Creating the Greenest Auto Mechanics on the Block
<p>(Episode 26): AAMCO, the auto service chain, launched a green certification program that will close the loop on waste in certified franchises and promote efficiency at every step. Matthew Wheeland sat down with AAMCO CEO Todd Leff to learn more, and discuss some of the challenges the company faced in launching the program.</p>
When you think of auto mechanics, clean and green aren't usually the first words that come to mind. But last week, AAMCO, the auto service center, unveiled a new program that aims to eliminate all the waste from their 880 franchises, as well as help AAMCO customers make their cars more environmentally friendly.
AAMCO's Eco-Green Auto Service Certification program has a checklist of nearly 40 ways for store owners to improve their performance, ranging from fairly standard goals like purchasing recycled and recyclable materials for the store, cleaning facilities with non-toxic solutions, and promoting alternative fuels to customers, to cutting-edge solutions like the use of a waste-oil heater that turns an otherwise polluting byproduct into heat for the building.
I sat down with Todd Leff, the CEO of AAMCO, to talk about the program, the specific challenges posed by working within a franchise system, and how small businesses can make a big impact with simple changes.
Matthew Wheeland: Todd, thanks for joining us. I wanted to ask you about the Eco-Green Auto Service Certification, the new program that AAMCO just launched. Will you give us an overview of the program, just a thumbnail sketch.
Todd Leff: Sure, the program allows AAMCO dealers who want to participate in an environmental program to obtain the certification from the company by meeting benchmarks in about 35 different categories that have to do with either the operation of the AAMCO center, or in delivering eco friendly services to customers' vehicles.
MW: So this is working on two fronts then. This is both about making the service centers themselves more environmentally friendly, but also helping customers reduce their own impact.
TL: Exactly, it's really a two-pronged approach to the issue, and because we are a franchise model, we need to demonstrate to our center owners that, one, there are new services you can market that are eco friendly services that customers want, and that will help the environment; and the second prong of it is that there are things that, as business owners, we can do in the shop to operate in a more environmentally conscious way, but also will save the business money. And so the bottom line is that being green can be good business.
MW: I want to come back to discussing the benefits of this, but tell me a little more about the certification itself. What are some of the steps that centers need to reach in order to be certified?
TL: We break the certification process down into five major categories. There are things like being proficient in delivering high-mileage services, low-impact cleaning method at the center, adhering to certain waste fluids management, environmental housekeeping, and then, conservation and waste reduction.
And the goal on that side is to create a zero-waste output environment, or a closed-loop shop so that we're putting less out the back of the store than we did in the past.
MW: So explain to me a little bit about, in the current model, what is waste, and where does that go now in this zero-waste model? In other words, what products are being sent out, and how are they going to be dealt with under a zero-waste model?
TL: Okay, well let me give you one example. In our business, we use a machine that basically cleans the inside of the customer's transmission, once we take it apart, with solvent. And that's how we clean it so we can then rebuild the customer's transmission. We use about 220 gallons of solvent per store, per year. And in the past, you would use the solvent a couple of times.
The solvent would, obviously, get dirty because you're cleaning all the gunk out of the inside of the transmission. And then, we'd have to send the solvent offsite, we'd have a waste hauler come, and whether that waste hauler recycled it or dumped it, it had to be transported offsite, and dealt with offsite.
As part of the Eco Green program, we're using a new machine in our shops that, basically, recycles the solvent in your store every single night. And so what happens is, you use the solvent; each night the machine turns on; it recycles the solvent through this machine, and what you're left with is kind of a small, quarter-sized cake of the impurities that were in the solvent for that day. And you basically start with fresh solvent each morning.
So instead of us having to have the solvent hauled away, dealt with offsite, we're now recycling onsite, and we're left with, basically, a quarter-sized cake of the dirt, or metal that was in the solvent. And so we've greatly reduced the amount that we're hauling offsite.
We're recycling that, and using it in the shop, and so the center benefits in two ways. They don't have to keep buying new solvent to replenish their cleaning machine, and they're putting out less waste into the waste stream. So that would be an example of one of the new machines that we're using as part of this program.
MW: In doing research for this interview, I was also reading about a machine that is going to turn waste oil into heating oil for the centers.
TL: Sure, and you know, some of that technology has been out there for a couple of years, but it's just been so improved over the last couple of years. And so we have a Waste-Oil Heater division, where we're, basically, putting these Waste Oil Heaters in shops, and what they will do, is -- again, it's similar to the solvent.
Instead of in the past, where we would take the customer's used transmission fluid and have to have an outside hauler come in and either take it and dump it or send it to a recycling facility, what we're doing now is taking that used transmission fluid from the customer. And we're actually using that to fuel our heating system in our centers.
And so we're doing away with all that hauling of waste out of the shop. You reduce the risk of any oil spill because it is immediately, basically, being stored at the site, and then, burned in this Waste-Oil Heater. And, obviously, it's a great savings for the center because they've turned a waste product into heat.
MW: It's ideas like that that make me wonder why now. What took so long to get to this point? Do you have an idea of -- were these technologies not ready for primetime?
TL: I really think the last couple of years -- it's twofold. There's been a much greater focus in the back of the shop by state regulators, and, really, looking at the automotive after market, and saying, hey, you guys have to clean up your act, and run a more environmentally efficient shop. And I think it's the general public awareness of a green consumerism. And that, given their choice, customers want to go to businesses that are more environmentally conscious.
And our goal, or our role as the franchisor here, is to take all of these great ideas that are out there, and kind of lay them out in one program for our franchisees. And that's what hasn't been done before. These bits and pieces have been out there, but as the central managing authority, it's really to put it all together in one program, and show dealers the benefits of going green.
MW: Another big thread of this program involves selling Flex-Fuel Conversion Kits. Tell me a little bit about that.
TL: Sure, the Flex-Fuel Conversion Kit is a bolt-on product that allows us to convert a gasoline-powered vehicle to run on both E85, or regular gasoline, or, really, any combination of ethanol and gasoline. And it's a product developed by a company called Flex Fuel US, and our goal is to be a distributor of that product, and to be preferred install centers for the Flex-Fuel product.
MW: And this is geared, primarily, towards fleet vehicles, at least at launch.
TL: Yeah, the first units that they're working on, obviously, the idea is to be able to market to the greatest number of vehicles they can. And because EPA requires that each vehicle unit gets certified, the focus has really been on the commercial market, and starting with the largest fleets. And so the first unit that was certified by the EPA was a unit that will cover Crown Victoria's Lincoln Town Cars because there's a lot of limos and police cars that use that engine family.
MW: It seems like that's a pretty great place to start. Not only because there are a lot of those vehicles under one roof -- one company or one municipality owns them -- but you could make a big difference in terms of total emissions pretty quickly if you convert all those.
TL: Absolutely, and because there really is a great, long-term savings in that, currently, E85 is, on average, about 18 percent less per gallon than gasoline right now. And so it's convincing fleets to kind of take advantage of, and there are certain tax credits available -- you know, take advantage of these tax credits. Take advantage of the fact that E85 is a lower price than gasoline, and use that to get a return on this investment.
MW: Well, this seems like the right time to ask. What are some of the benefits? Obviously, you've gone into some in terms of reducing waste and costs around that. How are you pitching this to franchisees?
TL: Well, we've done a number of outreach communications. A major focus of our convention was "Turning Green to Gold," was a big theme of our convention last November. We followed it up with webinars and, of course, this certification process. And so now, our field people are out, actually, certifying the stores. We started this in November, and we've had, to date, 55 stores already completely go through the certification process.
And we probably have about another 20 to 30 pending applications for certification. So now, it's really getting it out into the field, and creating market champions who have a sensitivity to this issue, and who want to lead in the marketplace. And I think once you start to get those people championing the cause in the marketplace, other franchisees will come along.
MW: Okay, and this is, you said, 55 out of about 800 total centers.
TL: Yeah, we have about 880 franchises in the United States right now. And so in two months, we've got probably 10 percent of the chain to submit applications, and we've got about 55 of those to actually certify.
MW: That's impressive growth already considering this is a new program...
TL: Well, we're excited about it 'cause you know when you launch something like this, obviously, you do your research; you try to gauge the reaction of franchisees, but remember, their primary business is being in automotive repair. And this takes some work. It takes some changing of their systems, so you're always unsure right up until the last minute how well received it's gonna be. But so far, we're really encouraged by this.
MW: And what are some of the benefits to individual owners?
TL: Well, we've actually quantified this, and we've told owners, if you implement the three or four new services that we think you can market to consumers -- if you implement three or four of these cost-saving but environmentally friendly methods in your store, at the bottom line we're looking at about a $25,000 increase to a typical store's bottom line per year, by just implementing three or four revenue things, and three or four cost-savings items.
So it adds up relatively quickly. I mentioned the recycling of the solvent. Well, you know, in one year, that's about a $3,500 savings to the store, just from that one method of implementing this program.
MW: And in thinking about some of these technologies that are being implemented, is that an up-front cost that people have to put some money down, and then they'll start seeing savings pretty much right away?
TL: Yeah, you know some of them are fairly significant up-front costs, and so there's a return on investment over a period of time. For example, that solvent machine is about a $3,000 investment, but we have some really very inexpensive methods and equipment that get immediate returns.
And I'll give you an example. For cleaning smaller parts on the bench, a shop typically uses cans of spray cleaner. Now, one, we don't like these because they're aerosol based, generally. And two, it's a lot of cans. A typical shop will use eight cans of cleaner per week per technician. Well, we found a device, it looks like a small paint sprayer. And what it does is it hooks up to their compressed air system in the shop, and now we're using bulk cleaner put into this bulk-spray dispenser, and that sprayer is about $75.
So for a $75 investment, they now don't have to go through eight cans of cleaner per week. And a typical shop, per technician -- this is for one technician -- is gonna save about $550 a year per technician. Our shops have an average of three or four technicians. So for a $75 investment per technician, you're gonna save $500.
And, again, now we're not dumping all of these cans into landfills. We're not using aerosol. We're using compressed air. And it's a simple, small investment item, that's part of this program that can get our shops a great return.
MW: It sounds like both the solvent machine and this cleaning machine you were just telling me about, are essentially going to pay for themselves in less than a year...
TL: Oh, absolutely. The solvent machine, I think the return on investment is about 14 months, maybe a little less, and same with the Waste Oil Heater. It's, really, about a one-year return on investment.
MW: Is that still a pretty significant hurdle for a smaller business to be looking at?
TL: You know I think it can be, but I think people recognize that our dealers are in this business for the long haul, and realize that, particularly for example, Waste Oil Heaters, a lot of stores bought these in the last couple of years. And now they're just really good fortune because we saw heating oil go from $1.65 a gallon to $3.00 a gallon.
And so now, that investment that they made two years ago is, really, doubling its return because of the large increase in the price of heating oil. So I think these are small businesses, but these are entrepreneurs, and they weigh the ROI on these investments, and I think they're sold that these things get a great return over the long haul.
MW: I want to come back to the franchise model, but let's back up a little bit and explain how this program came out at the corporate level.
TL: Sure, it's actually interesting. It came about because we started to investigate some technologies in the alternative fuel market, particularly E85 conversions. And that led us to start to say, what else should we be doing on the environmental front? Not just in the alternative-fuel side, but looking at the whole business, and from the environmental impact that this business has on the community, looking at how we can develop new services to market.
So it really led to a ground-up review of what's the environmental impact of this business, and where can we benefit, quite frankly, from the rising green consumerism.
MW: As far as spreading the word out to the franchises, what is that process like? It's not something that we cover all that often here, so I don't know that much about it.
TL: Right, well, these are independent small businesses, and we really wanted to make it -- we could have mandated certain elements of this program, but we've found in the past that you have to get buy in from franchisees for a program to be successful. They have to want to do it; they have to believe in it, and they have to see a return on their investment.
And so, at first, it involved creating a really self-contained program; it couldn't be a number of pieces. And so we went out and looked at three or four different state programs. Nobody has a comprehensive program that fit our business, but we were able to take pieces, use our own working knowledge and get franchisee input, and we came up with about a 38-point checklist that the franchisee can earn green points.
And that's how they go about getting certified. They have to earn a certain number of green points off of this checklist to get certified. But you know, it started with you have to develop that whole package. What are the elements that you want them to incorporate? How many points are each one of these things worth? And then, once we kind of developed that program, then we had to develop all of the support for it.
So the point-of-sale materials, the in-store signage, the unique website for people who get Eco Green certified. And so we went through that process. And then, once we got the whole package together, then, we were able to start launching this at the field level, and it started with -- we're great believers in webinar training, so we did a number of webinars, where we trained the franchisees over the Internet on this program.
We did it at our in-person convention, our annual convention, and now we're doing it in market meetings, and, really, down at the store visit level. We have operations people that are in-store each quarter, and this is one of the items that they're reviewing with the owners.
MW: What were some of the obstacles that you had to overcome? What were some of the concerns raised by the business owners themselves?
TL: It's interesting. Some of those franchisees have already come back to us with solutions for it. One of the things that we announced in this program, and we've seen in our experience in this business, is that in-ground lifts are probably one of the biggest problems that we face in-store. And we stopped selling in-ground lifts many years ago, but a lot of our older shops still have in-ground lifts.
And so we said, you can't be certified under this program if you have in-ground lifts because we know these are a problem. They leak fluid. That fluid can either get into the ground, or they can get into the waste stream. And so we wouldn't allow them. And a couple of our franchisees went out and researched, and found a food-based oil, a biodegradable oil, that they could replace the oil in these lifts, which is what's used to raise the lift up and down.
They can replace that petroleum-based fluid in the lift with this biodegradable, corn-based oil that goes in the lift, and that solved the problem. There was a physical limitation. We have a lot of shops with in-ground lifts that could have never been qualified because of that rule. But with this new development -- and we've had a number of shops in Washington State now go to this new oil, and they were able to get certified.
And so I think one of the biggest challenges is we're a mature system: We've been in business for 45 years, we have a lot of older stores, and they have physical limitations that make it difficult to meet the standards that we're presenting. And we have to find ways for them to be able to satisfy that, even with the physical limitations that they face. So I think that was one concern.
I think the cost of buying these products, or machinery, was another concern. So we've come up with some incentives from the home office for financing. We've developed equipment-leasing sources so that they can lease these products, machines, instead of having to make a capital investment. So we have to find solutions that will allow us to get these things implemented.
MW: And it sounds like, that to some extent, this is almost a reverse flow of information. Is this an expansion of -- learning from your franchisees -- is this just a new element of something that's already been established?
TL: I think there's some new, there's some old, and it really flows both ways. I think we learned something on this oil-based fluids, and a lot of the new machinery, and the bulk-dispensing equipment, a lot of our franchisees hadn't heard of yet. So I think the biggest value of it is taking it all, and putting it in one program. There were a lot of little pieces out there, but there was not, really, a comprehensive overall program. And that's, really, one of the benefits of this.
MW: Great, great. All right, well thanks very much for your time today.
TL: I appreciate it. Take care.
Matthew Wheeland is the managing editor at GreenBiz.com.