Shop owners rely too heavily on discounted oil changes that eat up half their orders with almost no profit. The speakers break labor into four types and explain why ELR should exceed your door rate, not match it, and how chemical programs can hide that your maintenance pricing is too low.
One of the first things they learn when they come on the program is how important effective labor rate is and what they're selling.
I want to add one thing because I was with everybody that just fell off the road, um, and Hoagie just said something really crucial, I think, is the mindset, right? So, uh, guide, or what most people say in the industry, is being 85% close to the door rate as being that— maybe that's the problem, the mindset. Isn't where it should be, to what Hoagie's point, to get higher than 85% or 100%, get well over your posted door rate.
Yeah, so it starts with believing that it's possible, and then once you do that, it's pretty easy to, to figure it out. So there's probably two that are really big that create this gap. The first one is a quick lube. So if you have a quick lube and it's more than 50% of your traffic and you're discounting your oil change, so let's say you're doing an oil change for $39.95 and your effective labor rate on that oil change is zero or it's $10 or whatever. You're just running those dudes through. Like if you're writing 100 ROs in a day and 50 of them are that, for a couple of reasons. One is the quick lube isn't built to sell more. So you're just doing more of the lowest common denominator. And that's a huge mix of the work is at a loss. You know, and so a really busy quick lube will do that to you.
You had me at discount. That hurt me. Yeah.
Then the, the second one is, is if you're pricing everything like it's competitive labor. So we look at it as you have 4 different types of labor. You have competitive labor. Now competitive labor is meant to drive traffic. You have diagnosis, you have maintenance, and you have repair labor. Most of the time, diagnosis, competitive labor, and maintenance will all have an effective labor rate way lower than the posted. The idea is that like, you know, a brake fluid exchange or brakes or batteries or anything like that drive traffic. And so that's, you know, that's the thought process is everything's competitive. We're trying to be competitive on on everything. And so if everything's competitive, then everything is at a loss, right? Because we're trying to drive traffic through pricing in that way. So that's the other big one that happens. So one is a really busy quick lube that is, you know, 50% of your RO account. And then the other one is that the way you're pricing everything is to be competitive. And a lot of times it's, it's shocking when you look at the effective labor rate on different maintenance items. And let's say they're on a chemical program. So they're with Justice Brothers or BG, whatever it is. By the time you actually figure out what your effective labor rate is, it's shocking how, how bad it is. You know, nobody's doing that math. And if you did do the math, you're like, well, I can't charge $300 for that. Or, you know, and so. Compromise through the effective labor rate, and you don't understand how to price those, how to set 'em up, that sort of thing. So that, those are the, the big two.
