Welcome to the highs and lows of owning a new business in the carwash industry. While most operators across the country have generally enjoyed record highs, carwash’s old adversary — weather — has surely passed along some lows over this past decade. Of course, we are referring to car counts, and if you are a new investor and have not yet shifted your mindset to focus on maximizing customer potential, consider a change in thinking.
As is the case with most businesses, the first few years of owning a carwash are critical. It’s well-known that many new businesses will fail within their first five years of operation — to the tune of over 50 percent.
Whether you are a new carwash owner/operator or a seasoned professional who is looking to refresh on the basics, this article discusses the myths, mistakes and opportunities of starting a new carwash business.
This is no myth: Owning a carwash can be a lucrative decision. Demand is currently high, unemployment is low and carwashing is a convenience customers are willing to spend money on. With the right business plan, wash format for the area and customer base, technologies, workers and approach, new investors can ride the high.
However, there are several myths about operating a carwash business that new investors should be mindful of. The first myth mentioned by the two experts we interviewed for this article is that the carwash industry is easy.
“This perception is created because the good carwash operations make it look easy,” explains Vic Monteleone, director of corporate accounts for National Carwash Solutions (NCS). “The reality is that operating a carwash business is not easy at all. For the operators who buckle down and commit everything during the first year, it does start to get easier, but it takes time.”
New investors and operators in this market also believe that they can simply learn on the job, and this, say the experts, is another myth. In reality, the knowledge new investors and operators can draw from experienced carwash operators can prove to be invaluable from the start. Additionally, there are consultants who can offer insightful industry research and information.
“Whether it’s a local distributor, manufacturer or consultant, invest the proper time to find quality industry partners, because in the long term, it will save you time and money as well as make your business more profitable,” says Monteleone.
Focusing on the customer experience, increasing car counts and implementing loyalty strategies is a winning combination that many carwashes in this country are reaping benefits from. Therefore, investors who are looking to play a passive role in operating and growing a new carwash business should find an operator and a general manager who are willing to have more skin in the game.
“One of the most common misunderstandings is that a carwash is a ‘set it and forget it’ business; in fact, carwashes need constant supervision,” asserts Todd Davy, vice president of sales and business development for DRB Systems. In addition to providing a clean, shiny and dry car every time, he continues, it’s important to pay attention to the details and meet customer service expectations.
According to Davy, another common misunderstanding among new investors is that if the competition lowers its prices, they should immediately lower prices to match. Instead, he advises, focus on ways to differentiate your carwash from your competitor’s.
“The most successful operators are finding that having a successful monthly plan program means that the base wash price can remain high, and the business will continue to build volume and revenue, regardless of how low your competition decides to go,” says Davy.
Avoiding common mistakes
In many ways, experience is gained when learning from past mistakes and situations. While it’s recommended to aim high and set lofty goals, no new carwash business will be 100 percent perfect in its first few years. Especially if you are brand new to the industry, there will be challenges to overcome and some important lessons to learn before claiming success in this market.
Fortunately, there are plenty of resources in this industry to learn from, including other carwash operators. Reading trade publications, like this one, and attending industry trade shows and events are smart investments in your business’ future. Some industry trade shows even offer new investor programs. In addition, some carwash manufacturers offer courses specifically focused on educating new owners and operators.
Being active in the industry will help your business now and in the long run. By growing your network of carwash operators, you will also gain experience by learning from others’ mistakes.
“The biggest mistake I see is that new investors focus all of their attention on the development of the carwash,” remarks Monteleone, who is also an instructor for a new investor workshop. “Spend time developing an operations and marketing plan. Having a proper marketing plan to launch your site and build your client base will be instrumental in accelerating your revenue growth curve.”
While the detailed strategies to use across today’s media platform offerings can be saved for a future article, there are some general best practices to implement in order to effectively market and promote your new carwash. Signage as well as creating an online presence with social media and a website are a great start.
“A good carwash has clean, easy-to-read signage on the property; a great carwash has a marketing presence in its community with a website, mobile application, community fundraising, direct mail programs, a social media presence and more,” explains Davy. “Also, you should be constantly marketing your carwash to bring in new customers and remind existing customers of your offerings.”
Another common mistake noted by our experts is new investors not being fully aware of what they are getting into. Opening a new carwash business is expensive. Moreover, there are choices in wash format. And, with those choices come more choices. For instance, if you are interested in opening a full-serve carwash, are you prepared to deal with the labor requirements of employing 20-plus people?
According to Monteleone, investors should also be prepared to pay a premium for a good location. “A professional looking building with the proper equipment will add up quick. A properly designed express exterior carwash, for example, will cost between $2 million and $5 million, depending on the market,” he adds.
In addition to securing the right lot — which we covered in more detail in the January 2019 issue of this publication — and the appropriate finances, another common mistake happens during the building process, states Davy. “If you want to build a carwash that can wash 200,000 cars in a year, you need to have room to stack those cars on the lot and systems that can quickly and efficiently process that volume of cars,” he says.
Securing a bright future
Fortunately, you picked a great time to enter the industry. Many factors are driving volume at carwashes across the country, and the industry, on the operator side, is still considered highly fragmented. From increased environmental awareness to consumers owning their vehicles longer and investing more money in care and maintenance, it’s not impossible for new operators today to gain a loyal customer base over a relatively short period of time.
Additionally, another prominent consumer trend in recent years has emerged, and many professional carwashes are at the forefront.
“The world is moving to a subscription economy. Carwashers are washing more cars now than ever before, thanks to monthly unlimited carwash plans. As you plan to build your wash, make sure to build a strong membership program, and market that program to the masses. The program should be easy to join, and pricing needs to be highlighted to show off your subscription/monthly plans,” educates Davy.
Loyalty and club memberships are common these days at carwashes; therefore, these plans are likely not a unique selling point that you can leverage for your business. Instead, new investors and operators need to give customers a reason to pick their washes over the competition, which can be achieved through focusing on customer experience.
“Today’s consumer wants to be in control of their experience,” continues Davy. “Give your customers the ability to buy a wash or monthly plan how they want — through a pay station, from a cashier or through a website or mobile app, as examples. The easier you can make the transaction for the consumer, the more likely they are to want to use your carwash.”
Successful operators live in the moment with short-term focus to serve the customer base better. These operators also keep an eye toward the future and stay ahead of industry trends as they are developing.
Investors should be aware that the carwash industry is experiencing tremendous growth as well as change in recent years. Consolidation is occurring across the industry, including manufacturers, distributors and operators. According to a press release on Carwash.com quoting Rob Worrell, a financial advisor with brokerage Davenport & Co., the top five carwash chains in the U.S. have only about a combined 2.9 percent market share. When compared to the fast food industry, for example, the top 10 chains have 50 percent of the market share, expresses Worrell.
In other words, industry insiders and new investors know that there is still plenty of room for expansion in this market. But, how will this impact the new investor entering the carwash industry today?
“The industry is consolidating,” concludes Monteleone. “There are more multi-site carwash operators than ever before. These larger operators will raise the bar, creating more of a ‘franchise’ experience. Be prepared to compete.”