dealers offer oil and lube service. Each shop averages 100 jobs per month; at $23 per job, the average dealer grosses $27,600 a year on oil and lube service.
Golden opportunity?
The fast oil and lube people say the tire business isn't for them, at least for now. Conversely, some of you contacted by MTD say the quick lube business isn't for you.
But could it be? What about a partnership? In general, the fast oil and lube business doesn't appear able to make a strong move into the heavy automotive service business.
Conversely, as tire dealers, you say you can't make money changing oil and filters. This feels like a made-to-order talking point.
It's no secret that the fast oil and lube participants suffer from high employee turnover. At the same time, tire dealers enjoy a fine reputation for service, including oil changes, with a dramatically smaller turnover in help.
In other words, most of you are looking at growth potential and you already have a well-trained workforce in place. Does that match up with the fast oil and lube folks who want to grow their business? It might.
As to the question of whether fast oil and lube centers will ever become more involved in the tire business, who knows? Who would have believed that people would pay $2 for a bottle of water at the county fair? Or that muffler shops would sell tires?
Unlike the early detractors of Starbucks, it's probably wise to keep an open mind when new possibilities appear. The last word goes to Jiffy Lube's Cindy Landers, who says her company, "will look at and test anything if it looks as if it could work."
