More Profits, Part II: From Your Wash
By Patrick H. Crowe

In this series of articles, we are discussing tested ways to operate self-service car washes more profitably. All told, we’ll be looking at 12 separate issues:

1. Photocells and Timers
2. Purchasing
3. Vandalism
4. Expansion
5. Promotion
6. Credit Cards, Pricing
7. Employees
8. Vending
9. Taxes
10. Depreciation
11. Restore vs. New-Built
12. Video Surveillance

Last month, we considered the first five on the list. This month, we take a closer look at credit cards through vending.

6. CREDIT CARDS, PRICING

Credit Cards
Slowly but surely more and more self-service car washes accept credit cards. Hardly any new self-serves would fail to consider credit-card acceptance in every bay.

The installation — especially in a retrofit situation — seems expensive. On top of that of course there are fees associated with each transaction. Even the post office and McDonalds began accepting credit cards years ago, so it is past time for self-service operators to do the same.

There are two more points, one on cost and one on income. Regarding cost, old timers will remember a time when there were no trigger guns. As hard as it may be for younger owners to imagine, the “gun” wasn’t even a pistol grip, let alone one with a trigger. It was a piece of quarter-inch pipe. It was joined to the hose with a nipple, and the delivery end was tapped out to hold the nozzle. A dollar would easily buy the pipe, and a man who cut his own out of 20’ lengths saved even more. Of course there were no moving parts. They were very dangerous if dropped while the pump was running.

Enter the trigger gun. It runs many times the cost of the old standby; has lots of moving parts and has a handy pistol grip. It is also completely safe if dropped. For a long time, some owners refused to buy them. Now they are universal. Here’s the point: just as trigger guns slowly became the universally accepted standard for self-serves, credit cards will do the same. The question is whether to be a leader or to follow along when forced by competition?

As to income, owners who accept credit cards in their bays report substantial increase in income. It more than pays the fees and the cost of the improvement — and then some. It satisfies customers; they spend more. It’s an absolute winner.

Pricing
Because costs tend to be steadily rising, car wash owners must frequently reconsider their pricing. There are four ways to vary the price:

• Increase the number of quarters, dollar coins, bills, or tokens for each cycle
• Decrease the amount of time given for each quarter, dollar coin, bill, or token
• If credit cards are accepted, increase the cost per minute
• Offer volume discounts — sell larger quantities of time at a lower cost per minute

Maximum flexibility is obtained by being able to do all four. The number of quarters or tokens to start the equipment will be obvious to the customer and should be changed only as often as rising costs demand. The profit situation should be carefully reviewed at least every 60 days or whenever there has been a substantial increase in soap, utility, or other costs. To maintain adequate profits as costs rise, the amount of time per quarter or token should be reduced accordingly. Small reductions in time will be less noticeable to customers than requiring a larger bill or more coin.

Failure to raise prices as costs increase can make for very troubl-ing circumstances. Often the unwillingness to raise prices is rationalized based on the competition. As profits decline, improvements are apt to be postponed and maintenance neglected. Once the customers sense this, they are likely to begin looking elsewhere. Having the lowest price is a questionable way to beat the competition, especially if compromises are made in the level of maintenance and/or the quality of the service. It seems more reasonable to maintain the facility in a state-of-the-art condition and charge a fair price than to have the lowest price but provide service of questionable quality.

Admittedly, there are situations where the supply of available bays exceeds the demand for them by such an extent that it becomes clear not all the car washes can possibly be profitable. This is a fairly uncommon but most unfortunate situation and the end result may well be determined by which of the washes can afford to lose money the longest, i.e., which will be forced to close down first. Having the lowest price will not solve this problem. The law of supply and demand applies to all businesses and those who ignore the level of competition are likely to do so at their own peril.

7. EMPLOYEES

Employee costs can be reduced by using contractors or so called “contract labor.” Each employee costs the employer a good bit more than his hourly wage. There are Social Security taxes, Worker’s Compensation insurance premiums, and payroll preparation. There are actually some owners who believe there is little reason to have any employees at self-service car washes. The following services are worth considering using contractors for:

• Lawn cutting
• Snow removal
• Trash service (the kind that will empty barrels and not just dumpsters is best)
• Clean-up service
• Maintenance service
• Management

In addition to contractual arrangements, using certain relatives (if you have them) can minimize the costs of employees.

The tax laws allow an owner to hire his/her children and under certain circumstances not pay Social Security taxes on their earnings.

Contractual arrangements need to be explicit and not a trick to cover up an employee who really works by the hour. Put the terms of the contract in writing, specify duties and compensate a contract manager with a fixed fee or preferably with a percentage of gross income or net profits. Check with your CPA because this can be tricky.

8. VENDING

Sell more than car washes. All owners know that vacuums are a necessity — and highly profitable. Painted vacuums are now almost a thing of the past and stainless steel ones have hit a second generation. The latest are oval, with options for digital readouts, grace timers, three motors, and so on. Not only should there be a minimum of one vacuum for each bay, but many owners have created detail areas where customers can utilize carpet cleaners, fragrance machines, and other services — often in an area shaded with a canopy.

But beyond vacuums, the area showing the greatest potential for increased revenues is vending. Paper towels, cloth towels, wet towels, and tire cleaner are only the beginning. Many more products should be considered. The criteria for setting up a vending service are:

1. Industrial Quality
Choose an industrial vending machine, preferably made of stainless steel. Some machines were never intended for car wash use and are safe for bank lobbies or other indoor vending areas but not outdoors at an unattended (at least sometimes) wash. Many soda pop machines are designed for indoor use only, so be careful not to put one of those outside. Some of the “standalone” vending machines which handle multiple items are sold as “Detail Centers”, but are simply a modified version of an indoor machine and have in many cases proven inadequate to the trials experienced at some self-serves. Get a vending machine designed for self-serves. If practical, consider a through-the-wall model.

2. Added Security
Once a vending machine has been selected, be prepared to reinforce it by adding locks and lock guards to it. This is especially true of the so called “drop-shelf’ vendors. When developing a new car wash, plan for an ample vending area, and consider the through-the-wall type vending machines. At existing washes, build vending islands if there isn’t sufficient wall space to hang enough vending machines

3. Pricing
Be sure there is at least a 50 percent markup on all vending products — 100 percent markup is more realistic. You need at least a 50 percent markup to pay for the vending machine and to compensate for the trouble of filling and maintaining it.

4. Impulse Purchases
There is some fairly strong evidence that car washing itself is not an impulse purchase, i.e., people tend to plan to wash their cars rather than suddenly pull into a car wash when they see it. However, vending items are impulse purchases and are therefore unlikely to be very price sensitive. A customer surely knows that he or she could go to the grocery store and get a roll of paper towels at a cost per towel well below what they can be purchased for from the vending machine at the car wash. It’s improbable that this knowledge will prevent most people from buying the paper towel from the vending machine — they do so “on impulse.” That’s why having these products available — and at a 100 percent markup — is good business.

5. Location
Vend the items in an area that is well lit and close to your bill changer.

NEXT MONTH

In next month’s issue of Auto Laundry News, we will conclude this series of articles with a discussion about taxes, depreciation, restore vs. new-built, and video surveillance.

Patrick Crowe is a veteran self-serve car wash operator and a recognized author and speaker on the subject. He owns Wonderful Waldo Car Wash in Kansas City, MO. For information about his Self-Service Car Wash Technical Bulletins, visit www.carwashappraisal.com.