Why does this business fail repeatedly?

[Bubba1235]

Have an opportunity(?) to partner with someone to take over a business (I supply financing and mentoring he provides the labor) in the local area. The problem is the business has failed 3 times in the last four years. It's a quick oil change shop that was built new 4 years ago and it *should* be a money maker but isn't, at least for the last three people that ran it. I've spoken with the all of the previous owners about why it failed and they all gave very different answers. That in itself suggests they don't know the real reason it failed.

It has a great location next to a Wal-Mart super center, right off the interstate, huge volume of traffic, has a very profitable car wash next door, etc. It *should* be a great location. (See Image)

The lease on the building is reasonable, utility costs are within expected norms and I can't see anything that I can point to and say "Ah, that?s why". I have a hard time saying all three of the previous owners were clueless but anything is possible I guess but I just don't think that is the case.

My biggest concern is that people are funny in that when a business goes under repeatedly it gets a certain stigmatism attached and they won't give it a try in the future. It could be I?m reaching for straws as to the why it failed but my gut instinct is that until I can come up with a real reason it?s failed so many times it?s a VERY questionable business investment. The flip side is that it could be a diamond in the rough and a real profit maker if I can find a way to polish it up.

Looking for any thoughts others may have.

 

[angus63]

Re: Why does this business fail repeatedly?

It may just be that economic downturn, or even just the mention of it, tends to push people to be more of a doityourselfer. Things like lawn service, gym membership, car washes and oil changes seem to be the type of things people cut out of their budgets first when financial worries begin.

 

[Cheetah 210es]

Re: Why does this business fail repeatedly?

What reasons did previous owners give? Location looks really good.

 

[Maclin]

Re: Why does this business fail repeatedly?

Most Walmart Supercenters have their own low cost Oil change service, you did not go into details about that particular Walmart. But if it offers that and is right next door? Sounds like a bad location already.

One wrong filter choice, or bad install, and a customer's engine goes south because of that, and the damages incurred from just one of those can negate profits fairly quickly. Sometimes a customer's engine will go out and it may not be the fault of the oil change but if you were the last one "in" so to speak it can fall on you in this litigious society. Sometimes the installer can inadvertently lean on a connection of some kind and break it or cause it to leak or come loose, and you are liable for those damages as well. I bet the bonding/insurance fees are high for this type of business.

There are lots of different type of oil filters, air filters, etc. Keeping them in stock can be a problem. Getting one you do not have on the shelf within an hour can be a problem. If you get too many of those "non-stocking" customers (that you have to make wait) in a row and word gets out.

Just sayin'...

 

[cribber]

Re: Why does this business fail repeatedly?

You really need to see the books on gross income and total expenditures for the last three years. There is a reason why it has failed three times in four years and before investing your hard earned coin you need to know why.

 

[rivermouse]

Re: Why does this business fail repeatedly?

There are of course many things that can cause one place to make money and another not. People that need to save money and shop at Walmart would most likely buy oil and filters there and do it themselves so traffic to that store is not relative. I would find another place that does oil changes and study what kind of customers use their shop. I think you may have a bad location and there is just nothing to draw people there. If you offered auto inspections and related repairs for a fair price you would have customers. If you plan to hire the low end workers little more than teenagers with NO REAL experience that alone can ruin your business.What is the starting pay for the workers? If you dont know this indicates you arent ready yet to make a decision....

 

[Cheetah 210es]

Re: Why does this business fail repeatedly?

There are of course many things that can cause one place to make money an another not. People that need to save money and shop at Walmart would most likely buy oil and filters there and do it themselves so traffic to that store is not relative. I would find another place that does oil changes and study what kind of customers use their shop. I think you have a bad location and a bad reputation for this shop..

Personally I don't really buy into this, I recently did the oil and filters on my truck and wife's suv. The price difference between DIY and the local shops was so minimal that next time I'll get it done. The saving doesn't warrant it.

 

[QC]

Re: Why does this business fail repeatedly?

Every question, and every answer, seems to deal with volume. Is volume the problem? If not then it is labor and cost and ultimately margin control right?

 

[Fireman431]

Re: Why does this business fail repeatedly?

Big money up front in stock and inventory of 55 gallon drums of 4 different weights (including diesel) oil
Big money up front in stock of filters for almost any vehicle that may drive in the bay
Big money up front in insurance regulations for any shop servicing the public where there are holes in the floor. You wouldn't think that people (employees and customers) would fall in there since they know they are there, but you would be surprised
Employees lifting on cash paying customers. Old receipt books used and employees pocketing the $$. Owner doesn't get the full amount he's actually making
EPA & federal regulation on used oil reclimation

Lots of reasons that it might not be making money. Only thing to do is scour the books of the last 3 owners.

 

[JB]

Re: Why does this business fail repeatedly?

I stopped using a quick change shop because of the constant, annoying pressure to do more. Change tranny fluid, brake fluid, diff fluid, etc, etc. They also pushed their favorite brand of oil and filters to replace my preferred brands. I would sit in the waiting room, with its three year old magazines and tv with soap operas and get a constant stream of live commercials in which they promised to save me from disaster.

I don't DIY anymore, but I get good prices and good service from the nearby Subaru, and now Toyota, dealers. They do what I want, when I want it and don't push to get more bux out of me.

I am sure the QC guys think this is the way to be more profitable and successful and maybe it is, but not on my business it isn't.

Look into their volume of business and how they have treated their customers.

 

[windshield_time]

Re: Why does this business fail repeatedly?

The above all make good points. Something is askew in this. The business failed for a reason, location, does the walmart do it ? Or bad reputation, did they break something or promise something from the original owner that caused a bad rep. Last but not least, think brand, what company was the other business associated with. I know I'm not going to jimmy jo bob to change my oil. I will go to Valvoline, speedy, etc etc.

Also you need to make sure there is an out for you, or at least you aren't the silent partner. IE: the guy hires idiots, or isn't able to do the job, you would have the ability to replace him, it's your money.

A little story, Family friend owned a body shop for years, insurance stuff and a lot of classic restores. He tried 3 times to work someone into the business before he retired. First guy was a drunk, Second was just stupid, last guy was lazy. He and I talked about it, and he said this to me, which made a lot sense. " I needed to find someone with something to loose" All three people were single, no kids, no other responsibilities, IE: nothing to loose, they just went and found jobs other places. Now I am not saying that all young or old single people don't have anything to loose but I think you get the point. Your money you're the one with the most to loose.

 

[QC]

Re: Why does this business fail repeatedly?

I am sure the QC guys think this is the way to be more profitable and successful and maybe it is, but not on my business it isn't.

If that was a reference to me please note I have an OEM dealer background, and I strongly believe in that model. Not sure to what you are referring . . .

 

[rogerwa]

I would also look at the previous owners pedigree. Are they mechanics who thought they could run an oil change shop? Or are they businessmen who know how to run a business. There is a big difference to running a business than to do an oil change. Managing labor, good hiring, marketing, inventory, financial/debt management, etc

If these were seasoned business owners I would be very wary.

 

[LippCJ7]

Re: Why does this business fail repeatedly?

Bubba I think I would lean a different way, True the constant badgering to upsell at the quick oil change places is annoying, another issue could be the lack of confidence some people get with the young uneducated men and women working in these places(yes it is a stereotype but you all know what I'm talking about) but I think that if you really want to make a go of this your best bet is to have a plan for 5 years, expect to loose money the first and possibly the second, focus on customer service, build a customer base that wants great customer service at a reasonable cost and I think you will build a lasting business.

My point is that you said this business has failed 3 times in 4 years, that in no way inspires customer loyalty I think the reason this business has failed is because the previous owners business plan is simply too short sighted and he/they should have planned for a longer term business plan to build a more robust customer base based on loyalty and customer service, include Dealership partnerships(again focused on good customer service at a reasonable cost), and Fleet pricing. These last two customer relationships will only come with the belief that your business is built for the long run not something that will change hands in 12-18 months.

 

[Bob_VT]

Re: Why does this business fail repeatedly?

When I worked at a car dealer years ago.....Jiffy Lube was the top "upselling" auto service business in the entire country and then the local one here went under. Valvoline re-opened in the same location and is now having problems. I think it has to do with the community and not the economy. People are creatures of habit and only trust certain places to spend money.

 

[rbh]

Re: Why does this business fail repeatedly?

I see lots of valid points, one thing that kinda strikes me about just a lube shop is that its just lube (detailing aside)
When you get your oil changed and "periodic maintanance" done some things must be done by a mechanic, IE hoses belts set valves ETC, so just offering a oil and lube service, you loose most of customer base right from the get go.

How many times have you gone in for a oil change and asked the mechanic to check this or that?

 

[Bob_VT]

Re: Why does this business fail repeatedly?

When I worked at a car dealer years ago.....Jiffy Lube was the top "upselling" auto service business in the entire country and then the local one here went under. Valvoline re-opened in the same location and is now having problems. I think it has to do with the community and not the economy. People are creatures of habit and only trust certain places to spend money.

To further add a bit more .......... we do have another locally owned private oil change place that has been sustainable for 20+ years and it is a no-brand name place. They also do brakes.

I seriously think it is based on community habits and resistance to change.

 

[rbh]

Re: Why does this business fail repeatedly?

To further add a bit more .......... we do have another locally owned private oil change place that has been sustainable for 20+ years and it is a no-brand name place. They also do brakes.

I seriously think it is based on community habits and resistance to change.

YUP, even the places around here that do brake and muffler work have a full time wrench or two on staff and have oil change specials on every now and then.

 

[LippCJ7]

Re: Why does this business fail repeatedly?

I have often thought that a quick change place such as this with a decent set of specialized tools such as a brake lathe and a Press would do well with oil changes and brakes but also providing rotor/drum turning and wheel bearing press service, basic machine shop service for the DIYers out there. I don't know a Machine shop that's open on Sundays so I think it would be a good way to build a customer base over time, and you could always provide a mid level mechanic to do the service for your customers as well.

 

[rbh]

Re: Why does this business fail repeatedly?

If you wanted, how about diversifying the businnes with a hitch shop, you have the lifts.