Converting to a $3 express tunnel

[Earl Weiss]

>>>>

Maybe I muddied the water with semi-variable. I can’t fault your logic in calculating the absolute base cost to wash a car but how useful is that number.<<<

Extremely useful. You figure the:
1. Basic Price per car
2. Projected Volume
3. Cost per basic Wash
Simple example 100,000 annual washes at $3.00 per car. $1.50 absolute base cost. Leaves $150,000.00 to cover total fixed cost.

Now you need to analyze:
A. Will this by itself do better or worse than break even?
B. Will you volume be more or less?
C. What is the potential impact on #2 above if you change #1?
D. What is the potential for addittional profit for sales of both on line or off line services? For this you must break out the cost of these extra sales to determine pricing of those items and profit potential.

>>>I would not use it for break-even because the analysis requires total fixed cost, average variable unit cost, average price and anticipated quantity sold. <<<

I guess we will agree to disagree . As set forth seems simple enough.


>>> Direct labor as well as a greeter’s sales commissions and payroll tax on these wages and commissions should go into AVC because each is a direct cost of production, as well as damage claims, etc. <<<

Damage claims, yes. All labor factors, absolutley not. Commissions perhaps. But I doubt those with the auto attendants are paying commissions. I run 4 ee's basicaly all set up with a 3 person crew. While not actual numbers volume may vary by location from 70K cars per year to 170K cars per year. So, how the heck is labor part of AVC?

>> I would also include all chemical cost because break-even relies on average price.

<<
Again, we will agree to disagree. Example: The lowest wash package is priced at $3.50 and lets just say for example the solution cost for Pre Soak, Soap, Wheel cleaner and drying agent is 50 cents. The top wash includes, Sealer Wax, Polish wax, Rust Inhibitor, Chassis bath - Water only, Rain X and Tire Shine. Total solutions are $1.50 but it sells for $11.50. Why the heck would I figure the average solution cost as an average? The base wash gross margin is 57% vs. 87% (less if there is a commission factor, but even a 10% commission on the extra $8.00 reduces the margin to 82%) for the top package.

 

[Earl Weiss]

Since I can’t speak for Mr. Essenberg, you may want to contact him and find out what he is willing to share.

.

FYI I have sent a draft counterpoint to Mr. Essenberg for comment. I will advise if anything happens.

 

[Earl Weiss]

Mr. Essenberg was gracious enough to respond to my counterpoint as follows.

Earl,

Thanks for the comments! That is some outstanding insight!

A lot of great points there.

I by no means have the answers and it’s funny cause when we’re traveling we always kid each other about washes that “break the rules” and are tearin’ it up. It’s hard to find a basis of what works and what doesn’t in the industry.

I’ve seen some outstanding $3 washes and I think there definitely is a niche for it.

I get mostly concerned when people jump into it unaware of the variables and go bankrupt within a year.

A few things I think we should research more:

How much impact does it have on a McDonalds site when they tear it down and rebuild? Honestly I believe it’s substantial. I don’t know why but it just seems to bring people in. Everyone likes new. We have one in town here that is a bad / dead area and location. They did the tear down and the McDonalds went from zero to hero.

What is a real average base wash cost per car?

I think if you went to an operation like Mike’s or Delta Sonic, or Cruz Thru, or other high end operators I think you’ll find a lot of people in that range of high $2 some even higher.

If you want, it’s pretty easy to get that down to much less, there’s a lot of fluff in there but some people that focus on the extra quality and fluff of customer service are willing to invest that.

I honestly don’t know exactly to the penny where we would be. I know we spend more than $.60 / car in just chemicals alone on our base wash. (price adjusted to 10% off retail price since we obtain large distributor discounts)

I reduced the chemical cost per car in the article below our realistic #’s to be more relatable to most washes by we are typically around $.95 / car total chemical cost with all package again price adjusted to 10% off retail.

We run 180 horsepower drying on the base wash full blast no restrictions. I believe our electric typically is between $.35-$.45 / car.

Typically running 250 degree heated drying on all washes, all packages which alone in gas runs about $.11 / car.

I know operators that have spent over $.80 / car in just heat for extreme heated drying!

1.8 million BTU boiler to heat all the water and still run out on busy days.

60 gallons of fresh water per car, no reclaim.

It all add’s up and with labor and everything else I know it’s in the high $2 to wash a car however that is in Michigan.

It changes greatly and is much cheaper in the southern climates.

Also another variable, it cost more to wash cars faster… It’s like having more people on an assembly line to move the line faster cost more money. In the northern climates we run 150-200’ tunnels to run 200 cars per hour which cost more chemicals, utilities, and equipment.

That is a huge factor I should have mentioned in the article!

Let’s keep discussing; I love your feedback and comments, much appreciated.

We are going to start a blog soon on our website and I’d love for you to input articles to help educate operators if you’re interested!

Thanks,

Ryan Essenburg

 

[robert roman]

Earl,

Thanks for the information from Mr. Essenburg. Consequently, perhaps it is not necessary agreeing to disagree but rather one size doesn’t fit all.

By the way, I did receive your letter today. LOL and LOL It made my morning and my wife got a real big kick out of it.

I can assure you that on my way to the airport tomorrow morning, I will deposit it in the Cancer Society collection box at the convenience store where I buy my gasoline.

Kudos