Car Wash and Detail - More than One Way to Combine Services

By Robert Roman

02/01/17

Pundits assert the client base for commercial car washing consists mostly of territorially minded, family-owned businesses, and the investor-type, i.e., strictly business.

Most look to convert from full-serve conveyor to flex-serve or to build an exterior express, the latter having become an expensive proposition because the trend is building large.

Of course, there are other ways, albeit less glamorous, to make money cleaning cars.

HAND CAR WASH

Hand car washing includes conveyor style, Caribbean style (no conveyor), or mobile operations.

The hand car wash process can either use water or go with a “waterless” cleaning product. Using water is expensive because it requires a supply and a method to dispose of the wastewater. Waterless does not.

The target market for waterless hand car wash is primarily people with college educations who own nice homes and drive nice cars and corporations that are environmentally conscious.

The target market for a mobile wash includes businesses, shopping malls, and the 38 percent of households that still wash their vehicles at home — roughly 117 million homes.

 

Benchmarks for a hand car wash are average annual wash volume of 7,500 and wash revenue of $180,000. In Metro areas, sales of $400,000 or more are possible.

A two-person mobile car wash operation can produce up to 14 full-service washes in eight hours whereas a mobile detail operation might wash 1,500 cars a year or about five a day.

A location-based hand car wash using waterless cleaning products can produce two full-serve washes or four exterior washes an hour for each two-person team. Typical pricing for an exterior waterless car wash is $25 and $40 for full-service. Most hand washes charge slightly less.

A mobile operation is a home-based business, so overhead is low and typical start-up expense is less than $10,000 including leased vehicle. Cost of goods includes credit card fees and $3 per car in supplies. Ongoing monthly expense are advertising, auto expense, insurance, telephone, Internet-related (website, phone app), and miscellaneous (e.g., towel laundry).

A location-based hand car wash requires a 1/4 acre of land, a 1,200-square-foot leasable building, and has total start-up expenses of $125,000. So, external funding may be desired. Cost of goods and monthly expense are the same as those for the mobile operation plus triple net lease (insurance, property tax, and rent), and labor cost. Other expense would include debt service on the loan.

The business models described above are occupational style, labor-intensive businesses that require a genuine love of cleaning cars. However, this would create a sustainable competitive advantage because this segment is too small and/or not of interest to most territorial washes and most, if not all, investor types.

So, where these developers have achieved trade area dominance, there should be pent-up demand for waterless hand car washing and detailing for both location-based and mobile operations.

DETAILING

The detailing segment includes freestanding shops, mobile operations, and detail operations at commercial car wash locations.

The target market for detailing is similar to that for hand car washing plus it includes motorists who want their whole vehicle reconditioned to like new.

Some detail shops also offer complementary services such as paint-less dent removal, glass repair, paint sealant, window tint, paint chip and scratch repair, headlamp restoration, etc.

Retail work represents 76 percent of all customers. About 20 percent of customers are car dealers and 4 percent fleet operators and body shops.

The benchmarks for detail shops are average annual volume of 1,300 cars and annual sales revenue of $148,000.

Mobile operations process an average of 1,500 cars annually and generate annual sales revenue of $120,000.

The cost of doing business for mobile detailers and detail shops is essentially the same as we described for their waterless counterparts. These models are also occupational style, labor-intensive businesses that require a genuine love of cleaning cars.

Similarly, most territorial washes and most, if not all, investor types would have no interest in pursuing the detail segment.

Shown above is pro forma analysis for each business model (excludes debt service, hand wash is wash-only no detail).

If we assume sustainable income is $40,000, only the location-based hand wash would generate enough income to allow for the creation of wealth, such as saving for retirement, or growth, such as expanding operations by opening, for example, another shop or building or buying a car wash.

BUSINESS DEVELOPMENT

There are a great many things that hand car washers and detailers can do to improve the typical profit picture. For example, the physical constraint that prevents many operators from making more money is time. Average time to complete a standard detail service is four to five hours. So, if the objective is more volume, producing it will take more employees and perhaps a larger shop and greater overhead.

A non-physical constraint preventing operators from making more money is attitude. Many detailers prefer to work alone and more than 80 percent do not offer express detail services or waterless wash.

Working in teams of two and using a waterless process can virtually double the throughput capacity of the typical operation. One benefit of working in teams of two people is it reduces time to complete work of one person by 50 percent in the same amount of space.

A waterless process offers the benefit of lower operating expenses. In addition, it takes half the time that wet washing does and it’s a two-fold product — it’s a car wash plus it leaves behind a glaze that works like a wax.

Express detailing and waterless service can help differentiate a detail operation from the competition. These services also have greater profit margins than standard detail. Moreover, waterless service helps attract environmentally conscious consumers — a niche market.

For mobile operations, the most obvious way to make more money is to add additional units. Likewise, detail shop operators could launch a mobile unit as a satellite business.

Time is also a crucial aspect of business development. Sustainable income means long-term survivability of the business as well as the owner. For example, a small business owner can get into a lot of financial trouble if he/she tries to take on new things before the core business is established.

COMPETITION

Retail trade area is the geographic area from which a business generates the majority of its customers. This often is the area that represents 75 percent of current customers.

For example, a commercial car wash may draw most of its customers from a 3-mile radius from the site. A detail shop may draw customers from a 10-mile distance whereas the trade area for mobile is a function of economic distance and will of the operator.

In rural and isolated areas, scarcity may cause consumers to travel further distances to obtain goods and services and operators customers.

Mobile washers and detail shop operators should also have some understanding of how the car wash and detail industry has changed and its future direction.

Today, the commercial car wash industry is consolidating. This means fewer equipment suppliers, more and larger car wash chains and bigger washes that buy up the smaller ones or put them out of business.

The industry is also converging on express exterior conveyor car wash. Compared to a full-service conveyor that might wash 60,000 cars a year, an express might wash 120,000 cars or more.

Instead of offering interior cleaning, express exterior locations have rows of “free” self-serve vacuums so customers can clean their own vehicles. Instead of express detailing or a detail shop, the express exterior offers 30-day products like rain repellant, four-step paint sealant, hot wax (carnauba), and tire shine that are applied while the vehicle is being washed. These online products certainly do not match the shine or durability of a high-quality hand-wax or paint sealant, but they only take three to four minutes to complete and are priced at $4 to $5.

How popular are these low-priced “express” washes and quick spray-on products? Today, the express exterior format represents over 60 percent of the total available car wash market and is growing, with more than 50 percent of express customers buying extra services.

Conversely, many full-service operators have incorporated the express format in their process and placed the emphasis on high-volume express detailing (flex-serve car washing).

More car dealerships are also getting into the act by building automatic washes on their properties, and some have built separate outlets to provide commercial car wash and detailing services.

There is also a growing number of mobile waterless car washers due to low start-up expenses and overhead, relative simplicity of business model, and the “green” aspect. Arguably, many mobile detail operators and detail shops will face a more competitive environment in the future.

OUTLOOK

Some years ago, Bud Abraham, owner of Detail Plus, pegged the number of detail shops in the United States at 10,000. Today, I dare say there are fewer freestanding detail shops and a lot more mobile units and temporary operations (e.g., malls, parking garages) in existence.

Robust new car sales, projected rise in disposable income and modest economic growth bodes well for the short-term (five years out). Consequently, the challenge for many hand washers and detailers is keeping pace with the industry and changing consumer demand.

Doing so requires breaking the constraints that are limiting progress towards that goal. One way to overcome this is to engage a consultant, obtain professional training, and/or join the International Detailing Association. Experience shows expert advice is often the key to determine how best to apply available resources to break the constraints that limit progress.

 

Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com.



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