Profit Centers in Three Phases: People, Places, Practices
A car wash is a common one. Maybe it’s a truck rental or a general auto repair bay. Heck, it could be an alignment machine stuffed into the side of the shop.
These could all be secondary profit centers to the quick lube. In times of strained car counts and longer drain intervals, many operators are looking at ways to pick up an extra buck—or hundreds.
Different organizations can define profit centers in different ways. Sure, the retail additive display in the waiting area could be interpreted as a profit center, but this story focuses on the bigger parts. The quick lube is the beating heart profit center for most readers of NOLN. A full 84 percent of respondents to the 2019 Operator Survey said that more than half of their revenue comes from quick maintenance services like oil changes and basic fluid exchanges.
At the core of an operator’s desire to add profit centers is the idea of complement. The ideal addition doesn’t detract from the core quick lube business. It might even drive customers from one profit center to another.
This article is less about choosing your profit centers and more about maintaining a healthy balance between them. To keep your multiple profit centers from getting too unwieldy, focus on three main aspects: People, places and processes.
Pit Stop Oil and Lube started in 2002 in east Texas. When owner Aaron Porter looked to get into quick lube ownership, he knew right away that he wanted a diverse operation. The first shop he bought had an attached car wash and a truck rental service built right in.
“I think they complement well,” Porter says. “Car washes aren’t huge profit centers, but in my opinion, anything you can do to get traffic on your lot is going to help complement your core business.”
Pit Stop expanded over the years into new locations and added a general repair division to the company.
By 2019, the network included seven quick lubes, five car washes (three attached to quick lubes), one full-service repair shop and the truck rental business. Porter sold to Grease Monkey in late 2019, but he shared his career experience with NOLN.
Porter says that the diversified operation sometimes tested his management skills, but it can be a great fit for the right market.
“People want the one-stop shop experience when they can get it,” he says. “As long as that doesn’t detract from your core business, I think that if you can do that without adding a whole bunch of expenses, then it’s always a win.”
Lending expert advice for this story is Bryan Stasch, who is the vice president of program and content development for the Automotive Training Institute.
Division of Labor
Knowing how to manage your people in a diversified operation is crucial. It’s the largest expense of doing business, so finding efficiencies among profit centers is a great way to keep overhead low.
But spread people too thin, and the product suffers.
“You’ve got to be willing to make the financial investment in adding that staff,” Porter says. “But everybody has got to maintain that focus. It would probably be on the shop manager’s shoulder a lot to make sure that they’re constantly reminding staff that we’re adding this new repair bay or service, but we cant’ even let our quality slip with our core business, which is the quick lube.”
Trouble can form when a customer service employee at the front desk is handling quick lube customers and truck rental customers at the same time.
Stasch has seen shop operators add a profit center that seems like a turnkey solution but just ends up splitting customer service in half for both.
“It usually just makes your people at the front counter very inefficient,” he says.
Porter said his truck rental division did well enough in business that he dedicated a full-time employee to that role. By clearly defining the roles, the employees weren’t moving back and forth between centers.
“If you’re providing bad customer service in your truck rental because you're understaffed and you're not running it as good as your quick lube, then it makes your quick lube look bad,” Porter says.
A Little Cross Training
While the daily roles need to be clearly defined, that doesn’t mean skilled employees can’t be ready to work in multiple centers.
Stasch says that having people trained for more than one profit center provides a backup plan if somebody needs time off. It’s also a training ground for future managers.
“Training specific to roles— but cross training roles so somebody can step in if somebody is not there. That’s also your growth. That's your next technician or next advisor’s succession plan,” he says.
Employees Know Best
Despite the division of labor, all employees need to be knowledgeable about the other profit centers and able to refer customers to the right person. Customers will be quickly frustrated if a shop tech can’t help a customer get to a truck rental employee or vice versa.
“I think the biggest thing is communication with your team,” Porter says. “To make sure they don’t view that profit center as someone else’s problem or someone else’s job.”
Porter’s employees were trained on the full scope of the business. But he says he still made it a point to let them know that at the end of the day, Pit Stop is a quick lube business first.
“It’s teamwork for sure in our industry, but it’s making sure that everybody understands that this is the main thing,” he says. “And it’s going to stay the main thing.”
Eyes vs. Stomach
Profit centers most often represent different aspects of one location. In the quick lube world, it’s more common that multiple profit centers might include multiple shop locations under a single ownership. While 51 percent of respondents in the 2019 NOLN Operator Survey said they just operated one shop, the number of multi-shop operators is growing.
To consider adding this kind of profit center, Stasch says that operators should ask themselves hard questions.
“Is it an ego thing, or is it a strategic plan of you doing business?” he says.
If it’s the latter, then Stasch offers a guideline to make sure that adding a location doesn’t simply create two stores operating at 50 percent.
“When we start talking about expanding locations, my first question is: Are we at 75 percent capacity?” he says. “If we’re not at 75 percent to capacity, I have a whole lot more room to work with the one store without doubling the cost of being in business with store no. 2.”
If the pieces aren’t there, operators would be smart to give it some time and set up long-term success over the short-term rush.
“We’ve always been slow and steady on our growth, and were able to maintain,” Porter says. “We didn't get too overzealous in growing too fast or just adding too many repair bays at once. I'd like to get as much as I'd like to handle with the staff I had before adding anybody else.”
The final part of this, Stasch says, is that the process needs to be duplicative in order to roll it into another location. The quick lube industry is great at this, but managers need to be strong leaders to make sure that the process is being replicated.
For any profit center, place also refers to the things that fill it. Research by the operator reveals the basic startup costs. After real estate, the big ticket items here will be equipment—specialized equipment.
Some areas offer more variability than others. While it’s tougher to incrementally start a car wash operation, mechanical repair is one area that can be closely tailored to what you plan to offer for services.
Porter had his mechanical repair space for three years before starting to form that part of the business.
“We bought that in 2009, and we didn’t start doing any repair work until maybe 2012,” he says. “It may have been a small amount. In 2012 we went ahead and started investing in equipment, getting AC machines and alignment machines. And really trying to get into it a little bit more.”
Be sure to buy equipment and tools with a certain model in mind. In Porter’s case, the model for general repair still relied on a timeliness factor. No engine overhauls or things like that.
“As a pure quick lube operator, at least for me, it was important to set myself apart and maintain that speed,” he says. “That’s kind of our core. We’re quick lubes. So it was my thought that if you get too far away from that, you get to the point that you’re no longer a quick lube. You’re a normal repair shop that does oil changes.”
No matter the operation, make sure that you’re working with your vendors to see past the equipment sale. Quick maintenance down the road is imperative to avoid costly downtime.
“Once you get into the repair side of things, and car wash as well, you need to make sure that whoever you’re buying equipment from, whether it’s car wash equipment or repair equipment, that you’re not only getting the best deal on it, but who in your area can service it quickly and so you’re not having a whole lot of downtime?” he says.
Get familiar with your local market for maintenance providers either from the manufacturer or from a third-party. This is especially important for rural operators who need to estimate their repair time if something goes wrong.
Creating a Cycle
The “practices” category includes anything that makes multiple profit centers work toward their namesake: profit. One of the core ideas here is that one center might refer customers to another, which in theory makes two sales with one customer.
Porter found this to be true with his truck rental business. It was never the main way to meet new customers, but he says that it helped drive more customers to his quick lube.
“You move to a new town, and one of the first things you have to do is go drop your rental truck off after you unload it,” he says. “That was a way for us to meet new folks in the community and really try to wow them with good customer service.”
If employees are trained for that cohesive company culture, then the customer will be more easily referred to another part of the business. A smooth rental truck operation would indicate that the quick lube would be just as good—or better.
Owners at the top of multiple profit centers, shop locations and everything else can’t have their fingers on the pulse of every aspect of the business.
To achieve that duplicative, successful business model, clear expectations need to be set and communicated to managers and staff.
“But in order for them to know how successful they are, they have to be able to measure that success. It’s just important in any aspect of the operation that you have measurable goals,” Porter says. “That makes it a lot easier to manage that, if everybody knows what the expectations and the goals are.”
Stasch says that expectations need to be tailored for different roles, too. Staff members who have some role in the flow and volume of daily work should have clear performance goals that are needed for the business. That’s the measurable part.
In the general auto repair world, where Stasch is an expert, the customer service advisor is often the first point of contact with customers. They work the phones and greet people at the desk.
This is a crucial cog in the machine, Stasch says.
“Those front counter people who meet and greet customers, who answer the phone, have more control over profitability than the owner does,” he says. “Make sure they know how many cars per day do we need? How many gross profit dollars do we need? What’s the average repair order per car?”
In the quick lube world, this might be a role more suited for the shop manager, who could be helping as a hood tech and conducting the flow of work. That’s the person who’s watching car counts throughout the day or tallying service tickets.
Managerial positions become more important in the diversified operation, because they’re keeping eyes on the main profit line that supports the other centers.
“If that quality suffers, it’s not going to be very much longer to worry about the repair side, because your business will be gone,” Porter says.