“That is an trade that has barely modified in any respect prior to now 30 years,” says entrepreneur Costa Kapothanasis. “The most important gamers have been round for a very long time, and we felt there was a possibility to do one thing new and completely different.”
It’s a well-recognized theme – the know-how sector is stuffed with tales of latest entrants hoping to disrupt legacy gamers and incumbents with innovation. Nonetheless, Kapothanasis isn’t a tech founder. His enterprise, Costa Oil, is decidedly previous financial system; it operates 32 shops, principally within the Japanese states of the US, the place American drivers can have their oil modified.
Now the corporate is about for growth. It’s as we speak saying that it has secured a major strategic funding from ABACO, a mid-market personal fairness agency led by Managing Associate Michael Abdy. With ABACO’s help, Kapothanasis hopes to construct a sequence of franchised shops with the size and attain of the trade’s largest gamers – he expects to open 25 to 30 new shops a yr within the coming years, although says this trajectory may speed up.
The Costa Oil strategy is predicated on serving drivers nicely and rapidly. “Our enterprise is all about comfort,” Kapothanasis says. “We intentionally got down to do no matter we may to scale back the friction between the client and the service.”
In apply, that interprets into Costa Oil providing 10-minute oil modifications. The enterprise doesn’t waste time attempting to upsell different companies, reminiscent of tyre modifications or brake fluid alternative. And prospects don’t want an appointment – they merely drive up every time it fits them.
There may be additionally the potential to undercut rivals. The corporate has intentionally eschewed using branded oil merchandise, preferring alternate options that supply the identical high quality however do not function costly advertising. “We will move the financial savings on to prospects,” Kapothanasis says.
It’s a mannequin that seems to enchantment to American drivers. Since its launch in 2013, Costa Oil has carried out greater than 1.8 million oil modifications and recycled greater than 1.5 million gallons of oil. Kapothanasis has opened 18 shops underneath his personal steam, with the opposite 14 within the present community operated by franchisees.
However, the corporate stays small relative to the market leaders. Analysis revealed earlier this yr by Franchise Chatter, a useful resource aimed toward People contemplating working as franchisees, recognized at the very least 4 nationwide chains of oil change companies with greater than 500 areas every.
The checklist is headed by Jiffy Lube Worldwide, which has near 2,200 shops, adopted by Valvoline On the spot Oil Change on round 1,600, Take 5 on round 750, and Grease Monkey on simply over 500.
Nonetheless, it is a large market. Provided that the common American drivers round 15,000 to twenty,000 miles a yr, and wishes their oil altering each 3,000 to five,000 miles, there’s large quantity of recurring enterprise to go at. Furthermore, argues, Kapothanasis, there’s a window of alternative for a brand new entrant. “I noticed a serious hole available in the market,” he says. “We will serve extra automobiles extra rapidly at a cheaper price level utilizing a small constructing footprint with tandem doorways.”
This blueprint – for smaller, extra environment friendly areas – allied to fashionable gross sales and advertising methods, together with focused spending on social media, has enabled Costa Oil to ascertain a wholesome basis for the enterprise. Kapothanasis’s purpose now’s “to turn into a model that each American is aware of”. New capital from ABACO, together with skilled help from a personal fairness investor with a protracted observe document of working intently with investee corporations, can get Costa Oil up to now, he argues.
Trade consolidation is a probably supportive development. In a mature trade, many smaller operators are actually seeking to promote up and retire, factors out Kapothanasis; that gives a prepared provide of buildings and areas to hurry up growth. “Utilizing know-how to identify these alternatives, in addition to relationships we’ve got developed because of our new fairness accomplice, we regularly have first mover benefit once they turn into obtainable.”
That accomplice actually believes within the potential of the enterprise. “Our funding in Costa Oil represents a novel alternative to turn into a number one model in a main service class,” says Abdy. “Costa is proudly owning the minimalism development by working with a a lot smaller footprint kiosk than typical oil change manufacturers and providing a sooner and less expensive service.”