Costa Oil founder Costa Kapothanasis
“That is an trade that has barely modified in any respect previously 30 years,” says entrepreneur Costa Kapothanasis. “The most important gamers have been round for a very long time, and we felt there was a chance to do one thing new and completely different.”
It’s a well-known theme – the know-how sector is stuffed with tales of recent entrants hoping to disrupt legacy gamers and incumbents with innovation. Nonetheless, Kapothanasis isn’t a tech founder. His enterprise, Costa Oil, is decidedly previous economic system; it operates 32 retailers, principally within the Japanese states of the US, the place American drivers can have their oil modified.
Now the corporate is about for enlargement. It’s at present saying that it has secured a major strategic funding from ABACO, a mid-market non-public fairness agency led by Managing Companion Michael Abdy. With ABACO’s help, Kapothanasis hopes to construct a sequence of franchised retailers with the size and attain of the trade’s greatest gamers – he expects to open 25 to 30 new shops a 12 months within the coming years, although says this trajectory may speed up.
The Costa Oil method is predicated on serving drivers effectively and shortly. “Our enterprise is all about comfort,” Kapothanasis says. “We intentionally got down to do no matter we may to cut back the friction between the shopper and the service.”
In apply, that interprets into Costa Oil providing 10-minute oil modifications. The enterprise doesn’t waste time making an attempt to upsell different companies, comparable to tyre modifications or brake fluid substitute. And prospects don’t want an appointment – they merely drive up at any time when it fits them.
There’s additionally the potential to undercut rivals. The corporate has intentionally eschewed the usage of branded oil merchandise, preferring options that supply the identical high quality however do not characteristic 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 beneath 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 printed earlier this 12 months by Franchise Chatter, a useful resource geared toward People contemplating working as franchisees, recognized not less than 4 nationwide chains of oil change companies with greater than 500 places every.
The listing is headed by Jiffy Lube Worldwide, which has near 2,200 retailers, 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, this can be a huge market. Provided that the common American drivers round 15,000 to twenty,000 miles a 12 months, and wishes their oil altering each 3,000 to five,000 miles, there’s enormous 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 vehicles extra shortly at a lower cost level utilizing a small constructing footprint with tandem doorways.”
This blueprint – for smaller, extra environment friendly places – allied to trendy gross sales and advertising strategies, together with focused spending on social media, has enabled Costa Oil to determine a wholesome basis for the enterprise. Kapothanasis’s intention now’s “to change 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 file of working intently with investee corporations, can get Costa Oil so far, he argues.
Trade consolidation is a probably supportive development. In a mature trade, many smaller operators at the moment are seeking to promote up and retire, factors out Kapothanasis; that gives a prepared provide of buildings and places to hurry up enlargement. “Utilizing know-how to identify these alternatives, in addition to relationships we have now developed because of our new fairness companion, we frequently have first mover benefit once they change into accessible.”
That companion actually believes within the potential of the enterprise. “Our funding in Costa Oil represents a novel alternative to change 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 quicker and less expensive service.”