5981 Tennyson St
Arvada, Colorado 80003 USA
+1 800.525.8248 toll free
+1 303.423.4910 direct
+1 303.430.0139 fax
623 S Service Rd Unit 1
Grimsby, ON L3M 4E8 Canada
866.658.9274 toll free
How best to recover?
Right now, that’s the million-dollar question I am asked all the time. Carwash operators across the country are seeing vastly different limitations on their usual operating practices. As a result, different operators are taking different financial hits. Many were forced to close, others only had to close vacuum areas, some had to shut down their self-serve wash bays, and some even had to shut down unattended roll-over bays.
Coming out of this shelter-in-place period, a car wash operator should not only strive to recover but also to thrive and grow their wash into an even more successful business. Right now, there is an unprecedented reset in buying habits. This is true not only in our industry but in all industries. People will be making new buying decisions as they venture out from quarantine. The solution to growing your business is to offer something new, fresh, exciting, and safe. This creates a buzz to get customers you never had before to come, try your wash, and seek you out. Most importantly, you want to give your customers, new and existing, a product and experience that brings them back again and again.
Right now is a crucial time to refresh or upgrade your car wash equipment. Our data shows car wash operators can experience a 30%-50% increase in wash revenues when they replace old equipment. This is under normal circumstances, imagine what could happen when consumers are making decisions based on new, fresh, clean, safe buying habits. In addition to a revenue increase from new equipment, you will see a decrease in operating costs due to equipment that is more efficient with water/sewer, electrical, and chemical usage. We all know consumers love new and fresh, which is precisely why a new business gets the initial bump in sales. It’s during that time that your wash needs to deliver on quality to maintain these new customers.
Car wash operators who install new equipment see wash volumes increase on average for the first five years. The volume will typically level off between five to seven years, and then steadily start declining after seven. This decline increases dramatically year-after-year once equipment reaches 10 years old. As you can see, the best time to update or replace an automatic car wash is every five to seven years. Unfortunately, the biggest mistake I see some operators make when they notice a consistent decline in volume is to lower their prices or add a cheaper wash package. This is in hopes that it will increase volume and bring in more money. However, let’s look at that scenario.
If a rollover location was washing 20,000 cars a year at $6, $9, and $12 (assuming an even split), they are averaging 9$ a wash, or $180k a year. If wash volume decreased over time by 15% to 17,000 cars per year at the same average of $9, sales would now be $153k a year. If the owner mistakenly thinks lowering the wash package price by $1 will help, now the average price is $8 and at the current 17,000 wash volume, the site is now generating $136k, which takes $17,000 off the plate. This means he will need to wash 2,125 more cars to hit the same gross revenue. Now don’t forget about the cost of goods. If the wash averages a cost of $1, now you need another 265 cars to have the same net and that doesn’t account for wear and tear on the equipment. Dropping the price means you need to increase volume by 14% JUST TO BREAK EVEN!
Now, let’s look at investing in your business using the same assumptions as above. The car wash site used to wash 20,000 cars a year and volume declined to 17,000 averaging $9 a car for $153k a year. The operator now invests in his business by installing a new Mark VII ChoiceWash XT. His customers can now choose the type of wash they want: touchless, soft-touch, or a combination of both. The operator creates a new wash menu and eliminates the bottom wash, creates a new top wash, and prices are now at $9, $12 and $15. Assuming the same split percentage, the new average is $12 per wash. Based on industry data, the volume should get back to the 20,000 washes a year, at minimum. This would generate $240k per year, an overall increase in gross revenues of $87k! Of course, there would be debt on the new equipment. We will use rough numbers; let’s say the cost is $200k and the lease payment would be $3,480 per month or $41,760 per year. This still leaves you with an additional $45,240 in profit to the bottom line, without even addressing the savings on water/sewer, electric, soaps, and maintenance costs!
The rules of business always stay true, keep investing in your business to be, and stay successful.
If you constantly make improvements to your facility, you won’t get to a point where you start worrying the revenue is not enough to where you can’t afford to spend money on improvements. That is the point where you MUST invest or you risk losing the business.
If you go to a restaurant that has not been updated for 10 or 15 years, you will notice the dirty, worn carpet, torn booths, bathrooms with ugly wallpaper and outdated fixtures. You then subconsciously question what type of service and food you will receive. When you go to a restaurant that is new, modern, and fresh, everything is more appealing. You will always choose to go to a newer, better-maintained restaurant. The same holds true for your wash, especially at this time. Customers will choose to go somewhere else if the facility is old, worn, dirty, and has mechanical issues.
This brings us back to the beginning question, how best to recover? This time, I would add how to flourish, grow, and succeed? If your equipment is 5 years or older, consider upgrading or replacing it. Take a good look at your wash menu, street sign, pay station, and vacuum/vending labels. Do they need replacing? How is your image from the street? Do you need to paint? Do you have good lighting in your bay(s)? Extra bright will show extra clean! I and everyone at Mark VII Equipment want you to succeed! Please let us know how we can help.
Mike Reijonen has worked in the car wash industry his entire life. From retail carwash operators to convenience stores, he is well-versed in all the carwash business needs.