Mitigation - Reduce Some Risks, Manage Others

By Robert Roman

05/01/21

Mitigation is the act of reducing the risk of loss from the occurrence of some undesirable event. For example, car wash developers conduct due diligence activities during the planning phase of a new project to help ensure they can obtain entitlements in an economic and timely manner.

Likewise, car wash operators take measures to mitigate business operating risks such as training staff and management during the construction phase and providing sufficient working capital to cover expenses until the business is cashflow positive.

Of course, there are some risks that car wash operators can’t do much about such as the weather, economic conditions, consumer behavior, or political/social unrest.

The latter of which has become a distinct reality for some folks. Experts recommend that retailers should develop an early warning system to help determine when store assets may be at risk.

Some of these include monitoring social media, repositioning people and assets out of harms way, complying with emergency directives, and developing tactics to help ensure business continuity. The latter of which is crucial because, like other brick and mortar retail businesses, car wash operators must drive traffic to the site.

Some of this traffic is acquired randomly from pass-by highway traffic whereas other door swings are subscribers or regular customers making a planned trip.

So, what can affect traffic? According to a study of gas prices and driving over the last two decades by economist Joe Cortright, sustained high prices for gasoline lead to real reductions in vehicle miles traveled.

For example, during this period, the Federal Highway Administration found an average gas price increase of 28 percent influenced a 3 percent reduction in the travel time index — 3 percent is roughly 90 billion vehicle miles.

Here, the price range for gasoline varied between $2 and $4 per gallon. The latter of which was considered by some as the tipping point for gasoline at that time. Tipping point is a price that once reached or exceeded would result in significant change in consumer behavior such as people buying less gasoline/driving less or buying a more fuel-efficient vehicle.

Likewise, researchers found a 23 percent increase in gasoline prices lead to a 2 percent decrease in retail spending.

Arguably, green energy policies that call for sustained higher prices for fossil fuels such as gasoline would not portend well for the car wash industry.

Car wash operators can mitigate some of this risk by maintaining a strong customer base of subscribers and regulars.

As for capturing random customers from lower volumes of pass-by traffic, one message consumers might hear is that price still matters. For example, experience has shown a $3 or $4 base price with free vacuums is still a pretty good draw regardless of circumstance.

Another option for car wash operators to consider is to differentiate the business by adding on mobile service. According to Bhawani Shankar Sharma, director at Fexle Services, the pandemic has led to surging growth in on-demand mobile app development.

Sharma says with just a few clicks, on-demand apps help people get their choice of products and services without going to the shop or service station or compromising their health and safety.

Today, there are a number of software companies that have created apps specifically designed for on-demand mobile car washers and mobile detailers. These apps allow for automated marketing, CRM organization, scheduling, payment processing, quality checklists, and professional customer workflows.

Besides car wash and detail, apps also allow for the delivery of other car-care services such as ceramic coating, interior cleaning, disinfect/sanitize, paint touch-up, paint-less dent removal, etc.

 

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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