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.
Trickle-Down Trends
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.”
Positional Marketing
Remember when washes were located behind the store? Not anymore. Visibility explains why many bays and tunnels are placed up front, often adjacent to the c-store or fuel island, where they can be easily accessed and are hard to overlook.
“Cross-marketing is key,” says SteveL’Heureux, CEO of Ryko Solutions Inc.,Grimes, Iowa, which has more than 8,000 installed car washes across the country.
He touts the seemingly countless positions that c-stores can use to promote their car wash. “C-stores have an opportunity to sell the car wash at the street level with signage drawing the customer in,” he says, “at the gas pump with signage and on-pump messages, on the forecourt of the store and inside at the cash register, at the activation point before the customer pays or redeems code, and at the end of the car wash to encourage repeat business.”David Dougherty, senior product manager for PDQ Manufacturing Inc., De Pere,Wis., says “offering multiple points of sale will increase your car-wash traffic, plus having a car wash will help be a destination point for fuel, which, in turn, can lead to more in-store traffic c.”
Wulf says he’s seen car-wash operations work most successfully at c-stores where the wash option is conveniently offered to the gas customer. “It’s rare to see high volumesites where the customer purchases the car wash inside the c-store. It’s mostly a play on gas sales, so marketing and selling at the pump is crucial,” says Wulf. “Marketing inside the store can support car-wash sales, particularly for products like monthly loyalty cards and unlimited wash passes, but roadside and pump marketing is the most powerful approach.”
To capitalize on in-store opportunities, employees must also be properly trained to promote car-wash sales by asking if the customer would like to add a wash during a register transaction, Perry says. Instituting car-wash sales commissions and holding sales contests that award prizes to employees can be powerful incentives.
Cut the Gas, Not the Wash
Lenard of NACS says retailers that have successfully grown their car-wash businesses have done so by tying it to the pump. One tried-and-true approach is to offer cents off per gallon for every customer who opts for a car wash.
“This is often much more enticing to customers than offering a discount on the car wash for those who fill up,” says Lenard.
And don’t try to be the cheapest guy on the street, says Ray Johnson, operations manager for 20 Las Vegas Speeded Mart stores, six of which are equipped within-bay car washes, each averaging 200 wash counts a day.
“You want the wash to be competitively priced and offer value at the pump,” he says. “If you give a discount on gas, it doesn’t affect the customer’s perceived quality of the gasoline, but if you discount the wash, people have a perception that the wash is a lower-quality product.”
Goyal of Vintners says his gas customers receive 20 cents off per gallon if they buy a car wash. They can also use a loyalty card awarding a free wash after five purchases. These and other marketing tactics have helped make car wash the second most important business component based on sales and profitability at his 13 stores.
“Traditionally, we used to discount $off the car wash when you bought gas, but we’ve found in the past five years that it works better to discount the gas, “says Goyal, whose sites offer a basic wash with a soap, rinse and dry cycle starting at $5; a middle option with underbody washing and wheel blasting for $7; and a premium wash that also provides aRain-X treatment for $9. His best locations average up to 5,000 wash counts per month.
Darrin Baum, senior vice president of sales and service for Zep Vehicle Care, anEagan, Minn.-based car-wash chemical supplier, says most c-store car washes offer three wash choice packages, with the average ticket about $7.50 per wash.
“The top package should be the most popular and profitable wash for convenience stores,” says Baum. “It’s important to use key products and branding to differentiate wash packages for consumers. A good chemical partner will help you develop your menu, analyze profitability and keep pricing and menus current.”
Threshold for Success
Not every c-store site is a worthy candidate for a car wash. Experts caution against taking the plunge if your operations don’t fit the right criteria.
“If a c-store has the space for it, a carwash is a great profit center to add and typically achieves the highest gross margin—65% to 70%—of any product or service category on a c-store site,” says Robinson of Mark VII. “A good rule of thumbs that you’ll sell about one car wash for every 125 to 150 gallons of gas. Plugging that assumption into [an ROI] calculation that includes building and equipment acquisition costs and typical car-wash menu prices in the area will indicate if it’s good investment for a specific site.”
Wulf says a common minimum threshold for car-wash sales sustainability is 100,000 gallons of gas sales a month. If your patrons pump less, it may not be worth the hefty investment.
Although adding a car wash can positively affect your bottom line, “it’s important to take into account the opportunity costs, existing competitive landscape and the customer base,” says Lenard. “The costs of running a basic hands-free car wash may not be that much: utilities, water and soaps. However, you also need to look at what else you might be able to do with the capital investment or the dedicated space.”
And seasonality should be carefully evaluated. In the Northeast, for instance, car washes tend to have a peak demand in the winter, when drivers want to get the salt and road grime off their vehicles.
Johnson of Vegas’ Speedee Mart offers this perspective: “Car-wash sales are smaller portion of our business, partially because people in this market don’t wash their cars as often and it only rains about five times a year. But it is a profitable category, and 90% of our car-wash sales are for the most expensive wash we offer.”
A well-developed and maintained carwash can be one of your top five revenue producing categories, says Perry. “But success is dependent on three things, “he says. “First, you have to choose a very customer-focused, well-established supplier whom you can rely on as a partner. Second, you need to conduct different types of promotions and advertising to build your customer base. And third, you have to see it as something that can differentiate your c-store and help maintain and protect your gasoline margins from your competition.”
Before committing to car wash, scout the competition carefully to prevent car-wash oversaturation in the market and to ensure you price appropriately, says Johnson. Finally, Baum says, remember that the best car-wash operators are those who are dedicated to the category for the long haul. “They choose to run their car wash actively by having a well-thought-out marketing calendar, an employee
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