Pro-Forma

Could anybody please comment on the pro-forma's that are given by the sales guys? Do you guys especially in the South East find those to be accurate or a mis-representation of the "real deal"

We developed our own grading system to score a property and to compare different sites. In all reality, it's just a wild guess, because so many other factors come into play i.e. weather, quality of your wash, pricing, etc.

It depends on the type of wash you are planning. For example, if people are telling you that you'll wash 100,000 cars in the southeast with a 25-30,000 car traffic count, either you'll have to start out at $3.00 a car (which is crazy)or pray for snow. That's our volume and traffic count in Northeast Ohio, but you won't match it without giving the basic wash away for $3.00 or have a traffic count closer to 45-50,000.

Pro-formas are best guesses based on sound criteria. However, I would caution you against basing your investment on a proforma given to you by anyone who has a vested interest in your either your decision to build a wash in the first place, or in what equipment you are buying. Most don't care if your realize the results of the proforma as long as you bought the equipment from them. Not all sales reps are like this though. The trick is to find one with a good track record and plenty of happy referrals for you to talk to.

Use some common sense, Visibility is extremely important; Ease of entrance and exit; Slower vs. faster traffic speeds; Similar competition further than 2-3 miles at a minimum; Larger vs. smaller population base withing 3-5 miles; proximity to shopping, restaurants, etc.; And, of course, the higher the traffic count the better. Find a site like this and you cannot go wrong as long as put out a quality wash.

I've done proformas for customers and had them actually get mad at me because our came out at 60,000 cars a year when someone else came out at 100,000 cars a year. If you base you investment decision on pie-in-the-sky proformas that don't come to fruition, then you've seriously jeopardized the chances of you long term viability and success which can have very negative consequences for you family and your finances.

Thanks for saying that anyone with a $3 wash is "crazy". It's a real ragtag group i.e. Benny Alford, Jimmy Branch, Tidal Wave. We sure don't mind being lumped together with them. What works for someone else may, not work for you. Remember, it's not a contest, and there is no right answer as long as civility prevails.

asjaffa,

Is the three dollar approach not the way to go or what? Do you guys believe that starting at 5 is a better bet?

I believe that the $3.00 approach is fine for an introductory offer to build a customer base. However, as a long term proposition I believe its crazy.

First of all, you invest well over a million dollars in a brand new facility, put in brand new equipment. Now how do you justify a price increase, because at $3.00, that's barely (if at all) covereing your cost to put a car through. Remember, cost per car is not just limited to utilities and chemicals. You have maintenance, labor, not to mention debt service and God forbid a decent profit.

Next, the $3.00 format assumes that you are going to have additional wash options of say $6, $9, and $12. Who do you think you have working for you? College graduates with sales experience and marketing degrees. I mean how annoying is it when you go to your favorite car wash and they are always hammering you to upgrade? If you do get a decent sales person, you're going to have to commission him too. Even at that, with a $3.00 starting price, you'd be damn lucky to average $6.00.

Keep it simple. If you're an express exterior give them more and charge a higher price. Then you can institute loyalty programs like book of washes, monthly passes and frequent washer programs that lock them in to your wash and your wash alone.

We also give perks away that others don't like informative seasonal newsletters, customized litter bags, and moist disposable towels for people to wipe of their steerin wheel, dash, etc. Those alone cost around 20 cents a car but serve to differentiate your wash from your $3.00 wham-bam-thank-you-ma'am competition. Vehicle washing is about more than naming that tune in the least amount of notes (dollars). Keeping the place clean, attractive well lit, well maintained inside and out, giving perks, taking care of the customers AND giving a great wash will be remembered and make you different. The bitterness of poor quality is remembered long after the sweetness of low price is forgotten.

Yes $5 is a better starting point and its a fair one to both you and the customer.

As for Benny and Jim,yes they're doing well and I do not begrudge them their success. However, their sites and washes are profitable and their business plans work due to the presence and synergy created by having several other profit centers to attract customers in. If you are a stand alone express exterior only then you have to make the money by washing cars and by washing cars alone. That is a huge difference and their experience cannot be extrapolated to a stand alone format. Just ask rapido rabbit.

By the way, we are a stand alone express exterior and all of our customers get the "works" for $9 and we're going to a $10 on 9/1/07. We have a monthly pass $40 (going to $50) and books (5 for $35 - going to $40). Books represent 28% of our annual gross revenue. lastly we give them a frequent washer card (buy 10 at the regular price, get the 11th free) which comes with a 12 month expiration date. If they don;t wash 10 times in 12 months, they don't meet the definition of frequent. The only upgrade is Rain-X for $2.00.

When we swicthed from full serve to express exterior in 1997 we dropped the rpice to $3 and $5 and washed 101,000 and 105,000 the first two years at an average of $4.30 per car. We now wash 90,000+ a year at an average of $8.25 a car. Which wash would you rather have?

If you can't answer that question - Continue with your due diligence until your are satisfied that the proforma is YOUR best estimate.

Do not depend on others to do your homework.

Visit other operators. I find it very beneficial to go out of state and talk to operators out my geographic area. These operators do not have a stake in what happens in your area and tend to be more open.

Go to you regional association meetings such as the Southeast Car Wash Association – Southwest Car Wash Association – Western Car Wash Association and meet other operators, visit there locations – ask questions.

You are about to make a multi-million dollar decision, make it an informed decision and your decision.

We start at $3 and our ticket average was $5.51 for the first year and a half we were opened (ticket average excludes sales tax). Through a concerted effort that started in March (i.e. changing services, etc.) we are now at $6.08 while still maintaining our $3 intro. Volumes have increased by 20%, thanks in part to an extended drought for the first five months of the year. By keeping our $3 wash, we are highly discouraging competition. If your starting price is higher, say $5 and up, then you may be leaving a window of opportunity for someone who can do it better and cheaper. Wal-Mart is obviously the best example. There is still room for stores with more customer service like Target, but would you want to compete against Wal-Mart? We give nothing away like air fresheners, towels, etc. (Does Wal-Mart give anything away?)

If someone else is washing 100,000 cars per year, and we are washing 200,000 cars per year, then their labor cost per car is at least double ours and probably more based on trying to have a higher level of customer service. Keep it simple is definitely our mantra. We don't do anything that adds labor, decreases efficiencies, or slows down the line like prep vehicles, tape wipers, remove antennas, hand out freebies, and most importantly we don't talk to customers. That's what our autocashiers are for. If someone has a problem or specifically asks for information, then we help them. Nothing will slow the wash down more than a customer with 1,000 questions.

Obviously not everyone agrees that there is more than one correct way to run your business. Some people believe that if you don't do it exactly like them, then you are "crazy" (the jihad approach). Make your pricing decisions based on personal preference. Talk to other operators, read about other success stories, visit as many washes as possible, and then do what's right for you.

I am Gator's partner in this venture and like him, I feel it is critical to get trustworthy information as this is our first wash. In looking at some of the pro-formas we have gotten from different sources, they are using calculations in a spreadsheet format. Do they pluck those formulas from the sky? For those of you who have done your own pro-forma, where did you come up with your formulas to estimate your numbers based on traffic counts and demographics? Thanks for all or your help.

The ICA has developed an excellent pro-forma that they offer through their "New Car Wash Investors Seminar". The last one was at the Las Vegas show. It is very through, and takes into account many factors to determine the critical wash volume. Once this is determined, the income and expense is easy. check out their web site at www.carcarecentral.com as to when the next seminar will be held, or if the material is available directly.

Good luck,

Jimmy

If you wash 200,000 cars a year vs. 1000,000, are not your chemical costs twice as much; Your maintenance and repair costs twice as much; Your replacement equipment costs (cloth, conveyor chain, etc.) twice as much?

Also, given the condition of the many cars you wash, and the inivetably faster line speed you have to run, how do you maintain a commitment to quality? I mean if you get cars covered in ice and snow do you just tell them that Mother Nature put it there and that she'll have to remove it because you are not a snow remal service? Or do you just tell them, "What do you expect for $3.00?" Or, do you just have more re-washes when they complain. I don't care what your price is, customers are going to complain if they are not satisfied.

I know you're going to tell me that you never get vehicles with extra ordinary washing conditions, or that your equipment is good that its able to clean off those conditions every time no matter how long its been since the car had a car wash.

Oh and how do you handle power antennas that don't retract and break or broken side view mirrors, broken rear window wiper blades. Maybe you have a sign like a saw at a wash in New York many years ago that simply read, "We Are Not Responsible For Anything!"

But hey if you're happy with operating way, more power to you. I guess if you have several other profit centers on site and can make up for dissatisfied customers with new customers based solely on price, go for it.

To say someone is "crazy" is fairly brash. I am sure anyone decision to be at the very low price of $3 is a very tactical well thought-out decision. Every car washer's main goal is to make as much money as they can per car, per year while growing their customer base. A secondary goal should be to judge the aspect future competition. In Panama City we have 6 conveyors for 150k people and the average household income is 35k. My Dad feels the pressure of immediate and future competition to say the least. To discourage others from the market he washes at $3. He is still very profitable at $3, is $3 the magic number to success? No way. He very profitable at $3 while still eliminating possible threat of competition. Build’em cheap, washes cheap should also be the slogan for most express operators. The more money you spend on overhead and construction costs the more cars you have to wash or the higher the price you have to demand. If my dad can wash 5,000 cars at $3 (average of 5.25) and still make a profit why not? Will he always be at $3? Who knows.

Bill, by the way, we haven’t had a multiprofit center in many years. Too many headaches.

If a wash is processing 200,000 cars per year, then obviously customers are satisfied. Of course there are rewashes, that's part of any car wash business. As for damages, if you are using the right equipment, this will be almost a non-issue.
As for cars with special situations, we have a bug scrub station. If customers prefer they can scrub before hand. We are in Florida, so snow is not an issue, but bugs definitely are.
Maintenance is an issue with any wash, but a high volume wash will have less wear on electric motors (our friction is 100% electric) because they are not starting and stopping as often. Your desire may be to wash as few cars as possible at a high ticket average because you are worried about maintenance costs. If that works, then that is good approach for you. Maintenance is a part of the car wash business. Preventative maintenance is always a key, but it is always better to maintain equipment versus maintaining people. We learned that lesson from our full service.

Our $3 wash is good, but not as good as our top washes. For $3 you get 1 top brush, one CTA with one high pressure wheel cleaning, and one set of wraps, to go along with van highs and rockers. On our top washes, you get a second set of wraps, a second top brush, and a second CTA with a second high pressure wheel cleaning. We have addressed part of the maintenance issue by not applying all of our equipment for $3. For $3 you get a clean car, but not as clean as the top wash. Isn't that the way every other business prices their service? Do you get the best seat on the plane when you pay for coach? Why should you get the best wash for $3? It's good, just not as good. That being said, with this new service approach and proper signage, our ticket average and volumes have both increased by double digits this year. Some car washes charge extra for spot free or for wheel cleaning. Everyone has a different approach. That's another great thing about this business, we can learn from others' models. Maybe you like it, maybe you don't. Just accept and appreciate the differences.

Whew! .........
Back to the original question.
I'm sure you've got a sweet looking proforma from a sales rep and it truly represents one, if not several locations but is it realistic. You have got to go out of town find some of the wonderful, sharing people in this industry and check for conservative numbers. The difference between an accurate or inaccurate proforma could be in taking one or two numbers too optimistically. It doesn't take much. On the expense side it's much easier to establish.
It's the revenue and car count side that is very difficult for even the most experience operator/distributor to nail down. IE: It's obvious a 50k car count is going to do much better than a 25k. But twice as good? And now with the flex serve phenom, revenue per car is all over the board. Simple, express revenues vary from $4.50 to $7.50 with car counts from 6k to 28k a month. That's a wide range isn't it.

Just remember this, the people who know the most(locations & #'s), will tend to be the most humble about their opinions.

So my advice, get on google maps, find some cities with similar #'s of conveyors relative to the population, go there, talk to some friendly operators and double check your numbers.

There are hundreds of seasoned operators in this industry that would help you any way they could, especially...face to face. Buy them lunch or dinner and you'll make a friend for life.

Keep the debate going guys. I have enjoyed reading it.

I don't know what I think. Obviously part of me would love for all the express washes to be at $5. But there is part of me that believes the $3 wash gets people in that would not come in at $5. So we split the difference and do $4 at our washes.

I used to think $3 was "crazy", but I have come to understand there are postives to it. And with the right marketing, you are able to drive your ticket average up. But really it comes down to personal preference. We are still happy with $4 at this point, but would be open to the idea of doing $3 in the future if we felt it was the right location.

So keep the debate going.

On the pricing issue, when everything is equal between sites I think the profit off of $3 base wash is going to be very close to the profit off a $5 base price(the difference is not going to make or break a P&L). Basically because of the lowering of the annual car count and lowering of the extra service sales with the higher base. I've been shocked by how well some of the $3 locations are having a +$6 avg gross per car.

I don't think maintenance costs or some of the utilities go up directly, portionally with the car count. You're right gadsen64, a lot of it is personal preference and what level of extras you want to throw in the basic wash. IE; Extra equipment, wheel cleaning, spot free, more drying, free towels on site, free window cleaner on site, free mat beaters, etc. etc.

I notice most of the $5 guys adding these extras and couponing/advertising more than the $3. And that's the way it should be.

Warning!
Many of us former fs operators, survived the last 20 years on increasing our average ticket. But that policy also opened the competitive doors for more ss and iba's. If the exterior conveyor industry follows the same philosophy (give me $/per not car count), we are liable to see the consumer trend back to driveway, ss and iba.

Here's a question for the group:
Do you think there has been more express failures at $3 or $5?
(I think I'll start a new thread)

Have you checked the price of IBAs?

Not only are they no bargain, but for the money they charge most (especially the touchless ones) can't get a vehicle anywhere near as clean or as dry as a tunnel does.

We're not (as an industry) washing Chevettes. You're accepting the job of washing, rinsing and drying vehicles that customers have paid anywhere from $20,000 - $60,000. Don't you get tired of depending on dumb and dumber trying to hammer people into upgrading and then having to pay them a commission to boot? Nothing like adding insult to injury. Why not charge a fair price, lock customers in with loyalty programs and stop all the games. BTW - don't the sales games get in the way when its busy? I'll wager that your average revenue per car drops on your busiest days as attendants don't have the time to haggle with people - as if they really do to begin with. Lastly, I'll bet your customers get tired of being asked to upgrade every time they come in. Why run a down and try to catch a cow when its much easier to walk down and catch them all?

Awe Bill, you and I are old full service guys. I was shocked 20 years ago when I opened my 6 & 1 at how happy people were while leaving in a flithy car (compared to my fs). But that's all they wanted. And on rainy days, there would be cars in the ss bays but none at my full serve. Convenience, speed, safety, and price wins a lot of the time. So my point is, there is room for all forms of washing. Yes, touchless IBA's are very expensive and consume vast quantities of soap & water...and I wouldn't dare put one up head to head against a low cost, friction express, especially with free vacs. :(

On the sales side at these low cost expresses, most of us are using auto cashiers, so there is never any high pressure sales. My sales are better at my two locations with auto cashiers than at my location with a live cashier...go figure. If the darn machines would work all the time, I think customers prefer the speed and lack of pressure with a machines.

I like your simplified pricing structure. It has worked well for you and others. I've been to some locations (IBA's and conveyors) where you have to be able to read 100 words a minute to digest their menus.

For signs, less is more. I also have seen some of these signs where it says number 4 wash has number 1 and number 2 and number3 but does not have x .. blah blah blah .. to much information.

The Psychology in a sign of less is more really can help your bottom line. A sign that shows people what they get rather than telling them what they get is by far better. Signs with lots of words allow a person to be that creature of habit we all are and pick the usual. This is the main reason why so many people say that the $3.00 wash gets picked nearly 50% of the time. They do not want to read all that so they choose the cheapest option.

Maybe Talk Car wash could put the ICA pro-forma on the site.
I personally am curious about it. Also if anyone has excel spreadsheets on income statement - costs etc etc . Maybe there could be a library of data for us all to use.
A library of data we all could basically edit then agree on one overall concept.

Just a thought. Have a good week guys.