Fast Lube Slow Down


Fast lube industry growth continues to slow, and profit margins slipped in the past year, according to National Oil & Lube News. For the fifth consecutive year, smaller fast oil change operators reported that they plan to open fewer stores than the previous year. Average profit margins for smaller operators declined from 13.1 percent last year to 11.8 percent this year, while average profits at larger companies dropped from 14 percent a year ago to 12.7 percent this year.

National Oil & Lube News reported the results of its 2002 Fast Lube Operators Survey in its September issue. Nearly 300 U.S. fast oil change operators replied, representing close to 4,000 facilities. The Lubbock, Texas-based tabloid reported the replies in two groups: the LT30 group, consisting of companies owning less than 30 stores; and the MT30 group, companies owning and operating more than 30 facilities.

The average LT30 owner has been in the business nine years and owns two facilities, each averaging just under three bays. Eighty-seven percent are independent, while 13 percent are franchisees. By contrast, the average MT30 company owns 374 facilities, with an average of just over three bays per store. The average LT30 charges $26.86 for a full-service lube, oil and filter service, while the average MT30 charges $28.64, nearly 7 percent more.

The average LT30 owner has plans to open only 0.3 facilities in the future, down from 0.4 last year and 0.8 in 1998. (By comparison, the average MT30 company plans to open 18.6 new stores next year. No prior year data was reported.)

One piece of bright news for the quick lube industry is the reported decline in the average cost of goods sold for the typical lube, oil and filter service. Last year the LT30s spent $8.54; this year they spent $8.40, the first decline in more than five years. They reported spending $4.13 per gallon for their highest volume bulk engine oil, down from $4.20 per gallon last year.

Their larger competitors in the MT30 group pay an average of just $6.73 for goods sold. However, they reported spending $4.20 per gallon on bulk engine oil, up more than 80 cents per gallon from last year.

Labor costs have not risen in the LT30 group, holding at $7.75 per hour on average. In the MT30 group, workers pay decreased slightly in the past year, to $7.43 per hour. That difference is reflected in the two groups views on the factors that will determine the future success of the fast lube industry. About half of the large and small companies alike say customer service is the most important factor. But 21 percent of the LT30 group list quality employees as the key to success, versus none of the big-company MT30 group. In the MT30 group, 25 percent said controlling the cost of goods is the key, and an equal number cited extended oil change intervals.

The report also provides details about costs to build and equip quick lubes, insurance costs, costs of goods sold, and much more. The complete 2002 Fast Lube Operators Survey is available from National Oil & Lube News for $7 for subscribers and $15 for others. For information or to order, contact NOLN at or by phone at (800) 796-2577 or (806) 762-4464.

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