Why $3 and Why not $5

It is no secret the Southeast has been pounded with bad weather this year and moving into 2010 we are looking at every potential area to increase our revenue. One obvious option is raising our price from $4 to $5. Is there anyone out there that has done this and what has been the feedback/results? We have gone from $3 to $4 before with no loss in volume or complaints from customers. But for some reason $4 to $5 makes me a little nervous.

Another thought...Most of you know how competitive the ATL market is and the majority of expresses here are still at $3. But how long can that continue? With expenses rising on a yearly basis how can express operators afford to stay at $3? I know price fixing is illegal, but is there anything that can be done to encourage a higher bottom wash package? Thoughts?

We are full service wash. We also offer through the tunnel wash as well. We don't do whole lot of the Express Wash, but for what it's worth, we have Express wash down the street that does $4. So, we matched it for awhile. Then I thought since we don't do whole lot of them anyway, I don't have much to loose. So, we went up to $5. Volume-wise, I didn't notice any difference. Not a single person complained. But then again, we never did much Express wash to begin with, so our wash may not be a good example.

If you're considering $5, take a shorter... and much more prudent leap of faith and choose $4.99 instead. Never underestimate the sheer power of the left-hand digit in marketing. The power of the penny has long been a valuable tool in grabbing attention in a competitive marketplace. The motor fuel business has platformed the entire gasoline pricing structure around it.

Atlanta and similar overdeveloped marketplaces respond to innovative marketing and creative merchandising that focuses on VALUE. We've done well in challenging marketplaces simply by embracing the fundamentals we introduced with precision menu-merchandising in carwashing way back in the late Sixties. Before carwash menu-merchandising and the introduction of extra-services and service advisors, the carwash business was flat and boring. Many operators are quietly enjoying those same fruits of their innovative efforts today... while others still feel content in tripping over quarters to pick up nickels.

If you've simply applied the same "express formula" that everyone else has adopted, you may be in a lot of financial pain. There is a better, more sensible way. 2010 should be a turn-around year for those who mindlessly followed everyone else in the express parade... and have now awakened to the financial reality of that very limiting format.

Focus on your own operation. Stop following... and start innovating. Help is readily available if you're really, and I mean genuinely, willing to grow.

Lee Iacocca often said there are those who are lost about how to proceed, as well as those who are waiting for someone to follow and copy. And, more refreshingly, there are those who ignore the status quo... and instead choose to take bold steps to improve their place in life. It's timely to consider upgrading to a more sensible approach... called Flex-Serve. The start of a new year is a convenient time to decide if you're ready. No more analysis-paralysis. Either step up... or step off.

WISHING ALL A VERY HAPPY, HEALTHY AND PROSPEROUS NEW YEAR!

-Steve

www.SMOKUN.com

We offer an express detail at one of our locations and have done well with it so far. My concerns with the flex serve model are the added labor and our customers expectations of our wash being fast. We thought long and hard about the flex serve model a while back and I visited some flex serves in the ATL area. The average wait time was much longer than what I experienced at full serves. Not only that, people in the lobby who were waiting like I was were complaining about how long the process took. After seeing this we backed away from the idea.

The express model is attractive because of low labor. In my opinion, to do a flex serve model well, labor then becomes an issue. With the express detail, which is basically a hand applied wax, we are still able to offer this service with 2 people on the clock on the weekdays and 3 on the weekends. It has worked nicely thus far.

The $4.99 idea is something to think about. Thanks.

Oh, by the way. We went up on Full Service wash packages by $1 and $2 on lower tier washes early this year due to minimum wage hike. So far, no sign of ill effect.

Jim...

One of the misunderstandings I've seen is that while some operators call their operation a Flex-Serve, they actually run it like a full-service in that they don't sell to their capabilities. In effect, they sell everything and everyone they can, irrespective of their capabilities, which is wrong. That mistake causes back-ups and delays... which upsets customers.

The exterior wash can rival any express wash in the country in volume and process time... because the washing is not dependent on the After-Care component being able to handle customer demand. Quite the contrary, an After-Care component functions independently, and labor can ramp up and down at the moment demand builds. Nevertheless, the facility must be able to handle the increased demand with either ample static production cells or a moving-floor conveyor for peak production.

Labor for a Flex-Serve After-Care component starts at two (2) cross-trained detailers. Staff is always increased by teams of two, and as increases in volume merit, detail teams can increase exponentially to meet demand. If and when demand decreases or bottoms out, teams are cut or sent on break in a rotational format in case what was thought to be the volume bottoming out is really a lull... followed by a return to demand.

If a well-planned After-Care operation has a team of two (2) detailers, that team can manage two production cells. If demand increases, a second team can be added. The two teams can adequately manage four (4) production cells and maintain effective throughput, even in spurts of heavy demand. If a team goes on break, adjustments are made in the sales area. An important management rule is to only sell to your facility's capabilities. If you under-plan your space and have too few cells... or you do not have adequate staff to meet the demand, your sales are adjusted accordingly. The key is to meet your efficacy standard; not too much, not too little.

If a restaurant had 10 tables, it would seat only ten sets of patrons at a time, and work diligently to service those customers and flip the tables as quickly as possible to gain more "table-turns" (more patrons). Same is true with static production cells.

Which is why we anticipate a robust trend in moving-floor conveyors that enable high-performance production processing. More cars and more satisfied customers. Instead of the restaurant table analogy, we accelerate to take-out food processing similar to fast-food convenience.

I have a Flex-Serve format for both and each one is designed for peak efficiency, prudent cost efficacy, and happy customers!

Before the express craze got into full swing, I cautioned the owners of major equipment companies to avoid simply designing stand-alone quickie washes because of the anticipated high failure rates... and instead to leave room for an eventual upgrade to Flex-Serve. Yes, it would have been much wiser to build a Flex in the first place but some suppliers and advisers lost their way (and possibly a bit of their conscience)and sold poorly designed layouts to anybody and everybody.

When the express failures come available, upgrades will be their primary source for profitable rejuvenation.

For the record, combine an express exterior + express detailing = Flex-Serve!

Bottom-line: There is absolutely no way that a standalone express exterior can effectively compete against a properly run Flex-Serve. In Atlanta... or anywhere else.

And upgrades are easy, fast and effective.

I renew my Holiday offer of assistance to any owner who needs additional guidance or enlightenment... and will provide it as a professional courtesy.

-Steve

www.SMOKUN.com

Most price increases don't have any effect on volume the first year. It takes that long for most of your clientele to realize you've gone up. It's the second and third year your feel the pain. By then your revenue increase has more than made up for the decrease in volume. But that's the same old vicious circle we were in when in the full service...ever raising the ticket average...ever reducing the car count(mostly due to less frequency).

What scares me Jim, is that we are losing that "purple cow" effect as we slowly raise our express prices. If you see a white, black or brown cow...no big deal. But if you saw a purple cow...you'd be telling everyone about it and going back for a second look. That's what we had with the $3 wash and free vacuums...the best deal ever. Now you and I are $4, still a good deal, but the purple effect has faded. I now there are some that's done it with no effect...but I've looked at some of their demographics and
would give my eye teeth for such good numbers.

If I was still $3, I'd be out of business after this year...but I think I can hang on a little longer at $4....we'll see. I'll not say: never $5.

I checked today (Dec 29th), Panama City is at 88" of rain this year. By the 1st, we should be at 90". That's 100% more rain than 2007 and 50% more rain than 2008 (a normal 60"). I think we should hang in there buddy. The farmer's almanac says 2010 should have below average rain. Let's hope it's right!

Happy 2010 to all...let's get done with 2009 as soon as possible.

As a first step we need to stop promoting our lowest price on our signage as the most important aspect of our business. When you are known as the $3 wash or the $4 wash, then that is what people are going to choose. We are guilty of this as well at our washes. Our approach has been to focus all of our attention and energies on our top wash. Our FUNdraising program promotes our top wash exclusively. We also highlight the top wash on our menu so that it stands out from the other washes. Where we used to have 40%+ choosing our $3/$4 wash, that percentage is now at 25% which is the same as for our $6 wash. Our top wash is now over 33% of our volume.

I feel that this is partly due to our philosophy that the lowest priced wash should not clean as well as the top wash. Some may disagree with this, but we feel that you should get what you pay for. Our bottom wash receives, 1 CTA, 1 hp wheel cleaning, 1 top brush, and 1 set of wraps, while our $6, $8, and $10 receive 2 CTAs, 2 hp wheel cleaning, 2 top brushes, and 2 sets of wraps plus extra drying. We call it Extreme Clean. Correct me if I'm wrong Jimmy, but I remember something that you don't apply spot free on your low priced wash. If a customer complains about the $4 wash, and typically they are the only ones who do complain because they don't wash their cars as frequently, then we will rewash them on our $6 wash, and we charge them the $2 difference. Any of the other washes we will rewash for free. Over time, we have trained our customers to the point that they know what level of clean to expect for their $4, $6, $8, or $10. Every now and then we will get some $4 guy who hasn't washed his car in six months complain very loudly. If he cares that much about his neglected vehicle, then he can pay the extra $2, and we'll wash him again.

As for express services, controlling labor through this weather cycle is near impossible. Like most washes in the SE, we have had more rain this year than any year in memory. This month, for example, will be our worst volume month ever thanks to two straight weeks of rain, followed by freezing temperatures. The great thing is that since we don't have that extra labor on hand, we will still survive. The thought of playing the labor game, even if it is four people in teams of two, makes my stomach churn. I can barely look when I drive past the full service wash about 2.5 miles up the road...too many bad memories. The practice of calling these teams up from the bullpen, assumes that these people are ready and capable, and not looking for another job due to the slowdown from the weather. Then when you do have extra services to provide, you don't have the labor and the owner is forced to cover. We've all been there. This frustrates your customers who can't seem to figure out when the employees will be there. Extra services (aka full service/flex/aftercare take your pick of names)is our Alamo. We remember, and vow not to make that mistake again.

Sorry for the wordiness.

Have a Happy New Year.

Andrew...

Anyone who's ever owned & operated a full-service carwash recognizes that you've likely been too traumatized by the challenges of managing and maintaining a staff, regardless of how small it might be. That's what has made express washing so attractive to investors who cringe at the thought of actually "managing" people. Unfortunately these fears are perpetuated by shell-shocked managers of the outmoded traditional full-service carwash model, and not their fellow brethren who have upgraded to a much better alternative.

The obvious trade-off is business lost and profits sent elsewhere... along with your customer who may wind up finding a business that appreciates the value in the lure of a one-stop shop. Avoid sending your customers elsewhere for services that your operation should be delivering.

I recognized that issue when I designed the Flex-Serve format and scaled the hands-on After-Care to run effectively with only TWO people. I also made each component a self-sustaining profit center with the flexibility of functioning independently, and with the adaptability of separate hours of operation. Some operators start out with selective week-end availability, and eventually let their customers indicate the greatest demands for service. Again, the requirement is only TWO cross-trained staff... and capable of target marketing available niches within the marketplace.

Consequently, we find the philosophy of "all... or nothing at all" far too shortsighted for today's choice-driven consumer.

This economic downturn has convinced many operators that they should no longer foolishly ignore the money left on the table... or sent elsewhere.

Battle-scarred full-service operators must find the sensibility to lick their wounds and move on to serve a new set of standards... with consumers who will gravitate to businesses that offer greater value and convenience.

With an industry that is ever-evolving towards greater consumer efficacy, the prudently controllable use of labor makes perfect sense. Flex-Serve provides a sensible way to achieve the fertile profitability of hands-on services while maintaining a very frugal workplace. You really can learn to manage and enjoy both!

The key is recognizing that you can impose limits on your productivity by selling to your capabilities. Over-promising and under-delivering is an unacceptable compromise, so responsible management combined with exceptional task performance will retain customers and sustain profits at an adaptable pace.

WISHING A VERY HAPPY, HEALTHY AND PROSPEROUS 2010!

-Steve

www.SMOKUN.com

We realize that we are leaving money on the table by not offering a full/flex service component. We are also leaving money on the table by not offering dent repair, windshield glass repair, vinyl repair, mobile services, etc. We like to run our business with the philosophy that if every one of our employees suddenly left at the same time, we can still run the business and not skip a beat. We don't want even TWO extra employees. We don't want to train TWO extra employees. When someone comes in asking for interior cleaning, we happily send them down the road to the full service wash. Our lives are simpler and much, much happier without having to deal with "Your employees stole my wallet out of my car", "My car smells now", "Your employees broke my cup holder", "My seat doesn't move back and forth any more" "The lights in my car no longer work", etc. etc. Been there done that and not going back!

We offer a few express detailing services at one of our washes, but I have only one employee whom I trust to do any type of carpet cleaning etc. Most of my employees can do an express wax, which is pretty easy. If my detailer is not there, then no interior detail services that day. If he's busy doing maintenance, then no detail that day. If he leaves me, then the detail will close, and we won't bat an eye. We don't want to be everything to everyone. We want to wash as many cars as possible with the fewest headaches. I happen to think that we are pretty good at washing cars. I also think that we do a good job marketing through our FUNdraising program, our recycling program, and our social networking efforts. Any time you add an extra pair of hands, you add a new level of headaches. Any time you can add value automatically (i.e. through the computer controlled functions of the car wash tunnel) then you have a winning formula. Flex-serve or any type of after care (beyond the minimal amount that we currently perform) does not fit our business philosophy or our lifestyle, and we and our customers are the better for it.

I have to agree w/andrew, we were a "flex format" don't know if were the dictionary version of it. and we battled labor 7days a week, praying having a crew on a friday-saturday, praying if people that weren't even that good would walk in the door the next day after a busy day. I hated depending on others and to run my business. It's not like other jobs, they are cold or hot, manually working in and out of cars 10 hours a day and obviously attendants were soaked as well. I worked 7days a week and rainy days were filled with overdue maitinence and a laundry list of things I wasnt able to get done during a sunny day. Offering interiors was a great service and I cant complain for where it has brought us to today. But I grew up in the carwash life, Dad never there for sports or weekend events, left at 6am came home at 7pm 6-7 days a week....I swore I would never do that to my little ones. You are entrusting someone making $7-8 per hour inside people cars on your reputation. unless your extremly trusting, I wasnt... I stood over each employee pretty much in every car. now my goal is too deliver a clean shiny dry car everytime with no hickups along the way....so far so good! we have a 120ft sonnys tunnel and a oasis typhoon both offering free vacuums and detail carts with courtsey towels and glass cleaner. I offer all the tools for free just do it yourself format! at one point in my life I felt like my company was vehicle interior cleaning and the carwash was off the a la carte menu. i couldnt let that service drive our business anymore

Steve,

I don't think anyone can honestly argue against the Flex-Serve model (with few exceptions), but the bottom line is that it still requires labor, be it one team of two or four teams of two or whatever. These teams are made up of people who are all coming for the same labor pool. From purely a labor stand-point the only difference between Flex and Full w/express detail is that you need less people, but unfortunately you're still drawing from the same pool. That one factor alone is enough to cause savvy investors or gritty long term veterans to the car wash industry to leave "money on the table" in search of greener pastures with little to no labor nightmares.