Getting back on track
Let’s be brutally honest: 2006 was a crummy year. Between out-of-control gas prices, rising minimum wages and an angry Mother Nature, the hand dealt to most carwashers was definitely not a winning one.
Perhaps the most telling sign that the industry was in trouble was the December announcement that the founders of WashUSA had decided to cancel the annual fundraising event. The program had been started in the wake of 9/11 as a way for carwashers to raise money for charity. From 2002 and on, WashUSA raised over $800,000 for the Make-A-Wish foundation.
But at the tail end of 2006, despite raising nearly $140,000 earlier that year, the co-founders announced they would not put together an event for 2007, citing the industry’s declining contributions.
“We empathize with carwashers across the country who have experienced a tough couple of years of weather and high gas prices,” Mark Curtis, founder of the event, said in an announcement. “We believe that economic pressures may have kept several from participating.”
Across the nation, most carwashes seemed to be down about 10-20 percent from 2005 revenues. But the industry can’t sit still while bad weather patterns persist. It needs to act now. So here it is, your forecast for 2007.
The problem: Lousy weather
According to Bloomberg, a global provider of data, news and analytics, 2006 was the sixth warmest year on record for the world, the third warmest for the USA, and the sixth wettest globally. Worldwide, the 10 warmest years since 1850 have all occurred in the past 12 years.
This trend does not bode well for carwashes that make their money on dry, sunny days or on snowy, salty days.
Case in point: Bill Consolo, owner of Chief’s Auto Wash and Chief’s Manufacturing & Equipment Co. in Cleveland said this was his first bad year since 1997. Earl Weiss, owner of Uptown Carwash with four locations in the Chicago market, agreed. His mature locations were down about 20 percent, and his newly acquired sites down about 10 percent in 2006.
The weather even hit the usually resilient self-serve market. David DuGoff, operator vice president of the Mid-Atlantic Carwash Association and owner of College Park Car Wash in College Park, MD, said his self-serve wash was off by about six percent most months.
Paul Fazio, president of Sonny’s, a carwash manufacturing company, points out that many operators resist acknowledging what they’re stacked up against.
“I can’t tell you how many times my brother has said to me, “The weather’s got to change.” But you know what? It doesn’t,” Fazio said. And he’s right. Weather experts indicate this current pattern is a part of a larger climate change.
“What has to happen is the operator has to decide what he’s going to do to bring business in under these conditions,” Fazio said.
The solution: Branch out
If your customers aren’t going to come in to get their car washed, maybe they’ll come in to have it detailed, or to buy a cup of Joe from your adjacent coffee shop. Whatever it is that brings them in, it’s high time carwashes diversify their profit centers.
Weiss supplements his carwash income with gasoline on the lot, as does Randy Cressall, owner of Valencia Auto Spa in Valencia, CA. Doug Newman, owner of Connecticut Car Care in Milford, CT, operates five oil change centers in conjunction with his carwash. Newman said his numbers are not off as much as other standalone carwashes because he has diversified.
For operators who might not have room for an oil change center or convenience store, consider adding or improving current detailing services. PC&D’s Detailer of the Year, Brian Messina, did just that when his carwash numbers started to slow down in 2005 due to the Northeast’s nasty weather pattern.
If you want to get really innovative, consider Newman’s futuristic idea. He wants to turn his carwash into a country club, where around 500 customers would have access to his services for about $1,000 a year. He’d be guaranteed business throughout the year, and could instead spend his headache-free time at… well, maybe a real country club?
The problem: High gas prices
This time last year, gas prices were still averaging $2.22 a gallon. By April, the pumps were pushing the $3 mark and the industry was legimately worried this might affect customers’ spending habits. By July, we were knee-deep in the $3 range, and some experts forecasted a $4 price-point by August.
Fortunately, relief came in September, although prices still hover around $2.50 and some experts predict another rise in 2007.
Consumer study after consumer study has proven that Americans start to cut their discretionary spending when the fill-up gets to be too much. So what can you do about it?
The solution: Clever marketing
When consumers are holding their wallets tight, you have to go the extra mile to convince them to spend. Behold: the clever marketing scheme.
Cressall, who is also president of the Western Carwash Association, phased out his frequent washer discount and converted it to a free gasoline giveaway. This not only made regular customers want to wash more, it also turned some gasoline customers into carwash customers. “Even if they’re only saving about 60 cents on the fill-up, it’s enough to bring them in,” Cressall said.
Consolo tried a different approach. He hates to give away this “great secret,” but said customers absolutely love the moist toilette his crew hands out at the end of the line. It’s made from a reinforced nylon towel sold by Stoner, Inc., he said, and only costs about 14 cents per car.
Similarly, Weiss will hand out windshield washer solvent in the winter months and a cold drink during the summer. With freebies like these, the customer will remember your wash long after the water has dried and they’ve driven off the lot.
Mark Curtis, CEO of Splash, LLC in Greenwich, CT, and founder of WashUSA, said many times operators cut advertising when their budget gets tight. “Either advertising works or it doesn’t,” Curtis said. “If you assumed it did last year, not to do it this year is a mistake.”
Curtis’ regional association, the Connecticut Carwash Association (CCA), recently launched a radio campaign to get motorists back in the habit. Money will be matched dollar for dollar by the CCA, up to $30,000.
Curtis said he hopes other regional associations put their money where their mouths are, and where the customers’ ears are.
“We keep hearing about the ‘rainy day,’ and it’s generally something legislative,” Curtis said. “Well, guess what? It’s raining — and it’s in the literal sense. So I think you get busy living or you get busy dying. We need to advertise, especially when times are tough.”
The problem: Market over-saturation/Big box competition
It’s a common complaint among veteran operators: the market is full and the slices of the pie are getting thinner. Actually, the pie is getting bigger. In 2007, the Federal Highway Administration predicts there will be 208.2 million licensed drivers, a three million increase from last year.
“In some areas, they’re absolutely correct [about market over-saturation],” Fazio said. “We just had a conflict with a perspective customer because we refused to sell to him because he was going to build right on top of one of our existing customers.”
But Fazio said there is still room for growth, pointing out the potential of the secondary market in suburbs and areas outlying major cities. And if you’re already in a market that’s over-saturated? Well, our panel of experts said you need to learn to stand out.
The solution: Be yourself
Don’t be a square peg in a round hole. The express exterior format does not work everywhere. If you’re just a plain and simple self-serve carwash, then by golly, be the best plain and simple self-serve you can be.
Mark Thorsby, executive director of the International Carwash Association (ICA), said today’s consumers are more conscious of their carwash buying habits.
“Consumers have more choices now,” Thorsby said. “They can choose on experience, they can choose on price, they can choose on location.”
Thorsby suggests that wash owners pinpoint what their wash is offering and capitalize on it to stand out among competition. If you’re next to a big box, add the hometown touch. If you’re a touch-less automatic and you know most of your customers prefer touch-less, then don’t buy into all the hype about hybrids and friction rollovers.
Make sure your wash is accessible, affordable and accommodating to your customer’s needs and you won’t have to worry about an over-saturated market or a new Home Depot convenience center.
The problem: Utility costs
Electric went up. Water went up. Gas went up. Too bad Newton’s Law of Gravity doesn’t apply to utilities. In order to fight these costs, you’re going to have to look to the future.
“We are working on systems to help reduce these utility bills, and I know my other competitors are, too,” Fazio said. “Whether it’s more efficiency out of our motors or air gates on dryers, we’re working on different things to help lower these costs.”
The solution: Renovate, reclaim and recycle
First off, take advantage of the new equipment. Install new electric drives to convert to Variable Frequency Drive (VFD). And maybe it’s time to update the now inefficient equipment you bought ten years ago.
If you’re not doing it yet, start reclaiming and recycling your water.
“We already save about $30,000 in water and sewer charges now with reclaim,” Consolo said. “Ours is about almost $13,000 for water and sewer. It would be pretty close to about $45,000 for water and sewer if we didn’t reclaim. It pays for itself handsomely every single year.”
“Up front it’s expensive, and often times, too, downstream it’s expensive in terms of maintenance, but it’s worth it.” All types of operators — self-serve, conveyorized and in-bay automatic — can benefit from reclaim technology.
The problem: Crime
The Federal Bureau of Investigations recently reported that violent crime was up by 3.7 percent in the first six months of 2006. Although national data for the rest of 2006 won’t be available for several months, there certainly was a surge in crime at self-serve carwashes in late November and early December.
Indeed, PC&D’s latest self-serve benchmarking report shows more money is being lost annually to crime, and operators with in-bay automatic washes are less likely to hire an attendant.
The solution: More eyes at the wash
If your carwash is open more hours than it is staffed, a security system is a necessity. DuGoff said this is especially so if your self-serve is set up like a tunnel carwash.
“If the wash is set up so that you enter the bay from the rear, so that the bill changers and vending machines are all in the back, then you’ve created a safe place for a crook to work in the middle of the night,” DuGoff said.
Security cameras are even a necessity for carwashes that aren’t worried about crime.
“I’ve put about $15,000 into my system. We have 13 cameras, and a 640-gig DVR, plus the previous system, which was VCR-based. I think it just saved me at least that much last week [in preventing damage claims],” Consolo said.
“Self-serve crime is only gonna get worse. People do stupid things,” Consolo added. “When it comes to [crime in self-services] — or even just a conveyor with cloth — cameras pay for themselves.”
The problem: Rising labor costs
During the elections of 2006, voters decided to raise the minimum wage in seven states. Currently, 30 states across the nation have minimum wages above the national standard, $5.15/hour. If the Democrat agenda is successful in 2007, this number will soon expand to all 50.
For conveyorized operators, this hits the pocket book hard. Many new investors are already drawn to the nearly labor-less concept of express exterior, and veteran operators are constantly trying to finagle more business with a smaller staff.
Not only that, but with legislation pending over what to do with the nation’s large illegal immigration population, documenting and keeping track of your workers is likely to become more expensive and time-consuming. What ever is an operator to do?
The solution: Automation
In-bay automatic operators and express exterior owners have already capitalized on the benefits of automation. It’s time full-serve operators did, too.
“Everyone should be using automation to reduce as much labor as possible,” Fazio said. “In the after-service, the way the business is run, that should be different whether its an express or a full-serve, but not the system that you’re using.”
Install credit card readers and pay acceptors at the beginning of your line to cut down on greeting and cashier staff. You can still have a greeter there, but it might not be necessary to staff more than one person on busy days.
“I put in auto cashiers at a new location and that helps you significantly,” New-man said. “You can alter your hours. It shows up at work all the time. And people in today’s era, they’re checking themselves in airports, they’re dealing with that type of automation everywhere.”
The problem: Rising costs of equipment
You might as well prepare for it now, equipment costs are going up in 2007.
“Yes, we’re going to have to pass on an increase,” Fazio said. “Not anywhere like its been in the past. This last year wasn’t as bad as the two previous, but we’re looking at probably a three percent increase this year.”
Fazio said there is already grumbling in the industry, especially in the Northeast markets that have been hit hardest by weather.
The solution: Pass it along
It’s time to raise your price. If you’ve completely renovated your carwash, like DuGoff did this year, then its practically mandated you raise your price. If you’re dealing with the rising costs of utilities, labor and equipment — it’s also time you face facts and tacked on another dollar to the basic wash price.
DuGoff raised his price a dollar and business has so far remained steady, as has Coy Lindblom, owner of The Carwasher, Inc., in Mesa, AZ, and secretary/treasurer of the WCA.
“Minimum wage just went up and so did our price,” Lindblom said. “I even got a raise.”
Bruce Milen, owner of the Jax Kar Wash chain with six locations in over-saturated Detroit, said his wash has never believed in cutting prices. “The level of service that we give at Jax, we feel is much greater than a lot of our competition,” Milen said. In order to increase his customer base, he added an exterior-only lane. But so far, has held his price to compensate for other expenses that have risen.
Happy New Year
With all of the positive changes in our industry, it’s hard to feel down in the dumps entirely. We’ve got more customers choosing professional carwashes over home washing, we’ve got more cars and drivers on the road, we’ve got more interest and awareness about the industry overall, and we’ve got a great group of carwashers out there already.
Sure, you’re going to have to constantly re-evaluate your business and update your strategy every day, every month, every year — but isn’t that why you chose carwashing in the first place?