As any business owner/operator knows, the two basic ways to maximize profit are to increase income and reduce expenses. I prefer increasing income as the upside to increased revenue, rather than pinching pennies to riches — although there are solid arguments for both.
The revenue game has changed with the mass marketing of monthly wash clubs/programs, which has transformed the business model into a far greater revenue-generating machine. Costs naturally go down as volume goes up, because expenses are measured on a cost per car basis. The busier you are, the lower your costs. Yet with revenue and volume going up, pennies per car takes on more significance.
Factoring cost per car
First, look at all expenses on a cost per car basis, including fixed costs. This allows carwash owners and operators to evaluate expenses as a variable of how many cars are washed. Items like property tax and land leases start to have a more tangible value that can easily be compared going forward.
Secondly, start picking up pennies. For instance, our flagship location last year washed 419,000 cars. This means that a one cent per car savings equates to $4,190 in additional profit. The control over the variable cost per car lies in tips and timing. We take soap management into our own hands, looking for pennies of savings on every application. However, we always hold vehicle quality — as well as damage claim reduction — at a higher importance than cutting soap costs.
Vehicle quality always takes priority, and lubricity levels can be directly linked to damage claims. Often a few cents worth of extra soap is cheaper than a potential claim, so I recommend cutting cautiously.
Furthermore, look for things such as water dripping, or even gushing, off the rocker panel. If the water is flooding off the car, much is often wasted. For example, we achieve 34 gallons of total water to wash a car (not including reclaim) by carefully managing the application method and leveraging more frequent but moderate soap and water applications.
Timing can also be improved at any carwash operations. Thankfully, tablet-based controller technology makes it easy to view line of site and make accurate adjustments.
Ensuring the most ROI
Fine modifications at each application, such as those discussed in this article, can make a measurable difference in the long run. Look at all applications on a vehicle like an annual investment. There’s no argument that picking up an additional five percent return on investment is pretty significant if you practically did nothing to achieve it.
With the average vehicle length in the U.S. being just over 14 feet — and looking at the applications for this vehicle like an annual investment, as mentioned— in terms of inches, that makes that additional five percent ROI about 8.5 inches of vehicle length; so split between the front of the vehicle and back of the vehicle, this provides about 4.25 inches to play with.
I can assure you that you can find 4.25 inches of timing errors at virtually any carwash in the country, meaning almost everyone is leaving around five percent in variable application expense savings on the table.
Increasing profit potential
Lastly, as important as it is to control expenses, I believe it’s easier to increase profits by increasing revenue. If you’re not offering a monthly club program, you’re missing a great opportunity. These extremely profitable customer loyalty plans have dramatically increased revenues far beyond what used to be thinkable. And in my opinion, the profit ceiling for carwashes has not been reached.
Every day, advances in technology, marketing and operations strategies make this an exciting and profitable time to be in this industry.
Bottom line: The average consumer spending trends for carwashing before club programs was low, meaning a low annual frequency. Wash programs now commit people to wash their cars more often, and the gross dollars invested annually is somewhere around two to four times what it used to be.
For example, since our locations are close and convenient for our current and prospective customers, we run at a higher-than-average frequency of usage. It’s nearly impossible to drive through town without passing at least one of our sites. Even with above average frequency, the numbers work great because a carwash offers even more value to the consumer if it is convenient to wash often.
Club programs are not going away and have reinvented the express carwash model. Those that can leverage multiple sites with shared club integration stand to benefit the most.
Ryan Essenburg is a carwash operator and president of the Tommy’s Express Car Wash franchise, www.tommys-express.com.