Strong new car sales are likely to spur more car wash trips, giving operators an opportunity to garner a strong repeat business in 2011.
by, Erin Rigik, associate editor
Buoyed by the likelihood of tax cut extensions and increased consumer confidence, auto sales climbed in December—great news for car wash operators as new automobile owners are likely to frequent car washes.
At presstime, industry tracking firm J.D. Power and Associates noted sales were on track to close out 2010 with a 14% increase from a year earlier. On the other hand, oil is teetering close to $90 a barrel, which can negatively impact customers’ spendable income when it comes to their vehicles.
“Customers equate anything they spend on their automobile—oil change, car wash, detail on their car—with the cost of fuel because that’s part of the cost of operating their vehicle. Oil does matter and it looks like it’s going to be up for a while longer,” said Lance Winslow, who founded Car Wash Guys, which operates mobile wash operations from car and truck washes to aircraft and boat washes.
Car wash companies are also facing a major challenge with rising energy costs, leading some companies to seek out alternative energy subsidies available in the form of grants and loans.
While adding solar panels or LED lights or recycling waste water can make sense from a financial perspective, especially if rebates are available, the real payback can come from customer response. Marketing the car wash to show it’s a good corporate citizen that cares about the environment can help win business away from competitors.
Adam Korngold, president of VFW Parkway Car Washes, knows first hand the benefits of researching alternative energy options. In July 2010, he had solar panels installed at his Waves Car Wash in Boston taking advantage of a large tax credit that was part of The American Recovery and Reinvestment Act.
“It’s a tax rebate of 30% on any solar improvement project. We had to start the project before the end of 2010 to get the rebate. Next year it’s going to become a tax credit, so we’ll still get the 30% back, but it’s applied to taxes,” Korngold said. “That’s one of the main reasons we added the panels—because of the money you get back within the month after you’re completed and approved.”
Korngold estimated he’s supplying about 20% of the car wash’s electricity through the solar panels installed on the 7,000 square feet of roof space. “It’s not a substitute for electricity, but it helps the electric bill,” he said. “We’re still connected to the grid, but if we generate more electricity on a sunny day than we use, we get a credit.”
Korngold also was able to take advantage of a state rebate in Massachusetts. “Every year for 10 years I get a rebate from the electric company. We generate renewable energy credits (RECs) for every mega watt hour (MWh) of electricity we produce. Right now the credits are trading on the open market at about $500 dollars per MWh, so I’m forecasting every year I’ll get about $20,000 back from these RECs,” he said.
The system cost Korngold $220,000 before the tax rebate and credits and he anticipates an ROI in four years.
VFW got the ball rolling on the process in April 2010 and was ready to install the panels by July. “It’s a very quick installation, but you have to make sure your roof is fairly new because you don’t want to put solar panels on a roof that you’re going to need to replace in 5-10 years,” Korngold said. “You also need to be in an area that’s sunny.”
Plus, there is little maintenance involved. The panels don’t require cleaning and last for about 30 years.
Customer response has been positive and the panels have attracted additional attention to the car wash. “Customers can see from the street that I have the solar panels. Then I also have signs at the car wash that let customers know we’re solar powered,” Korngold said.
Jason Lynch, the co-owner of two WashMe car washes and a Car Toyz car wash in Arizona, agreed that investigating available state rebates federal grants is smart business.
“If a company approaches you with a grant, don’t just turn them away,” said Lynch, who was approached by Emerald Sun Solutions and offered a grant to add solar panels to his three wash centers. He embarked on the project in October 2010, beginning with his Wash Me car wash in Kingman, Ariz.
The project cost $440,000 and the grant covered half of the cost. The other half is being paid for with a payment plan spread out over the next 10 years. The addition of solar panels is expected to cut the company’s electrical costs by about a third. But the big reward came from the community response. Newspapers, TV and radio stations got wind of the project and Wash Me car wash found itself the center of community attention.
“The response has been very positive from our customers and the community, especially the customers that read articles in the paper regarding the project,” Lynch said.
Convenience is key in keeping customers—who aim to get in and out of a car wash quickly and cheaply—satisfied. If they find themselves pressured into extras such as a seat cleaning or a deluxe detail they didn’t plan on buying, suddenly the car wash took longer and cost more than they bargained for. “They think, ‘I’m not going to come back anymore,’” Winslow warned.
Instead of over upselling, which can alienate customers, Winslow recommended focusing on loyalty. “At a car wash 15% of people are regular customers. The most important thing is to increase the frequency of customer visits so the number of regular customers reaches 30-40%,” he said. “Then you won’t believe how much more money your car wash makes and how steady it is.”
Wash Me car wash focuses on promotions to increase customer loyalty. The chain offers a discount card for $100, which is good for $130 worth of car wash services, and in November began offering a monthly club pass where customers pay a set amount for the package of their choice and then use the card for a month of unlimited washes. Plus the chain is active in fundraising with the community, pairing with schools, charities and causes such as breast cancer and bone cancer. “It lets customers know we want to be an active part of the community instead of just another business,” Lynch said.
Helpful Car Wash Tips
When it comes to driving sales at a car wash, the old fashion strategies are the ones that work the best, advised Lance Winslow, founder of Car Wash Guys. He offered the
• If you’ve recently done something with your location, let customers know. If you’ve installed LED lights, put an ad in the newspaper that says, “We have all LED lighting now! Come see the lighting and tell us if you think it’s the same or better.”
• Run fundraisers on a non-busy day for local schools or charities—the group will become loyal customers the other 51 weeks a year.
• Send clean-cut employees wearing the company uniform to canvas the neighborhood, going door to door and inviting people to the car wash with a coupon.
• Contact local companies that have fleets of vehicles and offer them a discount if they use your car wash. “You’d be amazed how many companies have fleets and the only reason they’re not aligned with a car wash is no one ever asked them,” Winslow said.
• Host events that draw people to the car wash. When it’s busy more people show up because they don’t want to miss out.