Kwik Lube Essay

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Dick Johnson, a successful textbook author and English professor at the University of Washington, retired from teaching in 1988 at age 40. His net worth was approximately a half-million dollars. In 1995, during a trip to Los Angeles, he came across a very interesting type of new business. It was a very small gas station that specialized only in oil changes and lubrication jobs. The old gas station had been remodeled, the gas pumps had been removed, and the large sign above the small building read "OIL AND LUBE-- $10 and 10 MINUTES." For two hours, Dick observed the converted gas station from a restaurant across the street. During the next month, Dick made three trips to Los Angeles to talk to the owner, George, about how he got into the business and how the business worked. Dick paid George $1,000 for his advice and information and promised never to compete directly with George or ever to open or operate a similar type of business in the Los Angeles area. After talking to his lawyer and accountant, Dick started to organize a new business--Kwik Lube. In March 1996, Dick had built his first Kwik Lube, and by the end of 1996, he had completed two additional Kwik Lubes in the Seattle area. The total gross revenues in 1996 from all three stations was $260,000. Between 1996 and 2000, business picked up rapidly. Total gross sales in 1997 and 1998 were $680,000 and $750,000, respectively. In 1999, total gross sales for the three Kwik Lube stations were $750,000, and in 2000, total gross sales were $780,000. Dick was convinced that this sales increase was due to his not significantly increasing the price of his basic service, which was to change the oil, change the filter, and do a lube job. In 1996, the total price was $9.95. In 1999, the total price per job was $10.95, and by 2000, the total price was only $12.95. In addition to running his three Kwik Lube stations in

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