CHAPTER 11
FORECASTING MODELS
Internet Case Study: Kwik Lube
1. The relationship between Kwik Lube sales (Y) and average industry sales (X) is as follows:
Year Kwik Lube Sales (Y) Industry Sales (X)
1996 68 22
1997 75 25
1998 75 24
All X and Y values are in thousands of dollars. Year 1995 was excluded since Kwik Lube revenues were
not for an entire year. Year 2003 was the last year of Kwik Lube operation without the competition from
Speedy Lube. The simple regression analysis between Y and X is summarized in file Ch11 Internet Case
Kwik Lube.XLS, sheet #1. The regression equation is:
2. Without the questionnaire study, the best estimate of lost sales would be from the regression of Y on
time T, where T = 1 corresponds to year 1996, T = 2 corresponds to year 1997, and so on. The simple
regression analysis between Y and T is summarized in file Ch11 Internet Case Kwik Lube.XLS, sheet #2.
The regression equation is:
3. The lawsuit filed by Dick Johnson should discuss two basic areas which will build a sound case for
damages being awarded in his favor. The first factor involves the concept behind setting up a franchise.
Franchises are designed so that independent owners can start a business with a well-known name (and
consequently, with an already-captured market). This, coupled with proven strategies and expertise given
to a franchise purchaser by the franchise seller, reduces the usually high probability of a new business
holder who violates such clauses has, in essence, gained free proven strategies and has capitalized on
them. Thus, the franchising firm has been damaged by the fact that a competitor has gained information
without paying for it.
This is the case with Kwik Lube. A franchise owner, T. A. Williams, has benefited from