The Benefits of Exterior Wash Operators Operate More Profitably
In this article we will explore some of the strong return metrics for operators who develop express Exterior Wash assets. EquityMultiple recently offered preferred equity investments in a ground-up development of express exterior car washes.
Increased Customer Satisfaction
Whether customers visit for a quick wash, a deluxe wash or a self-serve wash, they’re expecting to get clean vehicles and a positive experience. To ensure this, operators need to invest in equipment that delivers consistent, high-quality results. This means regular maintenance and attention to detail. Additionally, a carwash’s location can be an important factor in driving customer satisfaction. Communities with higher population density and higher car ownership rates tend to see greater demand for a variety of car washing options, leading to more opportunities for profits.
While operating costs for a carwash depend on the type, location and operations of each facility, most operators can expect to receive a return on their investment within two or three years. As a result, the carwash industry continues to attract investors seeking stable, low-risk income streams.
The most popular and profitable carwash types include Express Exterior (EE) tunnels, in-bay automatic wash machines and full-service washes. EEs use conveyor belts to move vehicles through a tunnel as specialized machinery does the cleaning. These types of car washes don’t require employees, lowering operating expenses and creating potentially higher returns for investors.
As an added benefit, most EEs offer free vacuums with their services to boost customer satisfaction and improve the overall experience. Additionally, these car washes typically don’t require as much water as traditional, soft-touch car washes.
In-bay automatic wash machines and flex-serve carwashes are similar to EEs in that they don’t require employees. As a result, they have lower operating costs and can fit into smaller spaces. In-bay washes are great for commercial and industrial areas where workers need to clean their vehicles regularly but may not have time to wash them at home.
Lastly, full-service car washes are generally found in urban and suburban communities where people have more time to wash their vehicles at home or at a dedicated carwash. In addition to the aforementioned benefits, FS washes can provide customers with more services and options, including hand-applied interior and exterior treatments. Ultimately, these facilities generate the highest revenue for operators and can provide a unique, recurring service that customers value.
Increased Repeat Business
Many of the most successful car wash operators focus heavily on creating a repeat customer base. This can be achieved through subtle reminders, a strong social media presence and accessibility of staff for customers to ask questions.
One of the most popular ways to grow a car wash business is by adding additional revenue-generating services to your offering. Some examples of these include a vacuuming service, a touchless or soft-touch dry and a free-rinse. These options can increase your overall revenue and help you stand out from the competition.
Using an express exterior tunnel model is another great way to attract repeat customers and increase your revenue potential. This type of car wash uses a conveyor belt to move vehicles through the tunnel while stationary equipment does the washing. It is much faster than a full-serve or flex-serve wash, and most express exterior car washes also offer free vacuums that customers can use to clean the interior of their vehicles after their wash.
The carwash industry has experienced significant growth in recent years. This has been largely due to the popularity of unlimited wash plans and the rise of the express exterior tunnel model. It is an attractive industry for investors, attracting private equity firms and other institutional investors.
Car wash real estate is a relatively low-risk investment when operated by an experienced operator. The majority of the initial investment is made up of one-time fixed payments for equipment. This allows for fast and consistent cash flow with low operating costs. In addition, the depreciation on the equipment is tax-deductible, making it an even more profitable investment.
It is important to invest in quality equipment that will last for the life of your car wash. It is tempting to buy cheap equipment to save on startup expenses, but sacrificing quality may wind up costing you more in the long run. In addition, cheap equipment often has issues that can lead to costly repairs or a loss of productivity.
Investing in quality car wash equipment can lead to increased profits and better ROI for your business. It is important to research the costs and benefits of each component, as well as the total cost of ownership over time. It is also essential to know your market and target audience so you can choose the right equipment for your location.
Increased Customer Loyalty
The ability to build customer loyalty is a major benefit of operating an exterior car wash. Acquiring a new customer costs five times as much as retaining an existing one, so creating a loyal following of customers is key to increasing profits for your business.
There are a few different ways to create a customer loyalty program that will benefit your business and increase repeat sales. For example, providing loyalty members with access to a dedicated car wash lane or offering them discounts on additional services can help your business stand out from competitors and attract more customers.
Another way to cultivate loyalty is through effective marketing strategies. Developing a strong brand and online presence can help your business stand out from the competition, attracting more customers and driving revenue growth. Implementing cost-effective digital advertising, like paid search engine ads and social media campaigns, can also help you reach a wider audience while keeping your budget under control.
A strong, recognizable brand can help your customers recall your business, which can lead to word-of-mouth referrals that will increase your customer base. Creating an online review system to encourage and reward satisfied customers can also go a long way toward building customer loyalty.
Other strategies for fostering customer loyalty include providing convenient payment options, like credit card swipes or auto-cashier machines, to make the experience as seamless as possible for your customers. Additionally, ensuring that prices are clearly displayed to show customers the full price of each service can increase satisfaction by eliminating any surprises or hidden fees.
In addition to these customer-focused strategies, reducing operational expenses can also improve profit margins for your business. Energy efficiency measures, utilizing low-maintenance equipment, and cross-training employees to take on multiple roles can all decrease operational costs while boosting productivity and revenue. Effective budgeting of expenses such as insurance and taxes can also help you stay on track with your financial goals. Lastly, implementing an employee satisfaction survey can help you identify any issues that may be impacting your business and develop solutions accordingly. The pandemic is a perfect time to test out these innovative strategies and prepare for future growth opportunities.
Increased Revenue
More than two-thirds of car wash operators reported higher revenues despite rising competition. These increases are a result of operational improvements, customer loyalty programs, and new product offerings. In addition, increased competition has forced car wash owners to focus on reducing expenses and increasing efficiency. Labor is the largest expense factor, accounting for nearly a quarter of all expenses, while chemicals, rent, general business costs and utilities are other key operating expenses.
Investing in the right equipment and systems can maximize revenue potential. For example, using energy-efficient lighting and appliances reduces utility costs, while cross-training employees allows for optimal staffing levels during peak times. Purchasing soaps, chemicals and other supplies in bulk reduces per-unit prices and increases profit margins. Similarly, implementing cost-effective marketing strategies attracts more customers and boosts revenue.
One of the best ways to grow profits is to offer a full range of services. Adding additional wash options such as vacuums can help increase average ticket sizes and encourage customer loyalty. Another way to improve profits is to target high traffic areas with the most potential customers. Population density and higher vehicle ownership rates often lead to greater demand for car washing.
Car wash real estate also offers the opportunity for higher returns than other real estate investments. Typically, a well-run car wash can achieve a return on investment within two to three years. EquityMultiple has worked with a Sponsor to develop express exterior car washes in several markets across Florida, Alabama and Georgia. These projects were designed to be completed over a 36-39 month hold period and then exited through sale or refinance.
In this article we will explore some of the strong return metrics for operators who develop express Exterior Wash assets. EquityMultiple recently offered preferred equity investments in a ground-up development of express exterior car washes. Increased Customer Satisfaction Whether customers visit for a quick wash, a deluxe wash or a self-serve wash, they’re expecting to…