In a recent article in CSPnet.com, Eric Wulf, CEO of the International Carwash Association, reported on some car wash industry trends. One trend is a slight increase in the number of cars being washed and the average price per wash for most operators who participate in ICA’s Wash Count program.
The construction trend is now based mainly around exterior cleaning, and there are more investors in the business today as opposed to the more traditional owner and operator.
Wulf also mentioned most operators continue to focus on managing business operating risks. Ostensibly, these risks include generating sufficient gross sales and providing an effective and customer-centric operation.
Here, private investment continues to converge on express exterior, which minimizes the requirement to provide adequate management and staff.
As a hedge against unfavorable weather, Wulf stated more operators are relying on unlimited programs where customer wash frequency is as much as five visits a month.
In terms of gross sales, operators are offering more online products and services including super-hydrophobic protectant, friction dryers, and lava-light shows to increase ticket averages.
Arguably, these trends are not going to give operators much incentive to cling to wands or full-serve formats. The principal reason is price and time. For example, only an estimated 15 percent of the U.S. car wash fleet now provides assisted-services like interior cleaning and express detailing.
While some of the tunnels in this market are washing 6,000 vehicles per month, the average store probably produces around 60,000 vehicles a year.
Applying the benchmarks to this sales volume, the average store would produce 2,400 express hand-waxes — each service takes 30 minutes. Here, we would expect $108,000 gross sales. Less sales expense, cost of goods, and labor burden equals net operating income of roughly $50,000.
If 30 percent of customers purchased 4-minute hot wax at $4 instead, we would expect sales of $72,000. Since there is no selling expense or labor cost, less cost of goods equal net operating income of $50,000.
Similarly, there is less incentive today for operators to cling to wands. For example, the benchmarks suggest express wash is approaching 120,000 vehicles a year and washing cars for less money.
With average guest time on site of about eight minutes, low prices, pay station/RFID, unlimited washing, and responsive website and mobile marketing strategy, we could argue self-serve has lost the war to the express format.
With many owners now unable or unwilling to bet on future growth as in the past, self-serve seems destined as a parts and replacement business for the foreseeable future, the exception being rural areas and sites capable of supporting express volumes.
Further evidence of this is the construction trend. For example, in the early 2000s, I remember an assessment that new conveyor projects were almost evenly split between express and full-serve/flex. Today, the split is more like 70/30, where 30 percent is flex with multiple profit centers. New self-serve and truck washes not so much.
Thus, barriers to entry are higher. For example, 15 years ago, average cost to build a 100’ full-serve tunnel was about $2 million including real estate. Today, average cost of an express or flex site is roughly $3 million.
Consequently, with fewer opportunities to start a new wash and higher start-up expenses, we have probably seen the end of the traditional mom and pop car wash investor.
Conversely, in the absence of this pool of investors, weaker demand, and fewer new construction projects, the industry will have to grapple with the availability of consistent service providers and their expertise for some time.
Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com.