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877-627-5844 US | 866-658-9274 Canada

Mark VII Equipment Inc.

USA

5981 Tennyson St

Arvada, Colorado 80003 USA

+1 800.525.8248 toll free

+1 303.423.4910 direct

+1 303.430.0139 fax

 

Canada

623 S Service Rd Unit 1

Grimsby, ON L3M 4E8 Canada

866.658.9274 toll free

289.235.8325 direct

289.235.7950 fax

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How Best to Recover from COVID-19

How will COVID-19 impact the carwash business?

How best to recover?

 

Right now, that’s a million-dollar question I am asked all the time. Carwash operators across the country are seeing widely varied limitations on their usual operating practices. As a result, different operators are taking a range of 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 strive not just to recover but to thrive and grow their wash into an even more successful business. At this moment there is an unprecedented reset in buying habits, not only in our industry but in all industries. People will be making new buying decisions as they venture out from quarantine. The key to growing your business is to offer something new, fresh, exciting and safe. This creates a buzz to attract new customers to seek you out and try your wash. Most importantly, you want to give both your new and existing customers a product and experience that brings them back again and again.

With that in mind, this 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. Those figures were generated under normal circumstances. Now imagine what could happen when consumers are making decisions based on new, fresh, clean and safe buying habits.

In addition to a revenue increase from new equipment, you will see a decrease in operating costs due to more efficient water/sewer, electrical and chemical usage. We all know consumers love new and fresh, which is precisely why a new business sees an 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 begin steadily declining after seven. This decline increases dramatically year-after-year once equipment reaches 10 years of age. 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. Their hope is that the change will increase volume and bring in more money. Let’s take a closer 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 $180,000 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 $153,000 a year. Let’s assume 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 $136,000, which takes $17,000 off the plate. This means he will need to wash 2,125 more cars to generate the same gross revenue. And let’s not forget about the cost of goods. If the wash averages a cost of $1, you’ll 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 $153,000 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. New equipment allows the operator to create a new wash menu with prices 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 $240,000 per year, an overall increase in gross revenues of $87,000! Of course, there would be debt attached to the new equipment. Using rough numbers, let’s say the cost is $200,000 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 bottom-line profit, without even addressing the savings on water/sewer, electricity, soaps and maintenance!

The rules of business remain the same:

1. Customers like new things and will pay more for a “Starbucks®” feel of luxury and quality.

2. Customers like a fun show with lights, vibrant colors, and pleasant smells.

3. Keep investing in your business!

That means:

• Update equipment

• Add new, revenue-enhancing options

• Install a digital sign

• Paint the exterior of the building

• Add wall panels in the bays

If you constantly make improvements to your facility, you won’t get to the place where revenue shrinks to the point that you can’t afford to spend money on improvements. That is the point where you MUST invest or 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. Subconsciously, you’ll 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 initial question, how best to recover? This time, I would add how best to flourish, grow and succeed? If your equipment is five 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 curb appeal? 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 aspects of the carwash business.

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