Site Selection 102 - An Updated Guide to Finding Success

By Anthony Analetto

08/01/17

Nostalgia is an interesting word. Chances are good that simply reading it evoked a fond memory. Was it a car you owned? Maybe a movie you saw or some family event from when you were a kid? Nostalgia can be fun, and occasionally it leads to action. I bought a 1950 Oldsmobile Rocket 88 last year — my dad’s first car — as a testament to that truth. There’s nothing wrong with longing for the past, unless of course it clouds your decision-making process in the present. I’ll admit certain nostalgia for my family’s old full-serve wash creeps into my mind each time I evaluate purchasing or building a new express exterior — despite building only express sites for decades.

“Intelligence is the ability to adapt to change.”— Stephen HawkingAs I find myself pulled into site-selection discussions for various projects, I’ve hit a dilemma: Is my belief that a new location shouldn’t have direct competition within three miles nostalgia for past market conditions, or are my convictions even relevant today? Things change. Express exterior with free vacuums has shifted the value proposition for consumers both in time and money, and brought waves of new traffic to professional car washing. Monthly wash clubs and premium online services have changed customer expectations. Population densities in many markets have changed.

So if intelligence is the ability to adapt to change, then I suppose it’s time for me to update my rules of car wash site selection to reflect today’s reality.

NEW RULES?

1950 Oldsmobile Rocket 88.

Let’s start with the three-mile rule. I won’t pretend that I don’t still prize locations that have no direct competition within three miles. However, those locations are very difficult to find today. I’ve also seen far too many markets with two, three, or more locations successfully coexisting within a three-mile radius to give this rule much weight any longer. That said, my challenge has been defining the new rule. After many hours debating this with friends and colleagues, the consensus is there aren’t any one-size-fits-all rules about competition. As one friend said, “I’ll build if it makes sense and there are at least 30 thousand heads or more available per tunnel operating within a three-mile radius.” Personally, I look for 40 to 50 thousand heads or more per site, but the reality is that a market with 500,000 heads is very different than one with 35,000 in the same radius, and each situation is unique. That brings us to the “what makes sense” part of his comment. Fortunately, there’s a little more consensus in gathering the numbers for a proforma analysis to see if the potential ROI makes sense.

First is to accurately define the boundaries of the market you’re planning to compete in. The days of drawing a three, five, or seven-mile circle around a physical address is no longer sufficient. Instead, savvy investors are incorporating large delineators such as rivers, traffic patterns, demographic shifts, and major highways into their calculations. It makes sense. I know two washes, separated by a major highway, that don’t view each other as competition — despite being less than a mile apart. Instead, each of them is on the outside ring of a different market that extends from a center three miles away. Most industry experts agree that site selection is the single biggest decision regarding the success of your car wash. I have seen operators make money “in spite of themselves” when they have chosen a great location. Conversely, I have seen great operators believe that their marketing and management skill can overcome a poor location struggle to stay alive. The fact is that part of selecting a winning site relies on understanding that particular market. Once you’ve got it clearly defined, many of the other guidelines to predicting a successful site become more predictable. So, what are they? Let’s take a look:
1. Traffic should exceed 25,000 cars per day in a 24-hour period. Bear in mind that commuter traffic (people on their way to and from work) will stop less often for a car wash than local residents. Also, when looking at a property on a divided highway, or without a nearby turning lane, only consider the traffic on your side of the street.
2. The property must be visible from a distance and easily accessible with enough time to slow and make a safe turn into the property. Ideally there is a deceleration lane. In a perfect world, your proposed property is on the right-hand side after a stoplight. Car washes are often an impulse buy: visibility is critical.
3. Zoning rules must allow you to prominently promote your brand and service. Never make assumptions. Confirm with reasonable certainty that you will be able to effectively promote your business to customers driving by with sufficient time to slow down and pull in. If that isn’t available, I’d recommend moving on to another piece of land.
4. Speed matters. Too fast and potential customers will zip past never realizing your wash is there. Too congested and frustrated drivers, eager to get through the traffic, seldom pull in for a car wash. The rule of thumb is 45 mph. Are there exceptions? Of course. Stoplights and signs can create intermittent traffic conditions that work well even at 60 mph, but these are outliers.
5. The population density per conveyor mentioned earlier isn’t the complete picture. Look for markets with high occupancy rates, meaning the market isn’t saturated with unoccupied units available for rent or sale. Mixed residential with some apartment inventory is preferable. Apartment complexes rarely allow driveway washing and can positively impact overall volume.
6. Look for markets with a working population with at least 55% of the total population being between the ages of 25 to 55. The logic here is quite simple: employed people have more disposable income than retirees and students.
7. Ideally, 50 percent of your proposed market should make over $50,000 household income per year. This is critical for a full or flex serve, though the income requirement is somewhat relaxed for an express-exterior wash.
8. Total population and income in your selected market should be projected to grow over the next five years. Enter a market too early, and you may fail before it takes off. Buy too late and the cost of the land may not fit your investment objective. Review census data to see if the population is growing. Visit the city planner’s office to see which — if any — areas have been plotted for retail development. You’re looking for opportunities to get in before land prices surge and that have sufficient traffic to support your businesses during that growth.
9. Car washing should be a permitable use for the property before you invest money. If it’s not, be prepared to spend tens (or even hundreds) of thousands of dollars to get an exception made, with no guarantee that you’ll have anything to show for it. That said, the right site may be worth the battle, so be prepared to fight if it makes sense.
10. Required utilities should be available before you make an offer. This includes the presence of a 2-inch water main and sewer connection without an exorbitant impact fee. Three-phase electricity must also be available. Don’t assume unless you enjoy wasting time, and money.

If you find sites with all of these characteristics you should fare well, provided you deliver a consistent quality product, good value, and a positive customer experience. Markets and industries change. Just make sure that while you adapt to these changes you continue to rely on sound business practices before moving forward on your next property. Do that, and chances are that someday, someone, will be nostalgic for the business you built.

Good luck and good washing.

Anthony Analetto has over 35 years’ experience in the car wash business and is a partner at SONNY’S The Car Wash Factory. Before coming to SONNY’S, Anthony was the director of operations for a 74-location national car wash chain. Anthony can be reached at (800) 327-8723 x 104 or at AAnaletto@SonnysDirect.com.

 

 



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