Unlimited Pass - Why are they offered?

[Kramerwv]

Consistency pays the bills and for most tunnels that cost upwards of $2mil that is what the lenders and investors want to see. Margins will continue to erode and eventually we’ll be left with a few large chains and some independents that made plenty of money or had enough forethought to change earlier rather than later. Hoping to be out before that happens. Making it up on volume drives out smaller players (see independent grocery chains). Get the margin while you can because the race to the bottom has begun, just gotta hold on and try to not get bucked off too early.

 

[Roz]

Too many people think that what works for a tunnel operator can work for a small IBA. They are totally different operating models.

A tunnel with high fixed operating costs, the ability to wash in one hour the same number of cars an IBA washes in a whole day, and equipment that is comprised of many individual machine components that can be replaced has significant excess capacity. Since they are paying people to be there even when the wash is not used it makes sense to offer an unlimited program. An IBA has a limited number of washes in the machines before it needs to be totally replaced so if you do the math unlimited plans do not make economic sense for a SS/IBA location unless most customers do not use their plans. Many small operators do not look closely at or understand the real numbers and just focus on the deposits to their accounts from monthly programs. Need to look at both hard (equipment replacement) and soft costs (chemical/water/variable).

 

[washnshine]

Why is there such focus on the money being consistent, rather than caring about the margin.

Per car profit margins aren’t much more than bragging rights if you are not washing sufficient volume. A $20 margin for every car would be great, but if you only wash 5 a day it isn’t that helpful.

That’s an extreme example, but the principle is the same. There is a breaking point between what customers will pay for single washes and the best facilities, chemicals and product will not make someone pay $15 four times a month if they don’t perceive it as economical. But they will wash 3-4 times a month at $35 or $40. So, it comes down to the fact that they might not wash, or go elsewhere to offset that difference.

Loyalty is a huge point as has been mentioned earlier in this thread. You have a more permanent customer with this model. The sticker can also provide a little free advertising.

 

[PaulLovesJamie]

Your arguments appear to be focused on margin, which is only one metric of many. If margin were what it is all about, grocery stores would have been out of business thousands of years ago. Have you searched & read about pricing strategies and discounting strategies yet?

 

[jfmoran]

Membership programs are just part of a two pronged revenue model, recurring and non-recurring. Memberships provide steady, predictable cash flow, that in most cases (depending on membership size) will cover all fixed expenses on a monthly basis. Memberships build loyalty to your car wash. One of the developers of the Amazon Prime model said, "Prime was never about the $79 annual fee, it was about changing customer habits to not shop anywhere else."

The average customer, which makes up about 85% of your customer base, washes their vehicle 4X or les per year. Membership programs promote the idea of washing your vehicle more than 4X per year, which helps drive up the # of people using professional car washes. There is a reason why the % of people using professional car washes has climbed to 70%+, from below 50%, 15-20 years ago.

To really embrace the membership model, there has to be a mind-shift. Total revenue, predictable cash flow, ROI and healthy profit margins are why the Private Equity guys, can't get enough of the car wash industry, specifically the EE model.

Is it right for everyone? I suppose not. If you're in an area where you have little to no competition, then you can probably get away without one, but if your competing against other washes that have membership programs, you better figure out, how you are going to get and protect your piece of the pie.

 

[BenBranam]

If you do the math and change it to 3.5x washes a month.
You collect $30/month from 100 customers. That 4200 washes, if it costs $2 to wash a car you spend $8400 to make $36000, $27,600 profit. You make $8400 more but you clean 1800 cars at $4.50/wash. Rather than the person keeping their margin high and line free. The only one benefitting from unlimited pass memberships benefit is companies that offer car wash equipment and soaps. The more they wash the more they make, the margins are great in the wash business, until promotion of overwashing by companies that encourage these plans landing them more profits from soaps, equipment, the more you wash the more wear occurs, the more they make, the more they control the whole process. Seems counter productive.

The math is different and easier than that. I want you to have a higher margin per wash on your monthly customers not lower. Easy Math Here: if you medium wash is $10. You charge 3.5x that price
Your monthly program for that wash is $35 a month.
Now if the average is 3.2 washes per month, that would be on average at normal cost of wash revenue of $32 a month.
See how you can make more per wash with your monthly program?
Of course you have to test the national average against your area, but whatever program you are using to sell your wash (POS) should be able to give you that number constantly.

I want you to make more money on your wash, not less.

 

[Kramerwv]

Problem is some EEs are doing 1.5x multiplier or less in some instances. Not much meat on that bone but gets a crowd.

 

[OurTown]

The one EE company that is building a lot of washes around here has a 1.86 multiplier on their top wash. ($27.95/mo for a $15 wash) Their washes do not wash cars all that great but they seem to stay busy. This is the issue with a low multiplier: Low quality.

 

[DavidM]

There is another point to consider as well. Customer tracking has shown that many of our customers wash less than 4 times per year. A membership can take that customer from $40 per year spent at your wash to $250-$300 per year. Would you rather have 50% of $40 or 15% of $250? That is why margin isn't everything.

Also to respond to Ben, it isn't as easy as pricing the monthly plan higher. The tunnel industry has shown that as the multiple goes up, so does the usage. A plan that is sold at a 3.5x multiple will only attract the heavy users. The reason some tunnels are less than 2x is because they know it is cheap enough to attract the people who are washing less than 1x a month.

I believe the jury is still out on whether or not this can work in the inbay market. I think it may be largely dependent on the speed of the equipment. Automatics that are maxed out at 8-10 cars an hour probably cannot make the unlimited memberships work.

I think we need to figure out how to make this work in the inbay world, it has been remarkably successful in the tunnel industry.

David

 

[jfmoran]

There is another point to consider as well. Customer tracking has shown that many of our customers wash less than 4 times per year. A membership can take that customer from $40 per year spent at your wash to $250-$300 per year. Would you rather have 50% of $40 or 15% of $250? That is why margin isn't everything.

Also to respond to Ben, it isn't as easy as pricing the monthly plan higher. The tunnel industry has shown that as the multiple goes up, so does the usage. A plan that is sold at a 3.5x multiple will only attract the heavy users. The reason some tunnels are less than 2x is because they know it is cheap enough to attract the people who are washing less than 1x a month.

I believe the jury is still out on whether or not this can work in the inbay market. I think it may be largely dependent on the speed of the equipment. Automatics that are maxed out at 8-10 cars an hour probably cannot make the unlimited memberships work.

I think we need to figure out how to make this work in the inbay world, it has been remarkably successful in the tunnel industry.

David

Spot on David! Lifetime value of a customer is a major metric that has to be looked at, when deciding whether or not to go with a membership program. Will it work for an IN-Bay? I think it can, especially one that is underperforming. At the very least and IN-Bay needs to have a robust rewards program to draw their customers in more often.

 

[jfmoran]

Problem is some EEs are doing 1.5x multiplier or less in some instances. Not much meat on that bone but gets a crowd.

That all depends in how you look at it. If the average customer only comes in 4X a year (which is what surveys tell us) and buys your best wash every time, which for this example we will say is $15, then that customer is worth to you $60/yr. Your ticket average is $15/car.

Now, if that customer joins your membership program at 1.5X multiplier for your Best wash, that plan will cost them $22.50/month. Lets assume they only stay on the plan for 6 months, their value to you is 6 X $22.50 or $135. Lets assume they visit 3X a month on the plan, your ticket average is $7.50/car.

So the questions is, are you willing to accept a lower ticket average to gain twice the revenue from this customer?

 

[Kramerwv]

That all depends in how you look at it. If the average customer only comes in 4X a year (which is what surveys tell us) and buys your best wash every time, which for this example we will say is $15, then that customer is worth to you $60/yr. Your ticket average is $15/car.

Now, if that customer joins your membership program at 1.5X multiplier for your Best wash, that plan will cost them $22.50/month. Lets assume they only stay on the plan for 6 months, their value to you is 6 X $22.50 or $135. Lets assume they visit 3X a month on the plan, your ticket average is $7.50/car.

So the questions is, are you willing to accept a lower ticket average to gain twice the revenue from this customer?

I think at some point we all have to do something like this to hook the customer or they’ll migrate elsewhere. We are iba so might explore rewards type setup via app rather than unlimited. The point of converting occasional washers into members is well taken and makes perfect sense. Just not sure all areas have the demographics to support it. Plus there’s the fact that your current best customers that wash once a week turn into unlimited members that reduces revenue. Hard to accurately estimate how much of each outcome you’d produce until actually doing it. Appreciate being able to gather opinions and experience from this site. Good topic.

 

[washnshine]

I think at some point we all have to do something like this to hook the customer or they’ll migrate elsewhere. We are iba so might explore rewards type setup via app rather than unlimited. The point of converting occasional washers into members is well taken and makes perfect sense. Just not sure all areas have the demographics to support it. Plus there’s the fact that your current best customers that wash once a week turn into unlimited members that reduces revenue. Hard to accurately estimate how much of each outcome you’d produce until actually doing it. Appreciate being able to gather opinions and experience from this site. Good topic.

Yes - I agree - this is not a plan that will work in every location/scenario/demographic- there needs to be the right mix and formula.

Also agree that it is great to have this forum to discuss these topics.

 

[Rockstar McGowan]

Just for the hell of it. It might be worth while for anyone (that is interested) to consider the perceived value of membership plan vs the price. While unlimited subscriptions for IBA's might seem too aggressive for your/the market, the ability to control the marketing campaign might be well within your right. For instance, someone that has an IBA and it's directly competing with a tunnel just down the street could consider placing a restriction on the membership and changing the narrative to the customer.

BECOME A MEMBER
SAVE 80%
Receive 6 washes a month for 'x' price...etc

This narrative controls abuse and tells the customer they are getting a staggering deal. Of course, the concept of the multiplier should first include your costs of:

wash equipment, amortization of said equipment 6-12 years?, heat (if a variable), pit/cleaning removal, maintenance, water, chemical, electricity, cost or pay tellers or software solutions like Apps for memberships, marketing budgets, land fees, property taxes, building fees, claims and damages (I realize I'm starting to talk to the people that are new to carwash lol), marketing budgets...etc

Take those historic costs and divide your packages by volume, factor in your pricing per wash and utilize a common ticket price for memberships, divide it all out and you'll actually really close to seeing how lucrative this model actually is. And if you're really really good, take John's advice above, identity your unique customer base, let's say it's the 15%, try to convert that group via your marketing campaigns. All while factoring that the abuse can be controlled at let's say 6 per month and let's pretend EVERYONE will abuse all 6 washes. Here's an idea of what that would look like:


19,446 washes means 2,917 potential customers - if you could convert half (25%) Leaves 729 subscribers but all of them are coming 6 times a month, that wouldn't happen either but I like erring on the side of caution.

Each wash package price; sub price:
A)9.99; $19.99
B)10.99; 22.99
C) 12.99; 26.99
D)14.99; 29.99

equipment is $750 amortized over 12 years - maintenance at 7k, pit removal at 4k, heating at 5k...etc water chemicals and elec all at roughly 2bucks per wash/ Appropriately I've divided all of the figures above include my budgets at full cap ex and op ex by the wash count per package... i.e., 4,853 package A); 1352 package B); 5,587 package C); 7654 package D) and then split this historic data into my assumptions of the conversion above, now including forfeited costs for people that will no longer purchase single washes and vacuumed them out of my potential earnings. Here's the split:

A) 10%
B) 25%
C)15%
D)50%

In a full year stagnating at the 729 members from beginning to end, I've profited 42,569K. My gross margins would seem too positive to share, so instead, this pragmatic approach tells me a little more of the story.

 

[Car_Wash_Guy]

I just ordered a Petit 360 and am leaning towards the Dencar teller. I fly out to OH on Monday to tour both facilities and learn as much as possible. I plan to offer a monthly plan. My customers ask for it often. I have an EE about 3 miles away but they literally own the area. They have 10k monthly subscribers ( I'm friendly with past and present management there).

I will say that I'm somewhat reserved about the whole idea in an IBA. I'm hoping with the throughput of the Petit and the ease of selling memberships of the Dencar, my business will not only grow, but my revenues and net profit will increase while creating a loyalty to my site.

If it goes well, I will replace the second IBA at this site with another 360.

 

[Flex- Wand]

I was there last Wednesday. Phil was highly motivated nice. It's totally internet dependent. His internet when down write at the start of are talking. It's simple inside the casher no coins. Your paying for software,, his trawl an airier for the system then he show you the 4 bay monster wash. I'm 15 you will 16 young company. Ground flow what do you think?

 

[I.B. Washincars]

his trawl an airier for the system then he show you the 4 bay monster wash. I'm 15 you will 16 young company. Ground flow what do you think?

Translation, please...

 

[Car_Wash_Guy]

Translation, please...

I assumed trial and error messed up by voice to text.

 

[Kramerwv]

The hard part competing with EE is that they’ll price unlimited at $25/mo. for a $20 wash. I couldn’t afford to make my $12 wash a $15 unlimited package.

 

[Roz]

Hard to compete with a tunnel who can wash in one hour what a busy IBA would wash in one day. Just need to provide customers a better wash experience with the way you wash a car. RIO tunnel prices the monthly below the cost of a single wash just to hook customers to join their club......Probably smarter for an IBA not to try to compete with a tunnel with a monthly program, driving your revenue down to $2-$5/wash (above example) is not a good longterm solution.

Home

Go Unlimited! https://websiteconnect.drb.com/gocarwash/GoUnlimited!.aspx center left #000000 #ffffff 2 Become a member and Go Unlimited! right center

www.riocarwash.com