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Obama's $10 per hour wage mandate and your bottom line...

Axxlrod

Car Washer
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I'm curious what you guys are thinking/planning for when your labor costs start to take a much larger bite out of your bottom line.

Here in CA, we have a min wage hike coming this July to $9/hour and another coming 12 months later to $10/hour. After factoring in the "full burden", that's going to be a huge increase.

When I opened my first wash 12 years ago, min wage was $6/hour and my base wash price was $7. Now min wage is soon to be $10/hour and my base price is $5. And volume has dropped over the years due to changes in consumer habits and increased competition.

I've head the "Do it better than your competitor and you will be fine" or "Make it up in volume" lines, but it would take a large increase in volume to make up for a 30% - 40% increase in labor costs.

Of course, I already try to run the best wash in town, and continually increase volume; that's a given.

But with these large labor cost increases looming, I think that cutting labor and/or raising the base price is going to be a necessity.

Not to mention how all our other costs have been creeping up over the years... chemicals, taxes, parts, water, electricity, insurance plus this ridiculous $150K bond us CA operators have to post, etc...

I think it's time for the base wash prices to go up.

What are you other full-serve/flex/express operators going to do?
 

robert roman

Bob Roman
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“When I opened my first wash 12 years ago, min wage was $6/hour and my base wash price was $7.”

“Now min wage is soon to be $10/hour and my base price is $5. And volume has dropped over the years due to changes in consumer habits and increased competition.”

Big mistake was decreasing the base price as labor costs increased.

Never decrease base price because the base wash is the foundation of the business.

Now you have big hill to climb trying to recover that $2.00 per wash given up.

“Of course, I already try to run the best wash in town, and continually increase volume; that's a given.”

This statement is inconsistent with your statement above “And volume has dropped over the years…”

“But with these large labor cost increases looming, I think that cutting labor and/or raising the base price is going to be a necessity.”

The benchmark for average labor wage is $10/hour and upper bound is about $12/hour.

Fully burdened, average cost for line labor (full-time employee) is currently between $18,000 and $20,000 per annum.

What to do?

Express is difficult – labor is fixed expense, so express will have to grin and bear it or raise prices because it’s already fully-automated and expanding into additional profit centers whether capital or labor intensive would be expensive

Full-service is easy – higher labor cost will make FS even more difficult/volatile to manage making conversion to flexible service format even more attractive

Flexible service is easy – like express, flex carwash labor is fixed expense but it is only 1/2 as much as express. After-care labor cost is about 1/2 as much as FS and is heavy on incentives. Thus, the moderate pricing of express services better allows for absorption of hourly wage increase
 

JGinther

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Obama is just forcing inflation by making the tail wag the dog. So the price change will be everywhere. You would be crazy not to adjust as well. In the end, the people making the smallest amount will have the littlest buying power....
On a completely different note.... I know its a bad idea, but have you thought about closing during lunch? I know an operator who analyed his lunch time profitability, and decided it wasn't worth the hassle at his location. He shaved an employee for the day, and even went to lunch himself (thats probably the real reason).
 

Randy

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Washington State has the highest minimum wage in the nation now at $9.32 an hour. There is movement in Seattle and by the Governor to raise the state minimum wage to $15.00 an hour. The city of SeaTac Washington has already passed a law raising the minimum wage to $15.00 an hour. This affects most of the workers at Sea-Tac airport, the airlines are fighting it tooth and nail. All this is going to raise prices, the poor will be poorer in the end.
 
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