The Economics of Everyday Things: Episode Summary – "Car Washes (Replay)"

Hosted by Zachary Crockett, The Economics of Everyday Things dives into the intriguing world of car washes, exploring the industry's transformation, economic impact, technological advancements, and personal stories that highlight its significance in everyday life.

1. Introduction to the Car Wash Industry

Zachary Crockett opens the episode by drawing a parallel from the TV drama Breaking Bad, where the protagonist, Walter White, seeks a low-profile business to launder money. This reference sets the stage for examining the seemingly mundane yet economically significant car wash industry.

Zachary Crockett [01:05]:
"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."

2. The Golden Age of Car Washes

Once perceived as outdated and labor-intensive, the car wash industry has undergone a remarkable transformation, entering what Eric Wolf, CEO of the International Car Wash Association, describes as its "golden age."

Eric Wolf [02:18]:
"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."

Statistics highlight this growth:

• $16 billion industry in the U.S.
• 80,000 car washes in North America.
• 8 million vehicles serviced daily.

Brian Cruz, owner of Sergeant Clean, a regional chain in Ohio, exemplifies the modern car wash entrepreneur.

3. Technological Advancements in Car Washes

Modern car washes have embraced cutting-edge technology to enhance efficiency and customer experience. These innovations include:

• Artificial Intelligence & Cameras: Tailor washes to each vehicle's size and shape, ensuring optimal cleaning without damage.

  Brian Cruz [07:10]:
  "We know how tall it is, how wide it is, how long it is, the contour of the vehicle."

• Sensors for Safety: Prevent car pile-ups within the wash tunnel by automatically shutting down systems if a car deviates from its designated path.

  Brian Cruz [07:41]:
  "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."

• Eco-friendly Practices: Advanced water recycling systems reduce water usage significantly—modern car washes use approximately 22 to 30 gallons per vehicle compared to 100 gallons for a home wash.

  Brian Cruz [10:40]:
  "I would say on average, 22 to 27, maybe 30 gallons per vehicle is used through the wash process."

4. Evolving Business Models and Economics

The economic landscape of car washes has shifted from purely transactional to subscription-based models, mirroring the gym industry. Key points include:

• Membership Programs: Customers can opt for unlimited washes for a monthly fee, providing steady revenue streams for owners.

  Brian Cruz [14:37]:
  "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."

• Investment and Consolidation: Technological efficiencies have attracted private equity and institutional investors, leading to significant industry consolidation.

  Eric Wolf [16:45]:
  "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."

• Operational Costs: High initial investments (around $6 million per car wash) and substantial ongoing expenses (monthly electric and water bills exceeding $16,000) underscore the economic commitments involved.

5. Challenges and Adaptations

Despite advancements, the industry faces several challenges:

• Vehicle Diversity: Modern cars come in various shapes and sizes, complicating the washing process. Express car washes can handle 80-90% of vehicles, but outliers like limousines or trucks with racks pose difficulties.

  Brian Cruz [17:24]:
  "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."

• Customer Reliability: Similar to gym memberships, some customers may not utilize their subscriptions frequently, effectively subsidizing those who do.

• Environmental Regulations: Stringent laws on water usage, especially in drought-prone areas, necessitate efficient water recycling systems.

6. Human Stories and Industry Impact

The episode highlights personal interactions that emphasize the car wash's role in customers' lives:

• Customer Anecdotes: Stories like that of an elderly gentleman who inadvertently gets soaked with soap but remains generous illustrate the community aspect of car washes.

  Brian Cruz [08:21]:
  "He pulls out $5 from his wallet and said, hey, guys, I'm sorry I didn't pay for my dry cleaning."

• Personal Fulfillment: Brian Cruz shares a poignant moment with a loyal customer, reflecting the emotional connections businesses can foster.

  Brian Cruz [18:29]:
  "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."

• Employment Shifts: While technological integration has reduced the need for a large workforce, it has also minimized unethical labor practices, such as underpaying workers.

  Eric Wolf [16:20]:
  "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."

7. Conclusion

The car wash industry exemplifies how traditional businesses can reinvent themselves through technology and innovative business models. From enhancing customer experience with AI-driven systems to adopting sustainable practices, car washes have evolved into efficient, lucrative enterprises. Personal stories from owners like Brian Cruz underscore the industry's broader economic and social impacts, highlighting its essential role in the fabric of everyday life.

Notable Quotes:

• Zachary Crockett [02:29]:
  "What was once an antiquated industry is now a cash flow machine."

• Brian Cruz [07:54]:
  "Any contact information it's kind of like a barcode, if you will, for your vehicle."

• Eric Wolf [10:05]:
  "If you ever 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 car is being reused for every subsequent car after it's cleaned."

This episode was produced by Sarah Lilly with assistance from Lyric Bowditch and mixed by Jeremy Johnston. The Economics of Everyday Things continues to uncover the hidden economic dynamics behind everyday objects and services.