Self Service - Rural Locations Hold Advantages

By Robert Roman

01/01/22

 

If you want to secure a good livelihood from a business, then owning and operating a self-service car wash in a rural location may have a lot to offer.

According to the U.S. Census Bureau, rural encompasses all population, housing, and territory not included within an urban area.

Rural includes areas with less than 500 people per square mile and small towns with less than 2,500 people and up to 10,000 in isolated or remote areas.

One attribute of rural locations is cost. According to a study of small businesses by the Federal Reserve Bank system, expense for insurance, advertising, taxes, and labor are all lower when operating in a rural area as compared to urban.

Rural locations have demand that the self-service business model is well adapted to cope with. For example, the ratio of trucks to cars in rural locations may be as great as 70/30 or more whereas it’s more like 30/70 in urban areas.

Rural locations also see a fair share of recreational vehicles, campers, toy haulers, boats, off-highway vehicles, farm and snow removal equipment, and cars with roof and bike racks.

There are also nuances to consider. In urban areas, most people have carpeted floor mats whereas in rural and isolated areas most people install rubber floor mats.

Retailers in rural locations usually do not have to contend with category killers or much in the way of competition. For example, a decent return on a $1.5 million express mini-tunnel requires a population base of at least 3,700 assuming no competition.

Moreover, a tunnel cannot accommodate the needs of many of the vehicle types we mentioned earlier.

Another attribute of rural locations is the rural amenities and quality of lifestyle that such an environment affords entrepreneurs and their families.

Generally speaking, rural locations tend to be friendlier places and customers more loyal.

Rural locations often contain diamonds in the rough. This means self-service washes built during the β€˜80s and early β€˜90s many of which need renewal.

Lastly, it is usually easier to obtain financing from a local bank in a rural location. Local banks evaluate traditional loan criteria but they also have more leeway to value other factors in underwriting such as personal relationships and reputation of the borrower.

Rural locations also present certain challenges. The first being total potential sales due to lower population densities and lower household incomes normally associated with rural areas.

Internet connectivity is another sore spot. Rural Internet coverage can be spotty, access scarce, and speeds abysmal. Moreover, relief on data caps and overage fees is denied to rural customers because of LTE sticks and mobile hotspots, the few options available to them.

Physical distance can also be an issue as some rural and isolated areas are located several hundred miles away from the nearest car wash equipment dealer.

Nevertheless, investing in a car wash in rural areas can be rewarding. To illustrate, one of our clients purchased a combination self-service wash in a remote area for less than $400,000. Over the next 18 months, the owner made $200,000 in improvements and managed to increase sales by over 100 percent and generate a cash-on-cash return of more than 60 percent.

 

Bob Roman is president of RJR Enterprises β€” Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com



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