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Multi-profit Centers

Which profit center is right for you?

March 08, 2011
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B.C. Forbes, founder of Forbes Magazine, once said, “If you don’t drive your business, you will be driven out of business.” Today’s economy demands that the business owner offer his customers more services and convenience. If your profits are running stagnant and stale at the carwash, it might be time to add on an additional profit center.

Professional Carwashing & Detailing has put together this comprehensive guide to profile the top five additional profit centers for the car care industry. From Laundromats, pet washes, quick lubes, c-stores, and gas stations, we talked to experts in the field to find out what you need to know before adding on.

LAUNDROMATS

The pros:
• Lots of downtime in between the washing and drying to get a car washed;
• Both businesses are associated with getting things clean;
• Recession resistant;
• Little everyday inventory overhead;
• Few employees needed; and
• Flexible hours.

The cons:
• Water and electricity costs are high;
• Maintenance intensive and possibility for equipment malfunctions;
• Small profits per customer; and
• Loiterers and crime can be a problem.

According to Brian Wallace, president and CEO of the Coin Laundry Association, most laundries (a.k.a. Laundromats) have performed well even with the shoddy economy because people always need clean clothes.

Wallace said that, as with any business opportunity, one must ask the following questions before considering this add-on:

1. What is the consumer demand for the service? Is there a need for additional laundry service in the market area?

2. What kind of space is required? Are you adding on to an existing building or constructing another building on the same site as the carwash?

3. What is the availability of (and ease of connection to) adequate utility services (electricity, natural gas or propane, water)?

4. And are they sized properly for the laundry demand?

The costs
Costs vary significantly from project to project and only a detailed proposal from a qualified laundry equipment distributor can narrow the range of costs one might expect, according to Wallace.

“That being said, many new laundry projects today will fall between $175 to $225 per square foot for equipment, installation, and leasehold improvements — this is a very rough estimate,” Wallace explained. “This range does not include any building construction, real estate, sewer impact fees or other major utility improvements that may be needed to accommodate the laundry among many other potential project cost variables,” he added.

Myths busted
According to Wallace, the biggest single misconception about owning a Laundromat is the belief that it is an absentee business for which the operator only needs to show up once a week to collect the quarters.

“While one of the main advantages of laundry ownership is the ability to operate the store on a part-time or flex-time basis, the laundry operator will have to dedicate time to equipment maintenance and repair, customer service, employee management and other responsibilities that you would associate with managing any small business,” he advised.

Most Laundromat owners do enjoy the freedom and flexibility (along with the profitability) with running a laundry, though, Wallace said. “You need to put the hours in, but you can determine when you spend those hours,” he explained.

PET WASH

The pros:
• The pet care industry is growing fast and strong;
• Customers with dirty vehicles are drawn to the convenience of also washing their family pet;
• Few employees needed;
• Little space required; and
• High-profit margin.

The cons:
• Regular cleaning/maintenance; and
• Seasonal down times.

According to Trent Walter, president of National Pride Equipment, people love their pets and they want them clean — especially if they just had their cars cleaned or detailed.

Today’s pet industry is in the $43 billion+ range and owners aren’t shy when it comes to spending money on their beloved four-legged pals. Walter also said the pet washing industry has been resilient throughout the economic crisis and should only grow more each year.

“Requiring a small space is not the only benefit of starting a self-service pet wash,” Walter said. “The average customer will spend up to $10 to wash their pet. Utilities and chemical costs will range from $1.50-$2. Calculating the gross profit one will see it is over 80 percent per wash.”

Trent said before adding on a pet wash, one must consider:
1. Utilities;
2. Investment costs;
3. Housekeeping;
4. Layout/space requirements; and
5. Liabilities

Trent said to determine tub placement, customer traffic patterns, parking and safe ingress/regress from the site. If there is plenty of space, start considering utility requirements.

“Each tub will require a separate 20 amp 110 volt electrical supply, 3/4” hot and cold water supply line and 1 1/2” sewer drain line,” Walter advised. “Then, consider costs for the following items: New building or modifications to current structure; hot water heater; room heating/cooling unit (HVAC); tub packages; security cameras; signage and advertising.”

The costs
According to Walter, the cost to open a pet wash will range from $7,000 - $12,000 per unit for equipment. This price, he said, includes a tub, a meter box (with or without credit card processing), a control center, startup chemicals, signage package and a water heater.

Myths busted
Just because we’ve talked about them for years in Professional Carwashing & Detailing magazine, pet washes are still not a part of the everyday lexicon in most areas, according to Walter, and are still relatively new in most areas. Therefore, a good amount of time and energy will be needed to market them and educate potential customers.

Also, a lot of housekeeping is involved. “An owner should be prepared to visit the site two or three times daily to make sure the tubs are clean,” Walter advised. “Remember, the more that dogs are washes, the more that the tubs will need to be cleaned.”

Walter suggested setting up an aggressive routine that includes mopping the floor, disinfecting the tubs and other basic sanitation procedures. “Keep in mind customer will not wash their pet in a dirty tub,” but he added, “All of the work is worth it when you consider the revenue one can generate.”

QUICK LUBE

The pros:
• Large potential for customer crossover and cross-marketing opportunities;
• Both businesses thrive on the convenience “while you wait” factor;
• Demand: Even if there is an influx of electric cars, most cars out there will have to have their oil changed; and
• Left over oil can be used to heat water and carwash bays and lobbies.

The cons:
• Need for trained and skilled employees;
• Business requires a good deal of space; and
• High start-up costs.

According to Leanne Stump, executive director of the Automotive Oil Change Association, you need to look at the demographics of your area and consider if the people in the area are more inclined to take care of their own oil changes.

As for the future, she said, “the fast lube industry will continue to mature and evolve to meet the needs of our customers and remain competitive. On the plus side, fast lubes should be able to offer more services and lower prices as the industry consolidates under fewer and fewer owners with more buying power.”

“We’ll be providing these services with a better-trained and better-compensated workforce,” she added.

The costs
According to Stump, it’s impossible to predict the costs of the average new quick lube as there are a lot of variables to consider. If it is new construction, you should look at digging a pit; if not, then you need to look at the cost of lifts, she said, adding that storage is also a factor in the cost.

“You will need new oil and filters on hand, but don’t forget about the used oil storage that you will have to have,” Stump said. “The major oil companies can be a great help with your expenses; they have all the cost data you need and will often supply most of the equipment at no cost if you will sign a contract to buy your oil from them.”

According to the website thefranchisemall.com, the average cost to start up a brand name oil change franchise, such as an Express Oil Change, can cost between $124,500 and $200,000; a Valvoline can cost between $107,800 and $1 million and a Victory Lane Quick Oil Change can cost between $229,500 and $402,000.

Those looking to start up an independent quick lube will have to build recognition on their own merits. Also, equipment, and a bay conversion needs to be factored into the total. Overhead costs include oil, tools needed for oil changes, and trained employees.

Myths busted
This isn’t the “field of dreams,” said Stump, adding that just because you build it, doesn’t mean they’ll come.

She said you have built a rapport with your customers when it comes to keeping their vehicles clean, but servicing them is a different animal.

“Complaints are much harder to investigate. With your carwash, you know what your equipment is capable of doing,” Stump said, but unfortunately, “Quick lube complaints are often not that cut-and-dry.”

C-STORES/FOOD/COFFEE

The pros
• Large potential for customer crossover;
• Impulse shopping can increase per-car sales; and
• Recession-resistant.

The cons
• Restocking is constant; and
• Need for late-shift employees.

According to the National Association of Convenience Stores (NACS), there are about 144,800-plus c-stores throughout the United States and it’s a $624 billion industry. Jeff Lenard, a spokesperson for NACS, said it’s pretty recession resistant, as people love the convenience and sell “immediate consumption,” he said, adding that “you don’t check your 401K or your stock portfolio when you’re hungry or thirsty: You just go and get something to eat.”

Milk, beer, coffee, and candy are all hot ticket items and sales don’t seem to be affected in a down economy, and in fact, sales have been going up over the years. “What happens with a recession is the more you have to contemplate a purchase, the more likely you aren’t going to buy it,” he said.

“But, with conveniences stores, you aren’t given a lot of time to think about a purchase.”

In terms of crime prevention, one tip from Lenard is to make sure windows are unobstructed and to make sure all customers know there is not a lot of money in the registers. Also, it is imperative to have surveillance cameras on and working at all times, to not only catch criminals in the act, but employees as well.

C-stores have to be careful with alcohol, tobacco and lottery ticket sales. Employees need to know how to properly identify and card all customers and they need to know every trick in the book in terms of fake licenses, excuses and using people to buy them products while they wait outside. “There are various programs available,” said Lenard, that help employees in making sure they’re not selling anything to a minor.

The costs
It’s all over the board and really depends on whether or not it will offer fuel, according to Lenard.

According to TheFranchiseMall.com, a White Hen Pantry Convenience Store can cost between $52,000 and $225,000; a NightOwl Convenience store can cost up to $395,000; and an Epress Mart can cost between $86,000 to $361,000.

Myths busted
The “big gulp” soda sizes, and beef jerky that go along with a lot of c-stores, may have painted them as a haven for unhealthy consumption. But, that’s not necessarily the case now.

According to Lenard, healthier options are now available and a lot of convenience stores are partnering with franchises, which offer brand recognition and more healthy food options.

Lenard also said it’s a difficult business to manage in that the food, drinks and coffee has to be good every time, or the customer will never buy it again. “One bad experience, and they’ll not be back,” he said. “It’s unforgiving and can have a ripple effect.” But, he added, “if the food is good, they will come back and you’ll establish a loyal customer.”

One growing trend, Lenard said, are mobile businesses, such as food carts, parking in the parking lots of convenience stores. Things such as mobile farm stands are on an upswing and a win-win for convenience stores that don’t already offer produce and will cater to the healthier consumers.

GAS STATIONS

The pros
• Convenience factor draws customers and encourages cross-sales;
• Recession resistant; and
• Easy cross-marketing opportunities and services can be sold under one combo purchase.

The cons
• High gas prices/unpredictability of gas prices;
• High start-up costs; and
• Stiff competition.

Gas stations are a big traffic driver to carwashes, according to Lenard. But, he said, in order to own one you have to have the stomach for it as there is a lot of volatility when it comes to the ever-changing gas prices, and sometimes you have to foot the bill yourself to appease your regular customers.

However, Lenard said, gas can bring in a lot of revenue, but not a lot of profit.

And, even with the fluctuation prices, the attitude towards gasoline and gas prices is rebounding. “In 2008, when it was up to $4 a gallon, what happened was people changed their behaviors. And, it helped with one-stop shopping.” Which, he said, is good thing for multi-profit centers.

The costs
The price depends on whether or not you have to install pumps, which is very pricey, according to Lenard because you have to crack concrete and drill and put in underground storage tanks. If not, then the start-up costs vary in terms of how many pumps are included, etc., and how much the permits cost.

Myths busted
According to Bill Bishop, vice president of marketing and communications of 4Rfiuel Canada, business continues to pick up in larger centers and sales volumes are climbing consistently.

“While high prices pose an ongoing challenge to business, it’s becoming the new norm. Fuel is unlikely to be the same cause of business turmoil that it was when prices spiked in August 2009,” Bishop said.

In terms of knowing trying to figure out price fluctuations and patterns, Bishop said there is a juxtaposition between high gas prices and bad news. “Any type of bad news usually brings higher oil prices — bad weather, bad credit, falling stock prices, high unemployment, unstable governments, supply issues around the world. Not many things bring prices down except a prolonged absence of bad news,” he said.

And, what about the electric car? Well, the plug-in hybrid electric vehicle still requires some gasoline. After a driver drives a certain amount of miles, the gasoline is fired to propel the vehicle. And, while the popularity of the electrically-charged vehicle isn’t at a high point yet, it’s still gaining momentum. However, the need for gasoline for regular cars does not seem to be going anywhere any time soon.

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