Fast Lubes Weather Rising Costs


Despite bulk oil prices rising almost $1 per gallon, and more OEMs introducing longer oil drain intervals, U.S. quick lubes posted higher average tickets and continue to weather the impacts of rising costs, National Oil & Lube News reported.

Published in the September issue of NOLN, the 2011 Fast Lube Operators Survey compiles data from 4,451 facilities in all 50 U.S. states, looking at quick lubes operations, prices, demographics, employees, sales, products and services.

The average [quick lube] shop is still enjoying a pretty good profit margin, with sales up just a little over last year, NOLN Editor Garrett McKinnon told Lube Report. In todays economy, youll take that.

NOLN presents survey results in two categories: for companies operating less than 30 stores, or LT30, and companies operating more than 30 stores, or MT30, the large corporate chains. The average LT30 company operates close to 3 stores, while the average MT30 has 288.

One major trend was a dramatic increase in cost of goods, driven by rising crude oil prices and four separate rounds of bulk oil price increases. The average cost of goods for a full-service oil change reached $15.33, a 16.8 percent increase from 2010, and the highest dollar figure ever recorded. Per-gallon bulk lube prices increased nearly 13 percent, from the average of $7.66 per gallon paid by a typical fast lube a year ago for its highest volume bulk oil, to $8.65/gal. today.

In talking to operators, that seems to be foremost in their minds, NOLN Editor Garrett McKinnon told Lube Report. The economys tough, and theres a lot more competition than there was, but it really is the cost of goods I think that has affected operators more than anything – the fact that bulk motor oil prices have gotten just very, very high, and the price increases we have seen this year have been pretty dramatic. Its been really tough in todays economy to pass on those costs.

The average ticket total for LT30 stores rose from $54.08 a year ago to $56.29 today. The number of cars coming in each day for oil changes declined from 31.7 last year to 30.5 now. The average price of a standard-full-service lube oil and filter changed reached $35.03 in the LT30 category, up 3 percent from last year.

McKinnon noted the decline in car counts was offset just barely by the increase in total ticket costs. Operators are concerned that every time they raise prices, the oil companies raise theirs, he said. A lot of operators are a little worried about Whats the limit? With the price of a full-service quick oil change averaging about $35, he noted, operators are concerned whether customers will still see it as a value proposition if rising costs require increasing that to $40 or $50.

Yearly sales per store average nearly $601,200 at the smaller companies, up from more than $575,400 last year. Payroll, as a percentage of gross sales, increased from 26.5 to 27.1 percent at LT30s, and the smaller shops average net profit declined from 13.3 percent last year to 11.3 percent in 2011.

Pennzoil remained the popular brand in fast lubes, with 18 percent of LT30s listing it as their house oil. It was followed by Mobil (16 percent), Valvoline (14 percent), Shell (8 percent), Chevron and Castrol (7 percent each), and all others (30 percent).

Mobil remains the leader in synthetic oil, with 56 percent of LT30 operators listing it as their top selling synthetic oil. Trailing it are Pennzoil (12 percent), Valvoline (8 percent), Castrol (6 percent), Amsoil (3 percent) and all others (15 percent).

The real growth weve seen in the last couple of years has been the private label, or even off-brands, and some of your independent brands, McKinnon pointed out. Operators are looking at that as a way to really cut costs.

Total miles driven between oil changes continues to rise, according to NOLN. LT30s reported average drain intervals of more than 4,500 miles this year, up from about 4,360 miles two years ago. The larger companies posted average drain intervals of more than 4,600 miles. Miles between oil changes for vehicles with oil monitors reached nearly 4,900 miles at LT30s, and more than 5,300 miles at MT30s.

McKinnon said that while operators are able to get customers back in the door regularly, the challenge going forward relates to more recent models and changes in recommended oil change intervals. He noted the typical vehicle a fast lube sees now is probably five to six years old.

A lot of those cars, when they left the factory, did have shorter intervals, he continued. In the last three years youve seen a wholesale movement away from those short intervals by automakers. These newer cars will probably be brand new to three years old when they start rolling into fast lube bays in the next two to three years. A lot of people are concerned that theyre going to see a real major increase in those average intervals, and if they do that, a corresponding decline in car counts.

The complete 2011 NOLN Fast Lube Operators Survey report is available on the NOLN web site (see at no charge through Sept. 30, McKinnon noted, thanks to Citgos sponsorship of this years survey. After that date it will be archived and available for purchase.

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