Operating a modern tunnel express car wash involves a variety of expenses that owners must manage to ensure profitability. Based on the financial projections provided, these expenses can be broken down into specific categories, each consuming a portion of the total revenue. Here's a breakdown of what an owner can expect in terms of operational costs
Key Operational Expenses
Detergents (5.22%):
For a $1.5 million revenue, detergents would cost approximately $78,300 annually. This covers the chemicals used to clean vehicles, an essential component for ensuring customer satisfaction.
Repair/Maintenance/Replacement (4.35%):
Maintenance of the car wash equipment is crucial for uninterrupted operations. At 4.35%, this would amount to $65,250 of the total revenue. This expense includes routine maintenance, repairs, and eventual replacement of worn-out components.
Supplies (0.43%):
General supplies such as towels, cleaning tools, and other necessary materials make up 0.43% of the revenue, totaling $6,450.
Claims (0.61%):
Covering any potential claims from customers, which might include damage during the wash, represents 0.61% of the revenue, or $9,150.
Water/Sewer (4.35%):
Water and sewer costs, integral to the operation of a car wash, account for another 4.35%, equating to $65,250.
Gas (0.61%):
Gas expenses for heating water or drying air amount to 0.61%, or $9,150.
Electricity (2.70%):
Electricity, necessary for running the entire operation, will take up 2.7% of the revenue, about $40,500.
Miscellaneous (2.54%):
Miscellaneous expenses might include unexpected costs or minor operational items, which would be around 2.54% or $38,100.
Labor (15.82%):
Labor is one of the largest expenses, consuming 15.82% of revenue. For $1.5 million, this would total $237,300. This includes salaries, wages, and associated benefits for all employees.
Property Tax (2.15%):
Property taxes represent a fixed cost based on the value of the location, accounting for 2.15% or $32,250.
Insurance (1.00%):
Insurance costs, covering liabilities, property, and other risks, account for 1% of revenue, or $15,000.
Credit Card Fees (2.5%):
Credit card processing fees take up 2.5% of revenue, approximately $37,500.
Royalty (4%):
If the car wash is a franchise, royalty fees might be 4%, equaling $60,000.
Brand Development Fund (1%):
Contributions to a brand development fund would be 1%, or $15,000.
Local Advertising (2%):
Advertising expenses to attract local customers would amount to 2%, or $30,000.
Regional & Corporate Management (4.29%):
Fees for regional and corporate management services, including administration and oversight, would be around 4.29%, totaling $64,350.
Total Expenses
When all these costs are combined, the total expenses account for 43.96% of Year 1 revenue. This represents the direct operational costs necessary to run the car wash efficiently and effectively.
Conclusion
Owners of a modern tunnel express car wash can expect operational expenses to be a significant portion of their revenue. For a business generating $1.5 million, the total operational expenses would amount to approximately $659,400. This detailed understanding of where the revenue is going helps owners manage costs and ensure profitability.
It's important to note that these expenses can vary based on factors such as location, scale, and operational efficiency. However, the ratios provided here represent a typical operating scenario.
Notably, we observed a significant increase in insurance costs over the past year, reflecting a broader trend in rising operational expenses within the industry.
MMCG's expertise in gathering Profit & Loss statements (P&Ls) and monitoring transactions provides invaluable insights that can help car wash owners plan and manage these expenses more effectively.
MMCG is a company specializing in car wash feasibility studies across the U.S.
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