Over the last several de-cades, the convenience store industry doubled in size whereas the installed base of car wash equipment within this segment declined by roughly 30 percent.
In the 1980s and 1990s, major fuel retailers such as Shell, BP, Mobil, Exxon, and others had thriving car wash sites — some with conveyor systems on them.
Today, however, many of those conveyor sites have been converted back to in-bay automatics or the station has been razed and replaced by a Thornton’s or Wawa’s, which have no car washes.
The principal reason for the shift away from car washing has been a change in the convenience store business model. Whether it’s fuel, coffee, merchandise, or food services, experience has shown consumers want them fast and a good value for their money.
Consequently, the value proposition for convenience stores has shifted from selling gas and convenience items to selling speed of service by selling items for immediate consumption.
For example, Wawa was one of the first c-store companies to implement self-serve, touch-screen menus for food orders to improve order accuracy and delivery speed. Thornton’s joined the trend in 2013 when it introduced a concept store that focused on providing quality food and beverages with the goal of becoming less dependent on gasoline and tobacco.
As shown by the above logos for some of the industry’s premier chains, the pursuit of these firms is a superior image, visual appeal, and customer service rather than a brand of gasoline.
Of these, only Sheetz operates car washes (140 units or about 30 percent of stores). Quik-Trip built two car wash facilities some years ago but exited the car wash business after only a few years.
In terms of ownership, the firms mentioned belong to a group that represents about one third of total stores. The remaining two thirds of the stores are operated by companies that own between one and 10 stores. In other words, the convenience store industry isn’t as fragmented as the car wash industry and it is getting less so.
For example, when a Wawa or Thornton’s builds a new store in my area, it isn’t long before the smaller convenience stores with gas put up perimeter fences and remove building signs.
Today, the typical c-store has almost 1,500 transactions per day — 341 are at the pump. After fueling, about 41 percent of customers will visit the store. The average time to visit the store and return to the car is about three and half minutes.
In selling this speed of service, convenience stores have gotten a lot larger. The old norm was a 1/2-acre or one-acre site, eight to 12 multiple product fuel dispensers (MPDs) and a convenience store measuring between 1,200 and 2,500 square feet. By comparison, a modern c-store may occupy nearly two acres of land, measure 4,500 square feet or larger, and have 20 or more MPDs and 50 or more parking spaces.
According NACS, the average cost to open a c-store in an urban market is $4.8 million. The average cost in 2009 was $3.8 million. Arguably, adding more land, constructing, and equipping a separate building for a car wash operation isn’t as easy a decision as mulling over an in-store food concession or drive-through.
For example, in 2003, I had the opportunity to review the template Quik-Trip would use for initial site plans for standard intersections. Options to add a car wash included an additional 9,000 to 12,500 square feet of land and provision for a 1,680 to 2,700 square foot building. System options included single and dual IBAs, mini-tunnels, and express conveyor.
Consequently, we could argue that it isn’t a lack of equipment solutions or cost of ownership that prevents convenience stores from operating car washes. Rather, it may be the product.
For example, modern convenience stores are designed as pride-of-ownership properties with big, bright buildings, and distinctive architecture whereas the car wash is often a nondescript box or industrial-like building.
The convenience store revenue model is also different than that of a car wash. For example, most convenience stores offer three grades of gasoline, but 85 percent of the gas sold is low-priced regular unleaded. After expenses, average pre-tax profit is only 3 to 5 cents per gallon. Average throughput is 130,000 gallons of gasoline per month.
On the other hand, in-store sales provide 60 percent of a store’s profit dollars. Here, margins are 27 percent for merchandise and 55 percent for food services. Today, a c-store may have in-store sales of $1.46 million whereas NACS finds car wash revenues at retail gas sites are approximately $134,000 per store. Generally speaking, average monthly profit from car washing after expenses is 50 percent of sales less capital cost.
Overall, convenience stores dispense about 90 to 130 gallons of gasoline for each car wash sold. This is up from an average of about 75 gallons in 2000, meaning fewer gas customers are buying washes.
Pundits argue that convenience store operators can improve the gallon-per-wash rate by converting from an IBA to a mini-tunnel or by installing an express conveyor for high-volume sites. However, this increased productivity comes at a cost.
Equipment cost for a 60’ mini-tunnel is about $250,000 whereas a 120’ tunnel with pay stations and vacuums will cost more than double this amount — and more if reclaim is required. Moreover, there is the additional cost of a larger building.
Conveyors are also more expensive to operate. With the capacity to wash 35 to 120 or more cars an hour, conveyors use more chemicals, water, and electricity compared to an IBA as well as more fuel during winter months. Labor costs are also a lot greater because conveyors require attendants and management oversight to ensure an efficient and customer-centric operation.
Conversely, IBAs can remain open 24/7 and don’t require attendants. However, IBAs are relatively slow with an average wash time of five minutes per car, or the capacity to wash 12 cars an hour.
Therein lies the problem with most car washes at c-store/gas sites. For example, it takes several minutes to fuel up and it takes about three minutes to visit the c-store. So, one would expect it would take a similar amount of time to get a wash. However, it doesn’t. Moreover, when busy and a lot of cars are waiting in line, the total time to get a wash at an IBA can grow to 20 or even 30 minutes.
Equipment manufacturers’ solution to this constraint has been to try and coax more speed by using technology and certain techniques to increase the hourly capacity of the machine. However, equipment solutions tend to be expensive and the gains incremental at best. Arguably, another approach would be to change the product rather than the machine.
For example, the value proposition for a commercial car wash is to clean and shine and protect customers’ vehicles. Commercial washes accomplish this by arranging the chemicals and equipment according to a process. Whereas at home, in the driveway, clean and shine and protect can be done in one step.
For example, there are a number of chemical manufacturers that make one-step wash-and-wax consumer products for washing cars at home. These products usually contain anionic and amphoteric surfactants, sodium salt, carnauba wax, and synthetic polymers.
One-step wash and wax has great sudsing action and leaves a deep, glossy, just-waxed shine serving as an in-between for regular waxing. Sound familiar?
Arguably, such a one-step product could be formulated for friction IBAs. The attributes and benefits of doing so would be considerable. For example, if all chemicals can be collapsed into one single application, this would cut the time to wash a car in half thereby doubling the hourly capacity of the IBA.
Since only chemicals are changed, it would be necessary to only recalibrate existing machines rather than opt for expensive equipment upgrades. Consequently, most of the gain would go to the bottom line.
Would less time on the machine mean less of a product or value in the consumer’s mind and therefore a lower price? Perhaps in the past, but experience shows consumers place a high value on speed of service. In fact, they crave it at the convenience store and are willing to pay for it.
Yes, a conveyor is most appropriate if the goal and objective is high-volume washing. However, the vast majority of convenience stores do not have the gasoline throughput or site location characteristics to justify a 120’ conveyor. Moreover, the 67 percent of operators that own between one and 10 stores would find the labor and management requirements a considerable additional burden to their organization.
Consequently, changing the product in a novel way might be a viable solution to increase demand for car washes at c-store/gas sites.