Gas Sites - Upgrading to Compete

By Robert Roman

05/01/17
Express exterior.

According to an article in Convenience Store News, there is a trend among retailers with car washes to upgrade equipment to be on par with professional car washes.

Here, upgrade refers to transitioning operations from an in-bay automatic system to a conveyor (tunnel) that can process more cars per hour.

How many more cars per hour depends on several factors including overall length of conveyor, line operating speed, vehicle spacing, and the point-of-sale. Generally speaking, a 60’ conveyor can process around 60 cars an hour, whereas equipment suppliers say an in-bay automatic (IBA) can move maybe 12 cars an hour.

An IBA capable of 12 cars an hour requires a 1,200-square-foot building and a 15,600-square-foot pad site, whereas a 60’ conveyor requires a 1,800-square-foot building and an 18,200-square-foot pad site. If customer amenities like self-service vacuum stations are planned, then even more land is needed.

No direct labor is needed for IBA operations, but overall site labor is utilized whereas conveyor operations are attended. Full-time attendants are needed for opening and closing duties, assisting customers with self-loading, general housekeeping, routine maintenance, and customer service.

So, given the difference in plants, is it possible to be on par with professional car washes without a conveyor? The value proposition for commercial car washing is to clean, shine, and protect customers’ vehicles.

Given the cleaning materials and chemistry available today, keeping this promise is no longer an issue regardless of whether the equipment is an IBA or a conveyor.

The group of customers that retailers can target today is potentially larger due to a gradual shift away from washing vehicles at home and the rising popularity of automatic car washing.

Just as customers are being captured with food services that fit within convenience-store and gas-station guest visit times, retailers can capture customers by offering a car wash that also fits within visit times.

Revenue is generated primarily from direct sales of car wash services at the pump and, preferably, at the point-of-sale at the wash entrance. Although most sales occur at the pumps, point-of-sale or pay station capability is essential to help ensure fast process speed and provide support for website, mobile marketing, and promotions.

Regardless of the type of equipment, retailers will find they can deliver more value to customers with a facility that is visually appealing, a customer satisfaction guarantee, and a streamlined complaint-handling process.

How retailers attempt to create a sustainable competitive advantage depends on the organizational fit. For example, there are large chains like Wawa, Quik-Trip, and others without car washes because the business doesn’t fit in with the organizational culture.

For other retailers like Buc’ees, a chain of 37 convenience stores and gasoline operations with headquarters in Lake Jackson, TX, entry into the car wash business began with a large express exterior conveyor replete with a covered vacuum area. Buc’ees now operates three conveyors.

However, it takes people to operate this wash. Generally, for sites that can support high-volume washing, minimum staffing is two employees per shift, two seven-hour shifts. Moreover, overall site labor would be needed to manage or oversee these employees.

Consequently, an IBA offers a substantial benefit to retailers who would like to benefit from the synergy a professional car wash can create without the additional labor burden. Arguably, this has more bearing on decision making about store size, layout, and implemented services given uncertainties such as rising cost of wages and health care.

Today, producing more cars an hour with an IBA can be accomplished in two ways. The first is to consider installing a high-speed IBA. 

Dual IBAs.

In response to competition, IBA OEMs are now making machines that are capable of producing a high-qualify finish in about three minutes or up to 20 cars per hour. Still higher volumes can be achieved by installing two machines side-by-side.

Some manufacturers now offer an express version of an IBA. IBA express is designed so one vehicle is being washed while another is dried in a separate bay. This design allows for maximum throughput and washing and drying at a rate of between 25 and 30 cars an hour or more.

According to Auto Laundry News surveys, between 1999 and 2016, the gas/wash ratio has varied from one car wash purchased for every 40 gallons of gasoline sold to one wash for every 150 gallons.

The current equation used to “test” the market potential for a car wash at gasoline sites is one car wash purchased for every 100 gallons of gas sold. For example, if the site is projected to sell 450,000 gallons per month, we might expect demand of 4,500 washes or an average of 150 per day.

IBA express.

The car wash is designed to meet maximum hourly demand. For example, if maximum demand is 2.5 times average, the wash would need the capacity to process 38 cars an hour. This could be accomplished with a dual IBA, IBA express, or conveyor.

Another important consideration is the amount of innovation that can be brought to bear on the profits to be made from car washing. For example, an ALN survey pegs IBA average per car revenue at $8.69, and data suggest unit variable cost of $2.60 or a contribution margin of about $6.

However, average sales of $10 or more can be obtained by offering products and services that customers actually want to buy. Consider the car wash value proposition. Clean means all exterior surfaces should be free from dirt and grime. Shine means leaving a glossy finish on paint, rims, and tires. Protect means offering products that repel water and resist UV, water spots, and stains. Solving the customer’s problems in this manner can have a significant effect on the take rate or sales mix of the car wash operation.

To illustrate, let’s examine a dual IBA operation: Our subject wash is a going concern and located in an outparcel immediately adjacent to a gasoline station operated by a grocery store. There is a cross-marketing agreement between the owner of the wash and the gas station.

The car wash has a long history of increasing volumes and revenues and represents a statement of risk. Sales volumes peaked at 50,000 washes annually. Highest single month recorded was over 5,000 washes, and the single highest hour was 26 cars.

So, with peak hour demand of roughly 40 cars an hour and the ability to wash only 26 cars, the result when busy was exceedingly long waiting lines and average waiting times.

Wash selections are basic, good, and best. Extra pay services include underbody, tri-foam, and clear coat. There is no website and no marketing expenditures. Average revenue per car is $8.50.

The building measures 2,400 square feet and the bays are 50’ long. The equipment is 15-years-old and includes low-tech pay stations and standard rollovers with a freestanding dryer.

Consequently, we can characterize this property as a good candidate for upgrading equipment to bring it on par with professional car washes.

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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