Mom and Pop – Small Business Does not Mean Insignificant

According to the folks who participated in the Auto Laundry News December 2021 Executive Forecast, there is still room in the car wash industry for mom-and-pop operators.

Pundits point out that despite consolidation the industry remains very fragmented and underserved with opportunities for mom and pop to build new sites as well as renovate old ones.

What exactly is a mom-and pop-operator?

According to online dictionaries, mom-and-pop is defined as a small, family-owned or independent business.

However, as shown below, census data indicates the “small” in small business does not mean insignificant.

In the car wash industry, small business encompasses a wide range of business models as well as scale and scope. This can run the gamut from a one-person mobile waterless car wash business to a $14 million super site.

The latter was accomplished by someone with no prior car wash ownership or car wash management experience.

Consequently, if you want to wash cars for a living, bad enough, the sky is the limit.

Given the opportunity cost of commuting, mom and pop should look for opportunities that are located within a reasonable driving distance from where they reside.

When looking for suitable property, it’s best to adhere to industry best practices regarding site selection criteria. For example, each type of car wash has different market, location, site, and building characteristics.

Consequently, a team of advisors should be assembled to assist in decision making regarding site selection, property acquisition, and development.

As with other small businesses, how much you can make with a car wash depends on how much you can sell less the cost of goods and expenses.

Historically, commercial car washing has been a low-ticket item. For example, 20 years ago, folks were selling a basic exterior car wash service for as low as $3 or $4. Ten years ago, the average per-car revenue was only $8.

Ten Years Ago, the average per-car revenue was only $8.

Today, the average is $10.50 and pricing for an exterior wash in many markets has a range of $10 to $20 or more.

In terms of cost, most car wash operators report cost of goods of between 20 percent and 25 percent of gross sales. This includes credit card fees, chemical, utilities, equipment maintenance, and customer claims.

There are also operating expenses and overhead. Principal operating expenses include advertising, building maintenance, and labor. According to the industry model, an exterior car wash requires at least 200 hours of labor per week. There are also management salaries, benefits, and payroll expenses.

Overhead is insurance, property tax, and rent or a mortgage. Operating expenses and overhead for an exterior car wash is typically around 35 percent of gross sales.

Although it is a non-cash expense, and viewed initially as a tax shield, depreciation of the building, equipment, and fixtures is a real cost.

A car wash is a harsh environment with special purpose equipment that will wear out prematurely if it is not maintained properly. If preventative maintenance is neglected, product quality will eventually decline, and the frequency and price tag for equipment repairs and replacement will increase.

How much you can make with a car wash also depends on the cost structure of the company. For example, if the wash price is $10, the unit variable cost $2, and fixed cost is $450,000, an operator would need to wash 56,250 cars per year to break even or an average of about 180 cars per day.

However, on some days the weather alone will severely limit progress towards that goal or prevent the washing of even a single car. On other days, customers may be lined up waiting at the entrance gate before the wash even opens and still trying to get in the door at closing time.

This is the challenge that car wash operators face each day, big or small.

Bob Roman is a car wash consultant. You can reach Bob via e-mail at bob@carwashplan.com or by visiting www.carwashplan.com.