← The Economics of Everyday Things
The Economics of Everyday Things
Car Washes (Replay)
00:15:41
Why are these sudsy roadside stops one of the fastest growing industries in America? Zachary Crockett takes a look under the hood.
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- [00:00]
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- [01:06]
Zachary Crockett
In the TV drama Breaking Bad, Walter White is a high school chemistry teacher turned meth kingpin, and he needs a business to launder his drug money, something that won't attract attention but still brings in large amounts of cash every day. He considers a laser tag facility a nail salon, but ultimately he and his wife, Skylar, settle on the most boring enterprise they can find.
- [01:33]
Brian Cruz
You want to buy my car wash?
- [01:35]
Zachary Crockett
I do, and I am prepared to talk numbers right now if you'd like.
- [01:40]
Brian Cruz
Do you think this is an easy job? You are willing to get down on your hands and knees and scrub like a housemaid with all the chemicals eating into your nice skin and stinging in your eyes?
- [01:55]
Zachary Crockett
There's nothing glamorous about a car wash. Their scene is outdated and labor intensive. Customers worry about scratchy bristles and harsh detergents. But folks in the industry want you to know that car washes have entered a new era, and business has never been.
- [02:19]
Eric Wolf
There's a lot of wind behind our sails right now. The car wash industry sort of quietly has to be rivaling almost any other industry in terms of its transformation and growth.
- [02:30]
Zachary Crockett
For the Freakonomics Radio Network, this is the economics of everyday things. I'm Zachary Crockett. Today, car washes. That guy. We just heard, his name is Eric Wolf. He's the CEO of the International Car Wash Association. It's an industry group that represents car wash owners and suppliers. Part of his job is to make car washes sound like the greatest place on earth.
- [02:57]
Eric Wolf
Going to the car wash? It's kind of Fun, right? I mean, you've got smell, you've got colors, you've got sounds.
- [03:04]
Zachary Crockett
In the past few decades, the car wash industry has entered its golden age. Customers are flocking to them like never before.
- [03:12]
Eric Wolf
We've really seen an explosion in demand. So we do, as an example, a national consumer study every year. When we started back in 1996, more than half of people with cars in the US reported that they most frequently wash their car themselves in the driveway. Our most recent survey, we're approaching 80% now use a professional car wash.
- [03:39]
Zachary Crockett
Car washes are now a $16 billion business in the U.S. there are around 80,000 of them in North America. And on any given day they service 8 million vehicles. Now some of these stations are self service. You get out of your car, pay a few bucks and wash it yourself. But the majority of them are what industry professionals call express washes.
- [04:04]
Eric Wolf
You as the customer are pulling the car onto a conveyor, you're staying into it, you're riding through the tunnel while the machines do their work. And then you either drive off in three minutes or you have the chance to go ahead and vacuum the vehicle yourself.
- [04:18]
Zachary Crockett
Most express car washes are owned by small to mid sized regional operators. People like Brian Cruz.
- [04:26]
Brian Cruz
I spent eight years in the Marine Corps. That was a bomb builder. And after I transitioned out of that, I worked for corporate America for a little bit. And in 2008 I was an executive banking recruiter. And we all know what happened in.
- [04:39]
Zachary Crockett
2008 after Cruise got laid off, he teamed up with his friend and ran a chain of convenience stores. And a few years later, he met a guy who owned a car wash.
- [04:50]
Brian Cruz
He invited me to go to a show in Atlantic City. I fell in love with the industry.
- [04:55]
Zachary Crockett
Cruz did what any aspiring car wash owner would do. He went to a car wash college, an intensive course in Tamarack, Florida run by a car wash equipment supplier. He studied up on maintenance, machinery and operations. Then he decided to buy a car wash of his own in Northeast Ohio. It was rundown, unprofitable and out of date.
- [05:22]
Brian Cruz
It was very old school. You'd get out of your vehicle, there'd be an attendant there, he would jump in the vehicle, drive up 10ft inside a dark, grungy, dingy tunnel. They would get out of the vehicle, they'd pressure wash the vehicle and then send the vehicle unmanned through the car wash. The equipment was in disarray. Maybe three quarters of it didn't even work.
- [05:45]
Zachary Crockett
Cruise managed to turn that car wash around and then he did it again and again. And again Today, he owns Sergeant Clean, a chain of 15 car washes, all in Ohio. His strategy was to integrate a lot of technology. On the surface, a car wash seems simple enough. You drive into a tunnel, the dirt, the dust, the bird poop, it all gets blasted away with soap and water jets and your vehicle comes out sparkling clean. But inside that tunnel, there's a whole hidden world.
- [06:23]
Eric Wolf
The consumer rolling through will see the conveyor they put the car on, and they'll see the cloth brushes going by the car, touching the car. They'll see the detergents and suds. What they're not seeing, though, is a lot of the computer systems and a lot of the cameras that are there to help us most effectively and safely wash that vehicle.
- [06:43]
Zachary Crockett
That technology is put to use as soon as you drive in. One problem with older car washes is that no two cars would get the same quality of wash.
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Brian Cruz
The Mazda Miata does not clean like the Ford F250. And the Chevy Tahoe does not clean like the, you know, Audi or smaller sedan.
- [07:02]
Zachary Crockett
Today's modern car washes use cameras, artificial intelligence and sonar to personalize the wash to each car.
- [07:10]
Brian Cruz
We know how tall it is, how wide it is, how long it is, the contour of the vehicle. So, for instance, trucks. We don't feel it's efficient to throw soap in the back of an open truck bed. So we're going to, you know, get that soap to a certain level, shut it off, the open bed goes, we turn it back on to get the sides in the back of the car.
- [07:33]
Zachary Crockett
They also have sensors in place to avoid the industry's age old car accidents. Inside the tunnel.
- [07:41]
Brian Cruz
In years past, a customer would push on the gas or hit the brake and it would cause the cars to pile up. So we have a system called no pile ups. And what that does is actually, you know, gives the teammate who's sending the cars behind them confidence that all these cars fit into a box. And if one car jumps outside this box, it shuts the car wash down. Where in years past, that could create three, four, five, six car pileups. And nobody knows.
- [08:13]
Zachary Crockett
That still doesn't prevent the occasional customer screw up. Like the guy in his 80s who visited one of Cruise's car washes a few years ago.
- [08:21]
Brian Cruz
He's in this nice suit and it's a khaki color. And we hit the send button, he starts rolling up the window and it doesn't go all the way up. This poor guy goes all the way through the car wash with his window three quarters down. He's drenched in water and soap. And here's the thing. He wasn't mad. He pulled out $5 from his wallet and said, hey, guys, I'm sorry I didn't pay for my dry cleaning.
- [08:46]
Zachary Crockett
Older customers in particular, also tend to be the most skeptical of newfangled machinery. Back in the 1970s and 80s, many car washes used plastic bristles that could damage your car. Decades later, that stigma still haunts the industry.
- [09:03]
Brian Cruz
That's the first question they always ask, is it brushless or does it have brushes? We've transitioned to a product called Neo Glide, which is actually foam. It's a safer, gentler way to clean your vehicle. So those little fingers, if you will, those foam wraps will hit all those little nooks and crannies of your car.
- [09:26]
Zachary Crockett
All of these advancements have made car washes safer and much more efficient. At an express wash like Sergeant Clean, you can get in and out in less than five minutes. That efficiency doesn't come cheap. Cruise says that building a car wash like this costs around $6 million. His monthly electric bill runs around 7,000 bucks. Water can easily top 9,000. And that water is also a political minefield. There are all kinds of laws, federal, state, local that govern water use at car washes.
- [10:06]
Eric Wolf
If you ever to watch a car wash being constructed, you'll see massive tanks underground, and that will be so that we can store that water we're using and recycle two thirds or more of the water that's touching your your car is being reused for every subsequent car after it's cleaned.
- [10:21]
Zachary Crockett
If you wash your car at home, you'll likely use around 100 gallons of water. That's so excessive that some cities and drought stricken states have temporarily banned washing at home altogether. By contrast, an efficient car wash might only use one third as much water.
- [10:40]
Brian Cruz
I would say on average, 22 to 27, maybe 30 gallons per vehicle is used through the wash process.
- [10:48]
Zachary Crockett
But the modern car wash's most important innovation might be at the cash register. That's coming up.
- [10:56]
Huggies Advertiser
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- [11:28]
Zachary Crockett
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- [14:20]
Brian Cruz
We fix a little RFID sticker in the bottom corner of your window and it knows exactly what wash to get, how often you've washed and what vehicle you're in. Any contact information it's kind of like a barcode, if you will, for your vehicle. And when you pull up to the pay station, the gate goes up immediately.
- [14:38]
Zachary Crockett
At Sargent Clean, you can get what's called a silver tier wash, which includes wheel cleaning for 17 bucks. Or you can pay $27 a month for unlimited visits. Brian Cruz says that 60% of his customers now go for the latter.
- [14:56]
Brian Cruz
The unlimited program that we offer, you know, less than two visits, it pays for itself, and then for us, it provides a steady stream of revenue, you know, residual income on an ongoing basis. And we're not really dependent upon the weather anymore.
- [15:11]
Zachary Crockett
The model is similar to what you'd see at a gym. Some people use it 10 times a month and others sign up and then never go. The people who never go essentially subsidize the people who go all the time. Of course, there are also people who take it to an extreme.
- [15:29]
Brian Cruz
From one of our facilities, the general manager, she kept saying, you know, there's this guy, he washes like five or six times a day. And I went, wait, hold on, no, no, no, no, no. You mean a week or you mean a month? They're like, no. So they pulled a report up and this guy was washing five or six times. He would come out of the end of the tunnel, back around and go right back in.
- [15:54]
Zachary Crockett
Historically, car washing has been a labor intensive business. That's been a huge expense for owners. And there are many cases of operators taking advantage of undocumented workers to reduce costs. They might stiff them on minimum wage or overtime pay. Car washes that have integrated technology and membership models have eliminated that issue by eliminating some jobs.
- [16:20]
Eric Wolf
A modern car wash today can be run with three or fewer employees versus having, you know, 12 to 25 at some stores back in the day. In those days, car wash owners were almost like farmers. I mean, you're always watching the weather. You're always trying to anticipate what demand is going to be, so you can manage that labor expense.
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Zachary Crockett
All of these efficiencies have attracted institutional investors.
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Eric Wolf
There is a ton of consolidation that has happened in the last five to seven years. There is a ton of outside investment coming in, largely in the form of private equity.
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Zachary Crockett
What was once an antiquated industry is now a cash flow machine. Some express locations can gross over a million dollars a year in revenue and wash upwards of 200,000 cars per year. Not everyone can be a customer, though. Over the years, American vehicles have gotten much bigger and more geometrically complex. That means they're harder to clean.
- [17:25]
Brian Cruz
Early on in our industry, in the 60s, you know, all cars were square, they were very boxy. And it was a little easier to clean those cars then. Now, with the different contours, the sleek, and the different visions that car makers come out with, just makes it more difficult for us to clean the car. And I often use the tagline, we wash 80% of the cars, 90%. Well, we can't wash vehicles with, like, ski racks or bike racks or ladder racks. The H1 Hummer, we can't wash that.
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Zachary Crockett
That said, Brian Cruise has seen some atypical vehicles make it through his car washes.
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Brian Cruz
We've actually washed limos in the past. Like, where does this vehicle end? The car just keeps coming out, like maybe pulling out a piece of taffy. It's hilarious.
- [18:14]
Zachary Crockett
But when he thinks back on his journey, one customer stands out in his mind. It was a guy who kept coming back every day so often and for so long that Cruise just had to ask, why?
- [18:29]
Brian Cruz
So I go out and I'm talking to the guy and he looks at me and he pauses and he said, this is the first thing that my entire family has ever owned is this car. So, you know, we're just a car wash, right? We're not, you know, developing the cure for cancer or reinventing the wheel, but we get to impact tons of people's lives. That's incredible to me.
- [18:59]
Zachary Crockett
For the economics of everyday things, I'm Zachary Crockett. This episode was produced by Sarah Lilly with help from Lyric Bowditch and mixed by Jeremy Johnston. I remember when I was like 8 years old, I accidentally washed my dad's car with a scrubby.
- [19:23]
Eric Wolf
Oh, no.
- [19:24]
Zachary Crockett
And I just, like, ruined his paint job.
- [19:26]
Eric Wolf
You can't be pointing fingers or even inferring that to us when you've done that yourself. Come on.
- [19:35]
Zachary Crockett
The Freakonomics Radio Network. The hidden side of everything.
- [19:43]
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Zachary Crockett
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