Cost of Doing Business - How Full/Flex Serve and Exterior Compare
By Robert Roman
The purpose of this article is to provide relevant information that participants in the car wash industry may find useful in gauging performance or decision-making.
Data presented herein was obtained from Auto Laundry News, the International Carwash Association, CBRE (valuation services), Professional Carwashing & Detailing, and from our internal files.
The following presents information on the conveyor product class which consists of full-service, flex-serve, exterior-only, and express exterior.
Figure 1 – Annual Sales Volumes
As shown in Figure 1, sales volumes for full-service/flex have remained steady during the period whereas operators are reporting much higher volumes for exterior car washes. Arguably, this can be attributed to economic recovery and continued growth of the high-volume express-exterior model. We can demonstrate how these higher volumes occur by examining what happens to car wash facilities that are developed in a closed system. By closed system, I am referring to situations where there are natural or man-made barriers that would effectively cut off the market to the property, isolated areas, and areas with no competition. In such situations, we find conversion from traditional full service to flex serve can boost sales volumes by as much as 30 percent. Similarly, we find that adding a subscription program (unlimited wash option) can result in a doubling of sales volumes.
Figure 2 – Capture Rates
As shown in Figure 2, the capture rate for full-service remains below 1990 levels whereas the rate for exterior has doubled over the last 10-year period.
Figure 3 – Base Price
As shown in Figure 3, the reported price for a basic full-service wash has nearly doubled since 2010 whereas the price for a basic exterior wash has increased by 23 percent.
Figure 4 – Average per-Car Revenue
As shown in Figure 4, average revenue for a full-service car wash has increased by 43 percent since 2010 whereas the exterior average revenue increased by 29 percent.
Figure 5 – Income
Income shown in Figure 5 is not reported income but rather income as the function of volume and average revenue shown in Figures 1 and 4.
Figure 6 – Unit Variable Cost
Unit variable cost shown in Figure 6 is not reported but rather the values calculated as function of reported cost of goods sold and sales volumes. Here, costs of goods include credit card fees, chemical, utilities, equipment maintenance, and customer claims.
Figure 7 – Labor Revenue Ratio
As shown in Figure 7, full-service/flex-serve operators are reporting a steady increase in labor cost as a percent of sales revenue while exterior has been moving in the opposite direction.
Figure 8 – Labor Cost per Car
Labor cost per car shown in Figure 8 is not reported but rather the values calculated as a function of reported sales volumes, average revenue, and labor revenue ratio.
Figure 9 – Advertising Expenditures
As shown in Figure 9, operators have reported a significant increase in expenditures for advertising and promotion over the last 10 years. Arguably, some of this increase is due to competitive factors but also changes in consumer preferences. In 2000, less than 20 percent of operators reported having a website. In 2010, this increased to 46 percent. Today, over 70 percent report having a website and over 80 percent participate in social media. For example, researchers find that customers overwhelmingly prefer to communicate by e-mail and text, and many want mobile payment options and customer apps. In addition, there are costs or fees associated with managing a subscription program (i.e. unlimited wash option).
Figure 10 – Development Cost
Lastly, there is the cost to develop a car wash facility. As shown in Figure 10, this cost has doubled for full-service/flex washes and nearly quadrupled for exteriors.