Dave VandeLinde, service director at Kuni Lexus of Portland, discusses the challenges of making money on tire sales and express service. He spoke by phone on June 6 with Dave Versical, editor of Fixed Ops Journal.
The conventional wisdom on Lexus service has been that it's easy to please customers when there are so few vehicles needing service.
Our active UIO (units in operation) is about 13,000. We do about 150 repair orders a day. Probably unique to our store is we execute that day with almost 50 percent of those people as "waiters." Sometimes we joke that we need to put bleachers in our lounge. But 75 or 80 waiters a day puts a lot of pressure on our organization because those are people that are toe-tapping, watching "Ellen" in lounge, eating all the donuts, trying to get out of there. That's probably the hardest experience for us to control. With 120 loaner cars, you've got to be able to get a lot of people in. That's, frankly, what the market demands.
How do you make money on express service?
We have to create a profitable model to do that. A lot of dealers have walked away from express service just because they lose money on it. We found a way -- mostly with our electronic multi-point inspection process and pit-crew processes -- to not only get the people through fast, which they demand, but to make sure they have a good time while they're in the store. We also make money in express. My express technicians are very productive.
Do you have a separate facility for express service?
It's a designated corner of the shop. The shop is set up into four lift quads. On the outside of each quad are work benches and computers, and then you work inside the quad. The express team is five techs and one captain that work in four bays. They have their own set of tire machines, and fluids are all delivered overhead. Those guys work in a team-type, pit-crew environment. Half of the entire work load (as measure by repair orders) goes through those six guys, and the other half goes through the 30 technicians that are in the shop.
How do you handle tire sales?
We pay Dealer Tire to put one of their representatives on the drive. He works in concert with our service consultants. So he sticks every tire that comes in as a check in and then has a conversation directly with the guest and serves them up a menu of options and discusses tire warranties and ride quality and everything else. He's really a specialist.
What's your potential in tires?
Our goal is 1,000 tires a month. Right now we're doing about 600, just kind of doing it on our own with our MPI process. But with David (the Dealer Tire representative) on the drive recommending as the car comes in, we're able to catch more. He's got a tablet that he works off of. He can print remotely and offer the guest a menu of good, better, best tire options. He can handle rebates, warranties, everything for us. We don't do tires to make money, but we do do it to keep people out of the independents and keep them out of Costco.
What other operations might you describe as "loss leaders"?
We don't charge to repair tires. Since oil is on a 10,000-mile service with synthetic fluids, if you just come in for one of those in-between services like a tire rotation, then it's less than $20 at our store. We typically don't charge to reset maintenance lights. If someone moves forward with a repair, we don't charge for the diagnosis. But we have to do that kind of stuff to stay competitive.
Les Schwab is the monster in tires in the northwest. They don't charge for tire repair, so there's no way that I would charge. But if I have to eat an $18 tire patch, I don't really care because I know the next time the car needs service, we're going to be top of mind.
You are a mature franchise in a mature market. How difficult is it to expand your parts and service business every year?
It’s not difficult in our model because I think we adapt and understand as the vehicle technology changes. Dealers that are sitting around wanting to get a thousand dollars for a 60,000-mile service and have gigantic labor rates just don’t get it. They sit there and scratch their head when they lose. You have to have a model. My technicians remember the days of 12- hour/90,000-mile services. The market and the vehicles just don’t command that anymore.
We are in a world of very high speed, competitive, light maintenance. We’ve built that model especially with an electronic MPI to back up the upsells. Our shop is very busy with, for the most part, small jobs. But we’ve created a profitable model doing that and that ensures our future. We’re not a shop that sits around and just waits for the 90K with the brake jobs and the timing belt to kind of fall in our lap.
What I also won’t do is sell you a dealer-recommended service or an orange/blue/yellow service or a gold/silver/platinum service. We only recommend what Lexus recommends at each mileage interval. And I think the guests trust us because of that.
So when we do come back with an additional recommendation on the oil leak, or the water pump, or your car really does need a transmission service because the fluid is really smoked in it right now because you’re driving to the mountains every weekend … then it just makes the upsell that much easier. I’m not into the whole corny service menu program.
Service advisers are notoriously unhappy. How do make yours exceptions to the norm?
We give them great support, whether its technology tools or just the ability to sell. One project I worked on this year more than anything, especially when it comes to service advisers, is flexible scheduling. A lot of dealerships add cash spiffs or bingo cards or pull boards or that kind of thing. But the greatest success I’ve had this year is recognizing their sales with the ability for them to have a more-flexible work schedule. Service consultants just work horrible hours; they work 10- to 12-hour days and they’re grinding it out through rushes. So I recognize my team and incent them with the ability to come in a little later, leave a lot earlier, that kind of thing. And they really enjoy that because that’s not part of the culture in automotive retail.
Some advisers complain about feeling pressure to sell services that customers don’t need.
We don’t do service menus, we don’t do oil flushes, we don’t do chemical programs. The only way that pencils is to have a healthy culture of a really good multi-point inspection process. We’ll only write and recommend what Lexus recommends, plus we do a thorough inspection on the car. Then we report back to the guest, with digital photos that show the bald tires, or the thin brake pads or the leaky water pump.
What about technicians? How do you keep them happy?
I bury 'em with hours. All of the griping and complaining goes out the window when they hammer out 12, 15 hours a day. We keep a very full, happy shop.
I treat the technicians like athletes, because they are. It’s a very physical job. It’s an aging workforce, which we all know. A couple of years ago I put hangers on every lift -- whether they wanted them or not –because I don’t want them lifting tires up and down.
They’ve got huge Gatorade tanks that are out there all day long. They’ve got non-productive team leads that are there to coach and help them with complicated diagnoses.
I hire techs from local Toyota stores or other stores in the market that are making 30 percent or 40 percent more per flat rate hour at the store they’re coming from than what I’m willing to pay them, but once they see the hours that I can give them and that we’re busy and that we’re competitive with the aftermarket and we’re competitive with the other luxury stores, we’re competitive even with other Toyota stores and because of that we’re banging out 9,000 hours a month and they love it.
I haven’t lost a tech to another dealership in the five years I’ve been at the store. And we’ve grown probably 25 percent in technician volume. The only ones I’ve lost are people that move out of state and that kind of thing.
As they get older, then I find either captain or supervisor, team leader or internal jobs that allow them to keep working comfortably and we can keep using their skills.
What makes you tick?
What really brings me the most joy in the job is seeing people move forward. If I had a dream for our business, it would be that everybody that works for me has a bigger house, a nicer car, and their kids go to a better college than they ever imagined. And it happens. I don’t want to say that I don’t focus on the guest having a great experience, but I just understand that if the people that work for me are moving up and providing for their families, and know, buying pickup trucks and buying boats and buying motorcycles, then I know we’re doing something right.
You don’t hear that very often.
It’s kind of a backwards way to look at it. But the more we focus internally on what we can do to support our own people, the more successful we are on the guest side of the business.