Wash Your Step
Car wash can be a cash cow, if you know how to milk it.
Most major chains and countless independents operate them and count them as valued contributors. Yet when conversation centers on hot profit centers, rarely do car washes enter the conversation.
More popular in drier and warmer climates, car washes perhaps resemble that reliable uncle, the one who brings a bottle of wine each year for Christmas and attends each family celebration. He is neither star nor invisible. He is reliable.
The facts remain much the same as they did a few years ago: Washes are profitable and a destination. Their sales in c-stores grew a respectable 1.6% in 2012 to a monthly average of nearly $4,150 per store, according to preliminary info from the NACS State of the Industry Survey of 2012 Data.
However, for operators eager to implement a new car-wash site, the initial and long-term investment can be considerable, and lack of proper due diligence can lead to disastrous downtimes and premature failure. They may also face zoning and permitting headaches, spatial challenges due to lack of available land, high installation, maintenance and repair costs, stiff competition and unfavorable seasonality/weather trends.
These and other factors discouraged many c-stores from developing new and upgrading older car-wash sites in the past, says Eric Wulf, CEO of the International Carwash Association (ICA), Chicago. But now that the economy is improving, operators may be ready to devote more attention to the category.
“Car washes can be a strong contributor to profit margins for convenience retailers, but only if they’re willing to commit to the business,” says Wulf.
In the current economy, “convenience operators are looking for every advantage they can employ to improve their results.” While the aforementioned NACS numbers may sound alluring, “it’s not an ‘If you build it, they will come’ model,’ ” says Jeff Lenard, NACS’ vice president of industry advocacy. “Before committing, you really need to see if you’re going to meet an untapped need.”
What You Pay For
Car-wash types and technologies haven’t radically changed in recent years. The vast majority of c-store operators opt for in-bay/rollover washes, typically 30 to 40 feet long and where cars sit stationary, absorbing a wash/rinse/dry cycle while the equipment moves around it in a touch-free or friction fashion, or a combination of the two. In-bay/roller types average 15 to 20 wash counts an hour. Conveyor-equipped carwashes often require more real estate (tunnels that are 35 feet or longer) in exchange for higher wash counts per hour—often double that of an in-bay facility.
Although most c-store car washes are fully automatic, some are staffed with attendants who monitor the equipment, direct drivers and help dry, vacuum and detail the vehicle manually, such as Delta Sonic sites. Other convenience operators and service stations forgo automatic and labor-intensive facilities altogether and simply offer self-service wash bays.
Today, there are approximately 20 major car-wash equipment/facility manufacturers(including big players such as Ryko Solutions, PDQ and Mark VII) and about a dozen major wash-chemical suppliers. While the vast majority of c-stores with carwashes own the car-wash operation and contract with an outside supplier (often the manufacturer) to stock the chemicals and maintain/service the equipment, others choose to reduce ownership risks by leasing the equipment from suppliers or engaging in a revenue-sharing program.
Paul Fazio, CEO/owner of Sonny’s The Car Wash Factory, a Tamarac, Fla.-based manufacturer of conveyor-type equipment found in many independent c-store car-wash operations, estimates that 90% of c-store car washes are in bay/rollover. This is primarily because conveyor washes generally require more land for the tunnel length needed and a slightly higher initial investment: approximately $230,000 to build, install and equip a new 35- to 40-foot conveyor facility vs. approximately $200,000 for a 35-foot in-bay facility.
Those costs can vary dramatically by region. For example, it can cost upwards of $400,000—including permitting, design, infrastructure, construction and equipment purchasing—to build a new medium-length conveyor system at one of the 13 Shell- and Chevron-branded Vintners stations in southern California supervised by Raman Goyal, regional manager.
“The return on that investment is usually within one to two years, and the expected lifespan of a [car-wash facility]is about 10 years,” says Goyal, who has had to replace three of his 13 car washes in the past year.
Mike Perry, an independent industry consultant in Marietta, Ga., acknowledges that the car-wash industry hasn’t necessarily introduced any groundbreaking new technologies or mechanical innovations in recent years. But don’t mistake that for indifference.
The industry has made great strides in improving operational efficiency—as evidenced by the proliferation of mini tunnels for conveyor-type washes, as well as faster wash cycles to increase wash counts per hour thanks to improved nozzle technology, better chemicals and more reliable variable frequency drive motors.
Contemporary car-wash building designs have also stressed higher efficiency. For example, many operators are choosing modular prefabricated components, assembled at the factory, that can be dropped onto a slab and quickly fashioned to reduce construction time and costs.
“Additionally, wash quality has been consistently high the past few years,” Perry says, “which shows that manufacturers have focused on making what was already good even better.”
Contributing to enhanced wash quality are improved brush materials. “Many brushes today use a closed cell foam that acts like a neoprene wetsuit in that it doesn’t absorb water and can thus do abettor job cleaning and producing a nice shine,” says Fazio. Other important changes:
Loyalty: Car-wash loyalty/membership programs are surging, often offering discounts at the pump while maximizing high profit yields at the wash. Contributing to these rewards programs are IT improvements dovetailing the wash to the retailer’sPOS system.
Total solutions: Car-wash consultant Perry observes an increasing consolidation of suppliers. Today, many operators choose a single-source company that serves as all-in-one provider of the equipment, chemicals, maintenance/repairs and marketing support—a popular option for convenience retailers seeking a simplified, turnkey operation.
“With groups of stores frequently changing hands, chains end up with multiple brands of equipment in their network, and they prefer to partner with a single service provider to keep them running, “says Steve Robinson, vice president of business development for Arvada, Colo.-based Mark VII Equipment Inc., whose clients include Circle K, Kwik Trip and 7-Eleven. If there’s one overarching trend today that trumps all others, it’s an enhanced focus on total cost of ownership, says Wulf.“[Car-wash] operators are looking at cost savings wherever they can. Reducing input costs is a significant part of that equation, from water to electrical to chemistry. It can also mean removing manual labor and inserting automation,” says Wulf. “And, from the customer’s perspective, ‘fast, shiny and dry’ remains the dominant expectation, but improved customer experience is also getting increased attention.”