ATLANTA -- In the Squeaky Clean With Car Washes workshop on Tuesday, the first day of NACS Show 2007 in Atlanta, four executives with car-wash experience told the audience the pros and cons of choosing car wash as an alternative profit center convenience store operators need to combat shrinking gasoline profits.
Emceed by Chip Lavigne, president of Lavigne Petroleum LLC, Blue Harbor Point, La., the session stressed that while there is money to be made from a car wash, it's not like selling a Snickers bar, according to Dave Carpenter, president and CEO [image-nocss] of J.D. Carpenter Cos. Inc., Ottumwa, Iowa.
Carpenter and Keith Baker, treasurer of Slidell Oil Co., Slidell, La., relayed their experiences with replacement of old car washes versus installing new, the upsides and downsides of different types of washes and tips for how to enter the car-wash business. Kevin Friederich, managing director of American Enterprise Funding LLC, Manheim, Pa., gave an overview of the car wash industry as well as financing options.
Friederich said that according to a study done by the International Carwash Association (ICA), fewer people are washing their cars at home, attracted by the lower prices of a rollover wash. The demographic for that choice is 16- to 49-year-olds who make between $20,000 and $60,000 annually.
The good news for potential operators of higher-priced express exterior washes is that the demographic for them is on the rise; 50- to 60-year-olds whose income is greater than $60,000 prefer a full-service or express exterior wash, and the age group between 50 and 85 will increase to 20 million in the coming years, Friedrich said. The minimum to zero labor needs of these washes are the most important reason to choose them, he said.
Friedrich gave examples of profit for short tunnels as half of that of longer tunnels. Investment expectations should be $500,000 to $3 million.
Since installing a car wash is obviously not a decision to be made lightly, Friedrich and the others highly recommended partnering with parties who have a passion for the car wash business. Above all, Friedrich said, before detailing financing options, plan for the unplanned.
Baker said when considering replacing an old car wash, take into account the volume of the old one, how many rooftops are nearby, household income, fuel volume, competition and cost of new. Carpenter added that fuel volume is not the be-all and end-all statistic for gauging the viability of a new car wash; he said 200,000 to 250,000 gallons per month should be enough but he has a store that does 300,000 and can't keep a low-priced rollover busy. He said heavy retail is a pretty good indicator, though.
What drives a gas purchase is different than what drives a car wash purchase. One is necessity and one is convenience, he said.
Baker, not passionate about the car-wash business, chose to enlist a partner for the two tunnel washes he put in. He paid for the site work and construction, while the partner obtained the equipment and does the operations. His modular 57-foot glass-walled soft-cloth and touchless machines give him and his partner strong cash flow, site differentiation and increase in fuel sales of 10% to 15%. They cost between $500,000 and $600,000 to start, and paid out in 26 months, Baker said.
Carpenter has both rollovers and express tunnels. He said rollovers are cheaper to start, less complicated, require no labor, are good for smaller lots, can be open 24 hours and there is no shortage of folks who have experience with them. The negatives are significantmuch lower throughput and quality of wash, more likelihood of downtime because of no oversight, plenty of similar businesses and above all, much longer wait.
I quit washing my car at my own car wash, said Carpenter, who began using express exterior 18 months ago. If you're going to do the volume you need to do to make money, people are going to wait.
And many of them won't, taking their business elsewhere. Carpenter said his express exterior washes do 12 times as many cars per hour, boast a higher-quality wash, the attendant on duty makes customers feel comfortable and safe and it rarely is completely down when there is a problem. The downsides are that the investment is much greater, it needs more space and labor, there is more of a safety risk and it requires a greater understanding of its workings and needs.
This type of wash forces you to be in' the business, he said. You can't ignore it, and that's a good thing, I think.
Carpenter suggested having a gated entry with lots of signage, in the store, by the pump and at the wash. To please the senses, have colored lights in the tunnel indicating different stages and good-smelling chemicals and have a consistent tire shine. One of the bonuses of having credit-card acceptors for the car wash is that, Carpenter said, there's margin, a reference to credit-card fees' diminishment of profit from low-margin fuel sales.
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