Originally Posted by Mad_Hatter
Originally Posted by Scuder
Thanks, I'm glad to weigh in when I can contribute. Sorry to take so long to reply. I thought I'd get a notification when you replied to me, but I didn't. I'll have to see if I missed that in the setup.
Jiffy Lube franchisees can be a funny bunch. But, when you're talking about annual oil costs in excess of a million dollars for owners of multiple stores, cutting that cost can realize significant contributions to the bottom line, even if national advertising features an oil brand different from the one used. And the price of the oil is only part of the equation. Large oil buyers will often get cash payments from the oil company. They are just like a business loan from a bank, but can be paid back by buying nearly exclusively from one oil company for a period of time. The repayment of the loan is built in the price of the oil, based on estimated purchases for the term of the agreement. Hopefully, both seller and buyer calculate correctly on the projected purchases, and everyone is happy. So, the brand of oil you see may depend almost exclusively on what deal makes the franchisee the most happy. Without these cash payments repaid this way, the price of the oil is much lower. This type of lube agreement is common from a two bay garage who may have lube equipment gifted to him, all the way up to large car dealers, where five figure payments are common. And, no, last I knew, franchisees couldn't opt out of advertising. It's included in the royalties they pay.
It's very likely the coupons you receive are local advertising done by the franchisee. I remember the fellow I worked with hated to do couponing, because he believed it lowered the perception of the value of the service in the eyes of customers, and they'd be reluctant to pay full price. The coupons you receive with the Pennzoil branding are likely at least partly reimbursed by Pennzoil through a co-op advertising program. Based on purchases, a Pennzoil buyer builds credits which can be spent on approved types of advertising. To get approval, branding needs to be very prominent. A minimum size for logos and emblems is determined by the size of the ad in square inches. While a Jiffy Lube franchisee buying, say Mobil, would lose this program from Pennzoil, but most, if not all the majors have a type of co-op advertising available to their customers.
Once again a great explanation of the inner workings. So It sounds like they're not restricted to one brand per se. I'm wondering if Valvoline oil change centers work in the same fashion. I've always thought one of the advantageous of using Wally's tire and lube is that you can have any oil you bought off the shelf or shipped to store put in. I believe I heard that to be the case..
Jiffy Lube and Valvoline Instant Oil Change took very different paths to get where they are. Jiffy Lube had moderate franchise growth in the '70s, and really snowballed in the mid '80s. During that time, they developed a non-exclusive working relationship with Pennzoil. Pennzoil was happy to be a supplier, but JL accrued a lot of debt, and to preserve their customer base, Pennzoil bought out Jiffy Lube's franchising company. That's another story, though. VIOC was watching from the sidelines, and suddenly realized they were late to the game, and needed to get in ASAP. So, Valvoline made a high effort to get in the fast lube market before they were shut out of it. Rather than selling franchises, they opened company owned stores. By the time the first VIOC store opened, there were hundreds of JLs, Quaker State Q-Lubes, Pennzoil 10 Minute Oil Change centers, and others. Franchising could come later. Since Valvoline was in control from day one, they could require exclusive use of their products. I remember even with JL lube contracts, only 85% could be required. I don't know if VIOC has lube purchase requirements built into their franchise agreements, but they could, and it would make sense.
You're right about Walmart. They'll install anything they sell. If you want something off the shelf, they'll charge a little more and put it in for you. I had about 20 Walmarts, and they had Pennzoil conventional 5W-20 and 5W-30 in bulk tanks. They also had racks full of six gallon dispensing boxes in a lot of different brands and grades.
