Competing against exterior only tunnel

[Sam]

I'm considering the purchase of an exterior only tunnel wash and in another thread expressed my concern about potential minimum wage increases and the impact it would have on this type of business which is a non-necessity and where other options exist for customers to wash their cars. It seems that IBA operators would have a competitive advantage over the conveyer operators who have higher labor costs. Does anyone think that a higher minimum wage of around $15.00 phased in over the next 5 years (hypothetically), would be a meaningful competitive advantage for your type of business. Meaning the tunnel would have to raise its prices even higher than yours and that would drive business from them to you. Or would the disparity in the labor costs be no more of an advantage than it currently is?

 

[robert roman]

“It seems that IBA operators would have a competitive advantage over the conveyer operators who have higher labor costs.”

You have to know enough about business and the carwash industry to ask the right questions.

Carwash operators usually attempt to create a sustainable competitive advantage by means of cost, differentiation and/or niche strategy.

Conveyor has distinct cost advantage over in-bay because a conveyor has built-in excess capacity.

Minimum wage is already $15.00 in Seattle and NY is looking at for fast food industry.

When labor expense reaches tipping point for a segment, owner/operators will substitute capital for labor as in automation or exit business.

Fast food industry has been researching this for several years now with robotic burger flippers, drink dispensers and cashiers.

Another example is WAWA’s computerized food ordering system.

You also didn’t mention unionization of carwash workers which has gravitated from the largest city in California to the largest city in N.Y.

Operators in NYC are dealing with this issue right now including registration of their washes, financial audit and paying for surety bond.