Tradition Holds on Tightly

The convenience store model eclipsed the auto service model … but service stations have hardly disappeared.

Tradition Holds on Tightly

September 2023   minute read

By: Keith Reid

The automotive service model was the perfect pairing with fuel sales for the first half of the fuel retailing industry’s history. The rise of national auto service centers, quick lube operations and dedicated tire shops in the 1960s pressured the model. The economy of scale that the new players enjoyed created pricing challenges and competition for quality technicians.

Cars also began to become both more complex to work on and less dependent on general maintenance. By the early 1970s, the industry started to morph into the current model, with the service bay making way for the convenience store.

One dealer who made the move in 1995 from repair to convenience was Chuck Nietsche, president of Harriman Motor Fuel Inc. in Central Valley, New York. “The auto repair business is too tough,” he said. “A lot of cars are leased now, and they don’t need a tune and a lot of other maintenance like they used to. And there are brake places, muffler places, tire places—look, Costco and BJ’s and all of them. The cars are getting too hard, and the equipment and software required to work on them is a never-ending expense.”

However, the conversion was far from universal. Repair shops, including some with the more traditional gasoline service station model, can still be found with some regularity. A quality local shop can often provide superior, personalized service compared with a national chain or auto dealership.

“You find an honest guy and you build a relationship with a shop owner, and he’s going to take care of you. He wants you to come back, and he wants you to be safe, and he doesn’t want you to break down on the road,” said Peter Kischak, president of Service Station Dealers & Automotive Services of Greater New York. “I wasn’t out there having to sell a certain amount of tires each month. If you needed tires, I’d tell you that you needed tires. If you needed brakes, you needed brakes.”

So what’s involved with being a service station dealer today? A good operator in a good location can still earn an income and support a family, all while being able to call the shots as an entrepreneur.

“You can make a decent living by being honest and not taking advantage of people,” said Vito Corbo, owner of Aries Automotive of Somers, New York. “People come in and they’re friendly and they’re happy to get their car done. That’s satisfying. And it’s a decent living, and I can’t complain. The downside of being an entrepreneur is if you want your business to thrive, you need to be there 80% to 90% of the time. You must be presentable, straightforward and stand behind what you do.”

A key to success expressed by many repair shop operators involves building trust in the community, with most of the new business being generated by word of mouth based on solid customer service.

“I get a lot of people who have bought a new car but can’t wait to get out from underneath the dealer and come back to us,” Corbo said. “Trust is a big part of it, and that’s what we built our business on. We answer the phone when we’re supposed to. When I call the auto dealers on behalf of customers for warranty work or such, they don’t answer the phone or get back to you half the time.”

While the service station model can be viable, there remain some significant challenges.

Working on Modern Automobiles

Maintaining modern cars can require sophisticated diagnostic tools, repair software that costs thousands of dollars and specialty OEM parts.

While it can be costly to stay up to date, even worse is not having access to the tools, parts and information required to make the repairs. Independent repair shops claim auto manufacturers make this access difficult in order to drive traffic to their dealership service departments. This has led to “Right to Repair” bills focused on the automobile industry at both the state and federal levels, which are working their way through the legislative process.

In response, automakers claim that their work since 2000 through the National Automotive Service Task Force (NASTF) has eliminated most of these concerns. NASTF points to a website it launched in 2001 that provides the data required to diagnose and repair current vehicles minus certain information for vehicle door/ignition key and immobilizer reprogramming that would raise security issues.

Independent repair companies claim that the information is still incomplete.

“The technology in automobiles today is truly amazing,” Kischak said. “It’s just mind-blowing, and for us to repair them, we need scan tools and information that will take care of all the cars, and that’s very difficult for us and why right to repair is so important.”

The increasing number of EVs is not a significant issue currently (especially with newer vehicles under warranty) but promises both challenges and opportunities. Consumer Reports currently finds EVs to be less reliable than their internal combustion counterparts, though that could change as the technology continues to mature.

Brakes, tires and suspension will offer similar repair and maintenance opportunities with both platforms. Batteries and electric motors are relatively hands-off but are linked to more electronics and computers that need sophistication from the technician.

Labor Issues

As with many quality trade jobs today, the pipeline for new technicians is drying up. And there is fierce competition for those new entrants or existing technicians.

“When I had my shop, I had a close relationship with the trade schools,” Kischak said. “We had a work-study program, and I would be able to take one of their best techs, and then they eventually worked for me. Now, most of the dealerships take any new technician in before the aftermarket repair folk get a chance,” Kischak said. “We can’t offer a lot of benefits, typically, or 401(k)s.”

Good pay can compensate somewhat, but even that has limits.

“I have a few good techs with me, and they’ve been with me for many years,” Corbo said. “I try and pay well. But I lost one guy who had been here for 20 years to a [municipal] garage. He took a bit of a pay cut, but their benefits are through the roof.”

To Sell or Not to Sell (Gasoline)

Selling gasoline works best in a business model where overall profitability is not exclusively driven by the profitability of the gasoline product itself. Gasoline can be profitable, as it is currently, or it can be marginal, as was the case for most of the past several decades. However, the traffic brought to the site from fuel sales lends itself well to highly profitable additional profit centers like those found in the convenience model. This also worked for the tires, batteries and a range of automotive accessories (TBA) sales and routine maintenance opportunities of the traditional service station.

Unfortunately, independent automotive repair shops can find gasoline to be more of a challenge than an opportunity, and many shops have removed the tanks and pumps.

Corbo still sells gasoline under the Gulf flag, but it’s a struggle.

“That side of the business, with the number of regulations that go along with it, with all of the paperwork, testing, everyday reconciliation—it’s a pain in the neck,” he said. “We make a very small amount on the gas, and then you have the credit card fees. And then if you have a little bit of profit, you’re taxed from the government.”

Jones Service Station in Olive Branch, Illinois, offers a range of products and services in conjunction with auto repair, which helps it work as an offshoot of the multiple profit center model. Location also plays a role, both good and bad.

“We do repair work, we have a hardware store, we sell propane and kerosene and have a car wash,” said Bobby Jones, owner. “We are also about the only gas station in the county. We border Missouri and Kentucky. Both of those have much lower [gasoline] taxes compared to Illinois. We’re around 50 cents higher than they are, so most of the folks that sold gas just couldn’t afford to do it anymore.”

Still, Jones can take advantage of being the only fuel in town for those who absolutely need or want a convenient fill-up and even offers full service. The repair business also benefits from a lack of local competition, combined with the company’s history as a fixture in the community and quality service (A-plus rated by the Better Business Bureau). And as challenging as the industry can be, it remains more than worth the trouble.

“My dad started in 1948,” Jones said. “He passed away when I was 18, and I took it over. So I’ve been here for a while. We’ve had three or four generations of people coming here, and you take care of them, and they tell other people, and we’re fortunate to have what we got. I’m able to pay our bills and have a little extra. I’m eventually going to retire. But I like doing what I do, so I’ll probably stay here a little longer.”

More Than Fuel

In the very earliest days of the industry, when automobiles were a novelty, it wasn’t uncommon for gasoline to simply be another product sold by hardware stores and other retail outlets. However, as the production line techniques promoted by Henry Ford produced reliable and affordable automobiles for the mass public, dedicated retail fueling facilities developed specifically to cater to motorists. Early retail sites in the United States date to 1905 and the first “drive-in” location was opened by Gulf Refining Company in Pittsburgh in 1913.

Then, as is the case today, while retailers could make various amounts of profit off the fuel itself, the traffic-driving potential from fuel sales created opportunities for other revenue streams.

A review of the archives of the historic but now defunct National Petroleum News (NPN) clearly shows that it wasn’t uncommon to see versions of the models that are popular today as far back as the 1920s. This included tying gasoline dispensing to foodservice and even prototypical convenience concepts. But until the early 1970s, the primary ancillary profit generator model involved some form of automotive service.

The first services were centered on lubrication with what were called “lubritoriums.” Automobiles before World War II tended to require an aggressive lubrication maintenance regime with oil and grease, which created a service opportunity based for a messy procedure. Once these early service stations became established, discussions arose about adding other products such as tires to the mix.

Automobiles after World War II did not need nearly the same degree of lubrication and other regular maintenance as in the past, but there were still oil changes and some routine maintenance, and the industry doubled down on the prewar expansions into tires, batteries and a range of automotive accessories.

That model ran effectively through the late 1960s, when a range of national auto service, muffler, quick lube and tire sales outlets arose and made the old model far less viable through economies of scale. While many independent repair shops remain in business today, including some with a traditional service station model, most service stations morphed into today’s convenience stores. This was first formally acknowledged in NPN in 1976 in an article titled “Sharp Tips for Oil Marketers From the C-Store Guys.”