Finishing Line

Virus - Uneven Effects

By Robert Roman

05/01/20

Writing in a print medium about an event that is developing and changing as rapidly as the Coronavirus outbreak presents the inevitable danger of being irrelevant by the time the article comes off the presses.

For example, while writing this, California, Illinois, Pennsylvania, and some parts of New York had declared shelter-in-place, stay-home, and business-closure orders. Exceptions to these orders are “essential” businesses and those whose work is considered essential.

Generally speaking, this is thought to include healthcare, public safety, banks, groceries, gas stations, hardware, laundries, delivery services, and auto repair among others.

On the car wash forums, there is a lot of talk about the other results such as sales volumes tanking, membership numbers plummeting, and managers and employees quitting because they are afraid of getting sick.

How long this situation will last and what to do about it will vary considerably because the virus is affecting areas of the country so disproportionately.

For example, in New York City, car washing has been in the dumps. In southwest Florida, car washing is jamming. The reasons for this are pollen and peak tourist season, and in Florida we are not on lock down, yet.

So, perhaps more important than the near term is what to expect after the all-clear signal is given.

For example, economists expect a significant number of small business failures and rising unemployment rates in the hardest hit areas.

Pundits also expect a V-shaped recession. However, small business typically lags behind big business in an economic recovery. In other words, a comeback may take longer than many hope for and there is probably going to be a number of businesses that will need to decide whether to operate or temporarily shutdown.

Here, we would expect operators to follow the shutdown rule. The rule states that in short run, firms should continue to operate if revenues are sufficient to cover variable costs.

Operators not facing closure orders have responded to these new circumstances in a number of ways.

This has included furloughs, washing exterior only, shutting down vacuums, and curtailing interior cleaning services. Operators have also taken steps to avoid communication of the virus by wiping down POS systems and vacuums with disinfectant, using personal protection equipment, social distancing, not accepting cash, and promoting interior sanitizing services.

On the other hand, there are an increasing number of car wash operators who have no choice but to shut down. For example, consider Vincent (Vinny) Orlando who owns and operates Soft Touch Car Wash in Brooklyn, NY.

On Sunday evening, March 22, Vinny received a notification that Governor Cuomo recently signed an executive order that required non-essential business to shut down on Monday morning until further notice.

Soft Touch is a conveyor car wash facility that offers traditional full-service, exterior-only, and detail services. The company has between eight and 11 employees, cashiers, and manager. Average weekly payroll is 540 hours and 140 hours overtime. Average annual labor cost is roughly $500,000.

On Monday morning, this $500,000 in wages disappeared and so did Vinny’s cash flow. In its place, Vinny will pay out for sick leave and then employees will have to file for unemployment compensation. As for Vinny, he gets to draw off his capital reserves.

In retrospect, Vinny said shutting down was probably a good thing because business was off by about 75 percent. As for coming back to life, Vinny has reservations. He believes most of his employees should come back. If they don’t, he may need to wash exterior-only until he can staff up.

Vinny is also unsure how quickly customers will return to the fold. Will they come back as often, spend as much money? There will also be a broken subscription program to repair.

Vinny believes this event, coupled with the $15 labor movement, rising local and state taxes, and several years of bad weather adds up to a herculean task ahead for New York City operators.

 

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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