$3 to $4 or $5

Is anyone doing the $3 base wash package looked to go to $4 or $5. We are looking to move our base wash up. I prefer to go to $5 and my Wife says $4. I know our wash volume will probably go down but then our ticket average will go up and less wear and tear on our equipment. Right now our $3 wash is 50-60% of our business. We have been open for a year and a half and I just feel like we are giving a carwash away at $3! Any suggestions would be appreciated. Thanks, Jeff

There is a new express in Gunbarrel, Tx with free vacs that starts at $3.00. I don't know how much electricity is used, but they must have all the business. Whats your wash do for $3.00?

Is there any competition in your area? If there is no competition I would say go to $5. If there is competition then go to $4. All of our locations currently are at $4.

The one concern about $5 is that it could invite competition. I have learned there are some people out there that don't think $2 million is a lot of money and will build near each other (doesn't make a whole lot of sense but people are doing it). And I bet those guys could look at your $5 base wash, especially if you are washing a lot of cars, and say I will build down the street and do a $3 wash.

Anyway, I think $3 and $4 is too cheap. Even at $5 it is a great deal. I personally think over the next year or two we will see less and less people at $3. The cost of development is rising every month, the cost of operating (power, water, chemicals, etc) are going up constantly, and we are going to have to find a way to help offest the costs.

Just my thoughts...

I've been in the car wash business since 1986. Everytime I've contemplated a price increase, up until 7 or 8 years ago, I would envision the numbers. More revenue, same costs in chemicals and utilities, more money for me. It never worked out that way. You loose customers, some don't come in as frequently as they did, some begin to look at other washes,
and some will pay whatever it is. The point is that you need to be careful with every increase. $3 certainly sounds cheap, but so does $4 and $5. The $3 to $5 customers are bargain hunters. What happens to a $1 store when the prices all of sudden go to $2 ?

All of our costs are going up - we all realize that. Do your homework. Be sure of what you want to do.

Just my opinions.

Joe

$5 regardless of your competition. You are right, at $3 you are giving it away. Not only do you have direct costs but you have equipment maintenance issues to worry about not to mention the liability you assume by washing each customer's vehicle. $5 is a fair price. If you do not go to $5, then I would think about making your base wash a wet wash and turn off the air dryers.

This is the fundamental problem with starting out at $3 per wash. Sure you do a lot of volume, but once you find out you're making little if any money washing 50-60% of your cars for $3, not to mention far higher water, sewer, gas, and maintenance costs, how do you go back and justify to the customer the raising of your price. The whole purpose of a low priced exterior only tunnel is to compete effectively with in-bay automatics charging $7-10 per wash but only able to wash 10 cars an hour. Charging only $3 given the costs and risks involved is insane especially given the fact that tunnel customers expect you to give them a clean, dry, shiny car but don't when they go to an in-bay automatic. Lost leaders are great for supermarkets and Walmart, they suck when the only product you are selling is a car wash.

When you feel like the $3 has had the full opportunity to develop car count, is an appropriate time to consider raising prices. I saw my volume going down while I hadn't raised prices, so I went ahead and raised my prices to $4 and my second tier wash from $5 to $6, leaving my $8 and $10 alone. My sales/car went from $5/car to $6.35/car. That extra $1.35 has made a big difference through these last 9 months. We've had much worse weather and much worse economic factors since. I can't tell what effect the price increase has done to volume. Like I said, I had already lost some volume because of weather before my price increase. The $3 was not beating the effect of the weather. I had a difficult time showing a profit at $5/car ticket average and low car count. The good thing about starting at $3 is that, within 2 years you will see your max volume potential. Changing to $3 later, for a short term, will never show you that potential. Bottom line, I don't think it matters a whole lot, as long as you are less than competing IBA's and you give the customer a better wash than those IBA's. Customers are pretty savvy today.

The more you charge, the more service you should deliver, ie: prepping, towel service, spot free rinse, hand drying, etc, as the price goes up.

Population density per conveyor(over 50k/conveyor), traffic count and weather are still the "biggest" factors in having a successful location. After those, we could all list a dozen secondary factors: quality, speed, signage, visibility, price, cleanliness, quality attendants, egress, etc, etc. All very important but give me density, traffic and good weather and I could make any price work. Unfortunately, after you build, there's not much you can do about traffic, density or the weather. And the factor, that I think is the fourth most important is difficult to change after the site is set up...and that's visibility. I've seen that factor totally negate a good traffic count, density and good weather.

I guess this is a long answer...but what I'm saying is that. If you are lucky to have the top four factors strong, then changing your price is not going to make a big difference in your volume. And can certainly help sites that have reached their peak.

Some may question if there is ever a peak. If you have been in this business a long time you'll experience certain times, after you have been "wall to wall" with dirty cars, that it will drop off for no reason whatsoever. After a good month or couple of months, it may still be great weather, but you're not washing as much. Why? Because your most of your potential customers have been serviced and you have peaked. This used to drive me crazy in the full serve format. Just as soon as we would be "staffed up for volume" it could drop off, even with good weather. In the exterior business, these changes are not so devastating.

The $3 car wash makes people a lot of money; primarily the equipment and chemical companies. I guess the new construction 2 mill washes can make it on 10K cars per month at $3 base, but for every one of those there is three that don't make it to those numbers and struggle.

I have an opinion that the successful $3 wash doesn't discourage competition, it actually may invite it. I've asked many new investors why they looked at getting into the business. Not one has said "I've examined the financial statements of several express car washes and their seems to be solid profitability in that business". They almost always say: "XYZ wash on the other side of town has lines out to the street every time I drive by." The $3 wash typically has longer lines and people take notice. With a $5 wash your margins are better, your net is most likely higher and the lines are shorter, drawing less attention to your site. Just a theory,anyway....

GP

I like the way you think.

At this point Greg, I don't think it matters if you are $3,4 or $5 someone can and will eventually build on top of you. I believe we are going to see fewer express only's and more flex new installations. And that, because the flex format allows you to make your numbers look better for loan approval...rightly or wrongly. Banks are getting tougher to deal with...especially if you are new to this industry.

Jimmy, you may get a brief break from the onslaught of new washes. Many banks are in trouble and want nothing to do with special purpose properties. I just talked to my banker who has loaned me quite a bit on three different ground-up projects. I have an eight year relationship with this bank with not so much as a late payment. I asked him what kind of rates I could get on a small project If I put down 20%. He responded that he didn't know, that it "would be probably be tough, but he would try his best to get me financed". It hurt my feelings. This bank's stock is down 70% in the past twelve months so they obviously have issues of their own. I guess SBA loans might might become a huge factor in car wash loans over the next few years. or maybe "Uncle Jimmy" can bankroll me.

"Uncle Jimmy" is equity-rich but cash-po. Banks are getting tougher to deal with and that's a good thing, long term, for us all. Come on down and visit your condo on the beach and I'll bankroll your lunch...

Should this thread be more about "average ticket" that "start price"? Yes the start price is a big part of average ticket, but I have see some good creative menus and operators with low start prices still acheive good ticket averages. Most express operators simply use the good - better - best menu plan. And have very little difference in wash quality between packages. In this scenario the client seeking a clean car has very little motivation to upgrade.