Despite the growing interest in electric vehicles and climate goals, most analysts predict gasoline is going to remain the principal means of powering cars for the foreseeable future.
According to industry sources, there are an estimated 122,000 convenience stores in the United States that sold a total of 154 billion gallons of gasoline.
New stores generally come in two sizes. Smaller sites may occupy one acre with a 4,000-square-foot store, 40 or more parking spaces, and eight or more fueling positions. Larger sites may occupy two acres with a 6,000-square-foot or more store, 60 or more parking spaces, and 16 or more fueling positions.
On the out are the smaller one-half acre sites with a 2,000-square-foot or smaller store, 20 or less parking spaces, and four or less fueling positions.
Reportedly, between 25 percent and 30 percent of convenience store locations that sell gasoline have a car wash facility. For the most part, the wash is an in-bay automatic (IBA).
The principal attribute of an IBA is it can be operated 24/7, rain or shine, without an attendant. Conversely, a conveyor operation such as an express exterior requires two full-time employees per shift plus several part-timers to fill in scheduling gaps.
Labor is a growing concern for convenience stores because wage expense has been rising at over 6 percent annually and employee turnover has ticked up to over 120 percent.
Space is another attribute. An IBA can go on a pad site as small as 8,000 square feet whereas an 80’ tunnel with one bank of self-service vacuums will require at least 14,000 square feet.
IBA operation is economical. Unit variable cost is between $2.00 and $2.50 including credit card fees, chemical, equipment maintenance, utilities, and customer claims. Other expenses are promotion, insurance, building maintenance and repairs, and capital (i.e., debt service).
The convenience store value proposition has become increasingly difficult to maintain.
Fuel margins have eroded and in-store sales are now driving profits. Stalwarts such as cigarettes have given way to increased sales of higher margin beverages and prepared food services.
Instead of beer and lotto tickets, top companies are focusing on healthy and fresh, trust and security, and brand and image. Despite this shift there is still a good opportunity for a car wash to complement a convenience store and gas site.
The car wash value proposition is to clean, shine, and protect the customer’s vehicle. Today, this can be delivered with the same precision and consistency as an automated beverage dispenser.
IBAs are now faster, produce better quality, and use less energy and water. Many machines can now deliver the customer experience or “show” that helps drive higher-margin extra services that consumers want to buy such as rain repellant, hot wax, and. ceramic.
Attractive gallon-per-wash rates can be achieved by offering a liberal discount on price of gasoline with the purchase of a car wash at the pumps. A point-of-sale system with smart technology and mobile payment will help attract a younger audience.
Subscription programs are all the rage, but a well-designed loyalty program (i.e., frequency discount) can go a long way to help improve a store’s attraction rate.
In terms of evaluating potential, practically any gas site would be suitable for a car wash if there is sufficient space to place it appropriately.
The reason for this is the methods and processes that companies use when searching for new store locations. For example, with a multi-criteria approach, properties are selected on the basis of location characteristics, environmental, socio-economic factors, and physical land attributes.
The evaluation process involves criteria such as surrounding development, traffic volume, highway geometry, access, visibility, curb appeal, and criteria related to competitors. Criteria that are important to determine the location of a convenience store and gas station are equally important to determine the location of a car wash. Consequently, we find good locations for convenience stores and gas sites are usually suitable for car washes.
Capturing value starts with random pass-by highway traffic. We can divide potential customers into two groups.
First are folks who are pulled in to buy fuel and/or make in-store purchases. Here, up to 70 percent of car wash sales transactions may occur at the pump.
The next group comprises folks who may pull in solely to purchase a car wash. To capture this type of customer, the car wash would need to exhibit characteristics of a free-standing commercial car wash.
Here, the principal requirements are capital and management with knowledge and skill to deliver the business model.
As shown on page 20, it is possible to take an IBA at a gas site from nothing to write home about to a robust profit center. On the other hand, a tunnel needs to generate sales consistent with a retail center due to its higher capital requirement and the labor and management needed to operate the wash.
Convenience store experts say the gap between the top performers and those at the bottom is widening. General advice to narrow this gap is to adapt the business model. This means developing expertise and devoting more resources to sell stuff that customers want to buy.
Today, more people are cleaning their vehicles at commercial car wash sites rather than at home in their driveway. Consequently, a high-quality car wash is an opportunity for a convenience store and gas station to earn more of the customer’s business.