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$15 an Hour - Get Ahead of the Increasing Minimum Wage

By Anthony Analetto

03/01/21

In my opinion, President Roosevelt opened a Pandora’s box in 1938 when the first federal minimum wage of 25 cents per hour was signed into law. You may never get me to deviate from my personal belief that a person should be compensated based on skill level.

But I’m a reasonable man. Like most car wash owners, I’m paying above the current minimum wage already, and my plan is to continue to do so even with a “The secret of getting ahead is getting started.”— Mark Twainminimum wage increase. Surprised? Don’t be. Keep reading. The reality is the writing is on the wall. It’s no longer if the minimum wage will move to $15 per hour, but when.

 

$15 May Be the New $21 For Some

Today, the federal minimum wage is $7.25 per hour. Most of us generally stay above the minimum wage because meeting the minimum wage would make us no different from other employers in the area.

Let’s say, on average, we pay $10 per hour for entry level staff; a 38 percent premium. Following that logic, a $15 minimum at a 38 percent premium would be $21 per hour.

That’s a significant increase. Yet, for a company to thrive, it has to compete against other car wash businesses and other industries. It pays to pay for the competitive edge and to reduce turnover. But can a wash afford this surge to the labor line item?

They Say a Rising Tide Lifts All Boats

The known known is rising labor costs impact everything from car wash owners, to manufacturing, distribution, service, etc. The unknown is if the market is willing to pay more for a car wash given the increase in labor costs, if the lower wage person will have more money to spend on a car wash, and if the increase in wage will mean an increase in revenue. Who knows?

There, My Friends, Hides the Opportunity!

No matter what happens, people will continue to drive and wash cars. How we prepare our businesses for the inevitable minimum wage increase is where the opportunity lies.

Is there an investment upfront? Sure. But at least it’s measurable against the proposed labor increase. Now is the time for all of us to take a hard look at our labor numbers, our equipment, our controls, our set-up, etc. and find ways to make our washes more efficient.

Burn Your Labor Cost into Your Brain

Each full-time employee is paid to work 2,080 hours per year (40 hours per week for 52 weeks).

Subtract 10 days or 80 hours for paid time off. It’s safe to say you annually get 2,000 hours of labor for 2,080 hours paid.

If a business is paying $7.25 per hour now and minimum wage rises to $15, that means $15,080 is now $31,200 annually. Insurance, taxes, and other payroll expenses vary from state to state, but average about 20 percent — an additional $6,240. That’s a total of $37,440 compared to $18,096 today. A business will now pay $18 per hour ($144 per eight-hour day) for the same $8.70/$69.60 per day employee.

$37,440 per employee annually at $15 minimum wage. Burn that number deeply into your brain.

Improve the Experience – Without Spiking Labor Costs

We all know there’s more to the car wash experience than washing cars. Smiling employees, helpful attendants, and friendliest service in town are all competitive advantages that are tied to labor costs. This is where technology and automation can help. With technology, you can cut down labor and use staff in customer-facing areas.

How? Where? Start with your queue. With technology, a queue can reorganize itself based on license plate recognition. No more reliance on staff pushing a button. From your pay station, customers can sign up for a wash club and manage payments on your website. No more staff needed at the pay station. Vacuum areas can be designed to satisfy customers without staff maintaining them. Is yours set up this way?

Technology. Period. An investment? Sure, but it doesn’t necessarily have to be a huge one. Remember, one minimum wage employee working 40 hours a week will soon be $37,400 annually.

Dig deep to identify ways to leverage technology to automate both your service and customer interaction.

Tweak Your Layout

Last week, I was at a wash who’s original renovation plan far exceeded the spend necessary. When all is said and done, this car wash owner managed to save in excess of $100,000 in on-going labor, building, and construction costs. How? With the implementation of controls and minor tweaks to layout. He no longer had to demolish a building, reconfigure the vacuum area, move the full-serve area, etc. With the addition of a far more efficient express experience, he went from averaging 22 employees to 16, and he was able to keep his full-serve option.

Before you start dumping money into demolition, I urge you to call your controls service provider to find out what can be done. These techy gurus are savvy, and they have solutions.

Review Your Existing Business Model

Take a deep look at the number of staff on your property. Will your market bear the price increases you’ll have to extend to customers to make the labor numbers work?

If you think yes, carry on.

If you’re not sure, I suggest two things. First, call your banker while interest rates are at historical lows.

Second, get with your equipment supplier asap. Start asking questions about converting some or all of your washes to an express, upgrading pay stations, adding free vacuums, etc. Food for thought: if you’re concerned with value-priced express-exterior competitors entering your market today, the format’s cost advantage goes up disproportionately as wages increase.

Improve Your Labor Efficiency

I don’t imagine ever opening or closing a tunnel wash with less than two people. At minimum, one to smile at customers entering the conveyor, one for safety and property maintenance, adding more throughout the day depending on season and volume. Where the opportunity lies is in hiring better, training better, and managing employee scheduling better. Today’s controls technology has easy-view reporting to align your labor with busier days of the week. The better you get at this, the more efficient your operation, the more control you have over labor costs. 

Improve Customer Retention

Reduce your churn, boost your profits. Do what you can to keep customers coming back. Use text automation to thank them for their business and/or to remind them to come back. Stay on top of social media to respond to customers and improve your brand image. Use professional graphics to make your wash memorable.

It’s Not Always About Saving Money

There are always ways to earn more without cutting costs.  Look at your wash packages. Are you offering ceramics? Are you displaying added services in a way that’s understandable to customers? Is your signage clear and professional? Have you met with your chemical representative lately for an audit? Have youupdated your signs? Are your menus static or digital, making it easier for you to promote specials or change pricing remotely (or even automatically)?

Opportunity Is Knocking

As with anything, the secret to getting ahead is getting started. The looming minimum wage increase appears to be inevitable. Gain control, start creating a plan of action, rely on your experts in technology, chemistry, equipment, and operations. If you can start to do something about it now, you’ll be ahead of the wage game and your competition.

Good luck and good washing!

 

Joining the company in 2000, Anthony Analetto serves as the president of Sonny’s CarWash Equipment Division. In this role, Anthony leads the innovation of new products to drive client success, and oversees all operations, engineering, and supply chain management. Washing cars for over 30 years, Anthony was the director of operations for a 74-location national car wash chain prior to joining the company.



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