Cherry Is Shutting Down Its On-Demand Car Wash Service
techcrunch.com
techcrunch.com
$5.25 MM seems like an awful lot of money for something with seemingly few exit opportunities. So I assume there's something I'm missing here.
And see, you just said something very important. You see yourself using them. But tell me, who washes your car right now? How much do you pay them? How come you don't have one of the local on-site car wash businesses come by and work on your car?
On-site car washing (or any other type of on-site auto service (YourMechanic guys should pay attention)) is very low on margins, and competition is tough. You have to compete with every 13 year old kid who wants to buy a new playstation game and will wash cars for $5. You will also have to compete with every other joe who will basically wash a car for a couple of bucks. So creating a solid customer list is tough.
There are also logistics issues. Getting a group of car washers who are not complete and total fuckheads is impossible (I'd say its easier to win the lottery twice). Cherry tried to circumvent that by having sub-contractors, which in other words means giving some random joe $5 to wash some car. They only provided them with some basic equipment. If you have ever washed a car in the cold, you know that you need more than a fucking soap sprayer and a sponge. There is a lot of equipment needed to correctly wash a car in diverse weather conditions. Sub-contractors did not buy equipment because they were being paid shit. So, getting good employees is impossible, getting good sub-contractors is like finding out you have a rich uncle who died and left you money and that suddenly, every hot celebrity out there is hot for you.
There is also the issue that people dont give a shit about cancelling an appointment 30 seconds before it is due. That plus rain, shady owners trying to blame you for "missing stuff", and people who smoke. Its just a shitty business to be in. The only people who manage to do something in that market are the professional detailers. Those guys do make some good money, but have to spend a shitload of time on a single customer, and cannot (in most cases) reliably duplicate their business in order to have any horizontal growth. The high end market is also very competitive and customer loyalty is very high. No Porsche owner will have some unknown detail his baby in order to save $50.
Also, I so called this. This is one of those "investments" that makes you go "huh?".
Edit:
And here I was feeling bummed about wasting $600 on car washing equipment. 5.25 million bucks! Hell, give me $500k and I'll make Nuuton so awesome that people will say "Google? What is that?" :)
Also, coming from consulting, I think I agree with you on the dynamics of subcontracting. People are going to think you're being hyperbolic, but a reliable stable of 1099 subcontractors you can bill out over cost is, fundamentally, free money. Consulting firms know this because staffing a consultancy involves accepting the sales-side risk and paying your team rain or shine. I get a little irritated every time I hear someone brag about a real-world business based on 1099 contractors working on a fixed schedule.
Your sub-contractor part does hit me straight in the heart, because I'm a sub-contractor right now. Its not all rosy and nice, but I do get to work remotely and make my own schedule. It also allows me to work on Nuuton without having to worry about IP issues with an employer. But would still consider a good remote job offer. ;)
Edit:
I also have to add that I studied this market from every angle. Even went as far as testing an android app to get customers to order car washes through it. People would download the app and just create an appointment through the app to get their car washed. Payment would be handled by the app itself. But it tested horribly and the local market did not want it. In the end, its just one more business that did not work out. After a dozen or so, it doesn't make you feel bad about it failing. :)
There are even startups trying to make space travel safer, easier, and cheaper. That must really piss off some old hands at NASA who are aware of barriers X, Y, and Z that those startups will face.
For each of the barriers you brought up, have you got any ideas on how Cherry could've addressed them? One trick I've learnt in the past couple of years is that solutions don't need to be 100%. If Cherry had found solutions that worked 80 - 90% of the time for those barriers, they would probably be doing an alright job of overcoming them.
There aren't any. The problem is that car washing is an extremely low-margin and low-volume business relative to other industries. High margins are measured in the singles of dollars; high volumes frequently means reaching double-digits in customers in a single day.
Cherry's business model actually increased the costs of business substantially by adding in costs for traveling, equipment, employee or subcontractor acquisition, insurance that would apply to infinitely variable service sites, and marketing costs that a normal car wash service would not have to deal with (note: making a distinction between a car wash service and a car wash facility; the two are separate and distinct business models). Thus, economically, it was essentially impossible for Cherry to succeed without first conquering the basic problems that dog existing car wash services.
I know that I don't want a random kid to wash my 50-60-80k car, not do I want keep using those $8 a pop touchless carwashes at gas stations all the time. From time to time I wouldn't mind paying $50 to have the car handwashed and cleaned (but not detailed). Or this is too unsustainable?
When I go through all the trouble of stripping the car, I can just drop it off at a detailing place near the office and get them to pick me up again when it's done.
The sustainable solution to this is to have children and then train/force them to wash your car for you.
* Anything is low margin if you provide a commodity. By being a car washer, the only people you see are people getting their car washed. What you don't see is people who need to get their car washed but don't. Some proportion of those people don't because the existing interfaces are too difficult to use. I just used a pathjoy recently to clean my apartment and I was willing to pay a premium to use them because I have no idea how to otherwise find a good house cleaner.
* Staffing is hard but I think you exaggerate how hard it is. Lyft has managed to solve this problem successfully and I would argue Exec has as well so this is at least two existence proofs. Postmates and Instacart also seem to have solved this problem but I haven't had enough datapoints to confirm.
I think what a lot of companies in this space are unaware of is that, no matter what problem you ostensibly solve, you are also ultimately solving how to scalably acquire talent. I think one thing that has helped immensely over the last 4 years is that the recession has created a pool of under/unemployed resourceful people that these startups are now capitalizing on.
* Proper incentive structures can trivially solve the cancellation problem. Just charge a cancellation fee if you cancel within an hour of cleaning.
* Some people are going to be fucktards the best way to deal with it is to just treat it as a statistical phenomena and price it into your model. There are lots of things you can do to bias the natural level of fraud but, anecdotally, companies I've talked to seem to report that just "has to own a smartphone" is enough to cut fraud by a significant amount.
* Barring certain mathematical proofs, it's impossible to prove that a startup won't work, only that it hasn't yet. The reason to spend $5M is that if you discover a way that it could work that nobody else had the patience/foresight to discover, it could be worth many multiples of that.
People who don't wash their cars just don't care enough about their cars to wash them. That's it. Also, finding a good house cleaner is not the same as a good car washer. You can stroll into a tunnel type car wash any day of the week and not have to worry about a thing. Having a stranger come into your home to clean is really stressful. Congrats on finding a good service provider for that.
shalmanese 2 hours ago | link | parent | flag
I'm not a car owner so I have no stake in this fight but I feel the need to rebut some of the claims:
* Anything is low margin if you provide a commodity. By being a car washer, the only people you see are people getting their car washed. What you don't see is people who need to get their car washed but don't. Some proportion of those people don't because the existing interfaces are too difficult to use. I just used a pathjoy recently to clean my apartment and I was willing to pay a premium to use them because I have no idea how to otherwise find a good house cleaner.
* Staffing is hard but I think you exaggerate how hard it is. Lyft has managed to solve this problem successfully and I would argue Exec has as well so this is at least two existence proofs. Postmates and Instacart also seem to have solved this problem but I haven't had enough datapoints to confirm.*
Have you ever had a car washing business? How did you fare with finding a good staff?
* Proper incentive structures can trivially solve the cancellation problem. Just charge a cancellation fee if you cancel within an hour of cleaning.*
Oh charge a fee you say? How do you think I will do that? Credit card? Then I have to deal with chargebacks and lose even more money than not doing anything. Mail them an invoice? Not going to work. Please provide some insight into this because I do want to learn how you would do this.
* Some people are going to be fucktards the best way to deal with it is to just treat it as a statistical phenomena and price it into your model. There are lots of things you can do to bias the natural level of fraud but, anecdotally, companies I've talked to seem to report that just "has to own a smartphone" is enough to cut fraud by a significant amount.*
My model could only be priced at a given rate because of competition. By pricing in fucktards I would be pricing myself out of non-fucktards.
* Barring certain mathematical proofs, it's impossible to prove that a startup won't work, only that it hasn't yet. The reason to spend $5M is that if you discover a way that it could work that nobody else had the patience/foresight to discover, it could be worth many multiples of that.*
You are right. But it does not take 5.25 million dollars to prove that Cherry would not work. Just a couple of thousands to test at a local market. In fact, most startups these days don't need millions of dollars to prove their business model. They just need thousands, not millions. Thats why YC only gives people a small bit of money as seed. They know that there is no need to spend that much. Where you do need money is to scale the operations and that varies a lot from business to business. Cherry would have been able to scale without much money, because they did not do anything themselves (the sub contracted the work).
I do appreciate that you took the time to reply, but I have real world experience with this, whereas you only are speculating while using Silicon Valley startup logic to it. Doesn't apply (hardly ever, actually).
By the way, visualcsharp, you've been dead for the past 16 days (at least). A review of your comments doesn't explain why, so you probably annoyed a moderator.
It is bubbly that a startup with limited traction raised a large round before having product/market fit and a business ready to scale, but their lucky they have supportive investors who probably believe strongly in the team, thus letting them try something new instead.
Some of these "real-world" business models are broken because the industry is commoditized. One one hand, the margins don't exist to offer customers a discount (remember, you're inserting yourself in the chain, so need to take some of the profit). On the other, there isn't enough value-added in the product to demand a premium; there's a mechanic on nearly every street corner in every town.
These products need to work for both buyers (people in need of car repair) and sellers (mechanics). In this case, the buyers see some obvious benefit, but what are the sellers gaining?
I have to agree with @orangethirty comments on this page. There is not enough margin in the auto service business to let this succeed. I have known people that washed cars professionally in both small high-end detail shops and full-size car wash operations. The high volume car washes are staffed largely with people that could not get better jobs - felons, drug abusers, those with no education or other job skills. The small high end detailers were generally guys that loved cars and found happiness in polishing a Porsche for an afternoon. There was an old guy named Al that used to come by my office and spend an hour on my truck for $30. I don't know where he went, but I miss the service. You do the math on what his income was per year if he had to travel, pay for soap and supplies, and then only grossed $30 per hour. My math estimates that he couldn't be netting more than $25,000 per year.
YourMechanic will also hit this same problem. They promise 30% savings and at-your-door service. This will run into the same issues. There is not 30% margin to cut at any small auto repair shop that I have ever dealt with. For those keeping track, I sold equipment to 200 auto repair shops over a ten year period. There are many car repair problems that are not fixable in the field. The bigger problem is that auto mechanics have the same rockstar ninja aspects as software. The rockstars simply will not be doing brakes in the rain, outside of your work in the parking lot. Why would they? They can earn $100K a year at a dealer, there is no way they are going to earn less in your parking lot. In worse conditions. In the rain.
Ask the question in a different way. Would you prefer to work in a heated/cooled work environment with restrooms nearby, a break room, a place to wash your hands, specialized tools and equipment nearby, support staff to get your parts, queue up the next job, a counter guy to deal with the customer OR----- would you like to work in the rain, deal with angry customers, no restroom, not enough tools or equipment with you, doing jobs that become much harder because of location, etc etc all for 30% less money? You will not get any talented person to work for you. They have better options. Auto repair is very talent driven, especially any area that is hard like diagnostics, transmissions, or solving the problem that the last 3 shops couldn't figure out.
You wouldn't expect to produce good code in a parking lot, would you?
And then there is the classic problem of auto repair. Once you touch the car, the customer finds all sorts of things that YOU apparently did even though you didn't. Scratches, dents, missing items, the list is long and familiar to all.
So there kind of isn't an average non-rockstar mechanic. I will try to answer your question anyway. A person changing oil and doing brake pad replacement might make between $8-12 in Tucson. This worker would not do any engine diagnostics, nor any specialty work like alignment, air conditioning service, or any problems that would be unusual. A surprising number of problems auto shops repair is unusual. Things like "What is that noise at 70 when I hit a bump" which can often be a hard puzzle to solve.
A better mechanic who can use all the equipment could earn up to $1000 per week as a base, but more typically would be paid on a flat rate basis. So you might get $25 per hour flat rate, and you pay would be $25 x #ofhourscharged . The "flat rate" is typically based on Mitchell Time Guides, which was a book and is now a DVD which lists the expected times to do a standard repair. Unusual problems are not covered in this book, which is somewhat inaccurate but is the best the industry has. (Startup idea: crowdsourced auto repair times).
Specialized skills can get you more money, like any other business. If you are fantastic at transmission repair, or at engine diagnostics, or at solving diesel problems, then you can almost set your own rate. I have a friend who could make a few hundred per hour solving engine drivability problems, but I will note that he is unique. He fixed IBM mainframes before turning to cars. He has his own shop, and works by himself. He fixes cars in a day that other shops have spent weeks on before giving up.
Dealership mechanics can make the most money. A few reasons: - They work on new cars, so nothing is rusted or dirty. No rusted bolts to slow you down. - they work on the same cars over and over again, they become familiar - they have warranty work coming in, and recall work - the dealership charges more per hour typically than an independent shop - the dealer is forced to buy the latest equipment, and to send mechanics for training - the automakers restrict repair information from the auto repair aftermarket
Remember that cars are complex systems now. They involve mechanical parts, electronic parts, wear items, user behavior, and you never have enough information to solve the problem. You don't get to see the source code on anything, most of the time you are diagnosing blind. There are no logs to review besides the trouble codes. Trouble Codes only tell you what the opinion of the ECU is, not reality. I sold several million dollars of equipment based on this distinction.
(1)Side note: once (1996) I won a cruise with 4000 other Snap-on Tools people. My ice-breaking question was "How many mechanics do you let work on your car?" with the typical answer being "none" or "just a couple" which is revealing if you consider that on average a Snap-on Tools dealer has 300 customers. So 1% pass the standard of a salesman who visits him once a week.
I had my car tires replace by a company that has a truck tirevan.com and comes to your home or office. The cost was more than it would have cost me to wait at a dealer which I gladly paid because of the convenience and scheduling issues. The work was professional and the driver used to work doing the same thing at a retail location and it was easy to see why, for him, this was a much better job.
So the ingredients were there to make the service successful. It was a niche though and certainly wouldn't apply to something which (as you say) needed more parts and equipment (not to mention the pricing which works well if you have a high end car but not necessarily with the Chevy crowd.)
The other issue to consider if doing a business like this as a "business" is the tax aspect. No doubt the guy coming to your house not only was taking a hit financially but was also making those dollars go further by not (speculating) paying taxes on any income (just like cleaning people that work doing that on the side or a handyman or anyone in a "cash" business). I don't know that for sure of course. He could have reported all that income. But from my experience (and I'm sure you will agree) probably not.
I am not claiming that you are wrong or that YourMechanic will succeed (only time will tell).
p.s. Of the 1000+ cars we have fixed, not a single customer ever came back to us claiming that our techs made the dents, scratches, stole stuff etc. I am sure we will one day run into some of those interesting people. I may be cynical and/or naive, but I happen to believe that most people are basically good.
I have not met a shop yet that hasn't had a ridiculous customer complaint. You seem to be lucky, for the rest of the industry it is always 1% that drives you crazy. By that math you should have had 10 unreasonable customers by now. I also believe that people are inherently good. I did $2,000,000 in sales of $50 tools with Snap-on and only ended up with $6000 in bad debt on what where essentially handshake deals. A loss of $3 per thousand.
Also if you would like to have a non-public discussion, you can email me at gregpilling @ gmail.com
Plus, we really don't need more wasteful services. No way to collect and recycle the waste water for example. Car washes are just ugly wastes of a resource we don't have enough of.
My husband was working for Cherry as a second job 3 days a week, and we're really sad to see it go. The money and hours were decent, and he thought it was better than being stuck in a coffee shop or something like that for a second job. He was solidly booked with customers on the days he worked, so I don't think Cherry folded for lack of customers. I also want to point out that not all Cherry car washers were social rejects who had no others options for work except for menial labor... my husband is college educated, we just needed some extra cash.
I think the real crime here, which no one has brought up, is that Cherry gave ZERO notice to the washers that it was going to fold up yesterday. We got an email last night that it was over effective immediately. I'm glad it wasn't our only source of income, but even a weeks notice to get things sorted out would have been nice. FU Cherry!
On the specifics of this idea, I wouldn't trust anyone in the carwash business because of the horror stories about it being the last resort fro felons, druggies etc. Do you really want those people going through your glovebox?