I recently spoke with Jon Lancaster, a “retired” dealer out of the Midwest. He sold his Toyota dealership to Penske Automotive Group, Inc. (PAG) in 2012. At the time of sale, the dealership was in the top 5 for customer service retention in the United States.
How did he get there? Jon’s unequivocal explanation is that he got in the quick lube business.
In the early 2000s, Jon attended a dealer conference that exposed some surprising findings about the service department in the eyes of the customer. The facts were simple. According to the study, dealerships were losing 75 percent of customers due to convenience and satisfaction. Convenience issues uncovered two major problems: quick lubes were more convenient and customers want service on Saturdays. The findings went on to outline how repurchase rate improves with each service visit.
When he saw the effects it could have on the entire operation, Jon started by educating himself on the quick lube business model. He joined associations for quick lubes, got franchising information to understand value and profit, and then built facilities for Jon Lancaster Toyota.
The value proposition was very specific. The quick service facility needed 15 minutes and $39.99 to change oil and filter, rotate tires, and perform a 21-point safety inspection. The added bonus: a free car wash. Saturday was treated exactly like a weekday with unabbreviated service hours.
Jon didn’t sacrifice profit to see his business in a new way. While a normal service department works around 51% service labor and parts margin, a quick lube runs around 50%. The business model incorporated some “give-aways” but they played a very calculated role in building rapport and opening the door for larger ticket items.
Once the quick lube was rolling Jon profit-centered his used oil (sold to asphalt companies in the summer and heated the facility in the winter), got in the discount tire business to drive wheel balance and alignment sales, and committed to “attacking the garage.” In other words, technicians took on any make or model to keep a family’s service business within the dealership.
When you look at your business in the eyes of the customer the solutions aren’t that difficult. Making those solutions profitable requires a bit of creativity.