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Car Wash Investing - 10 Most Tragic Misconceptions

Each year, I’m approached by hundreds of potential new investors looking to start a career in car washing. I understand their attraction to a real-estate business with no inventory. I understand their excitement about an industry not dominated by large chains or franchises. What confuses me, however, is how many of them insist on underestimating the complexity of actually building and running a car wash business.

By Anthony Analetto

12/26/14

Each year, I’m approached by hundreds of potential new investors looking to start a career in car washing. I understand their attraction to a real-estate business with no inventory. I understand their excitement about an industry not dominated by large chains or franchises. What confuses me, however, is how many of them insist on underestimating the complexity of actually building and running a car wash business.  For whatever reason, otherwise savvy business people with no car washing experience suddenly envision themselves installing their own equipment with an enthusiastic attitude of “how hard can it be?” Any industry veteran can tell you that succeeding in this industry requires a level of effort, persistence, and passion few are prepared for. Below, I’ve assembled a list of the most tragic misconceptions. New investors and existing operators looking to expand would both do well to review them before starting their next project. Let’s get started.

 

#1 - I’ll Build It and They Will Come

Many new investors carefully conduct demographic studies, create proformas to predict market potential, build the wash, and open their doors expecting to capture the percentage of traffic they calculated. Maybe an established national brand such as Starbucks can get away with that today, but I sincerely doubt they pulled off that trick with their first location. I’d bet they fought tooth and nail to attract first-time customers to try their product. I’m sure they had a marketing plan in place that included everything from community involvement strategies and advertising to training programs to ensure absolute consistency. It’s likely they crafted and refined every detail of the customer experience until first-time buyers became raving fans. Believing you’ll attract your estimated capture rate without a comprehensive marketing plan and a lot of effort is a tragic misconception.

 

#2 - I’ll Steal an Existing Wash’s Business

For many new investors not familiar with the concept of a “single use property,” this misconception makes intuitive sense. It’s a scary proposition to combine intuition and research to select the perfect piece of land in an underserved market. For many new investors, building across the street from a busy wash with a plan to steal their business by offering a better customer value seems like a safer bet. There’s no denying that this logic has advanced every technology from cell phones to social media. So why doesn’t it work for car washing? Because car washes are “single use properties.” That means that once a property has a car wash built on it, it can only be a car wash. If you build across the street from another wash and are successful putting it out of business, the bank takes over the other property when it fails. They will then try to get rid of it fast, more often than not to an experienced operator well below market value.  Now you have a competitor across the street with a lower debt service that can retrofit the wash and reopen at a lower price to steal market share. Believing you’ll build across the street from a busy wash and steal their business is a tragic misconception that rarely turns out well.

 

#3 - It’s Easy to Expand into Multiple Locations

Happily, there are numerous examples of flex and express-exterior operators quickly expanding their brands and opening multiple locations. Sadly, many new investors see that and believe it’s an easy thing to do. There’s a reason our industry remains largely composed of independent owner operators; it’s incredibly difficult to replicate a consistent customer experience across locations. Believing you’ll open your first wash and finance a quick expansion from cash flow can be a tragic misconception.

 

#4 - A Car Wash is Perfect for an Absentee Owner

Sadly, nothing could be further from the truth. When you choose to build a car wash, you’re not investing in a business, you’re embracing a lifestyle. With cash flow only as predictable as the weather, making the quick decisions to capitalize on volume spikes and deliver a consistent product demands ownership of the process. Believing that you’ll find a manager who functions with the passion of an owner in your absence is a tragic misconception that normally results in failure.

 

#5 - It Can’t Cost That Much to Build a Car Wash, It’s Just Soap and Water

Most ground-up car wash projects cost between $1.5 million and $3 million. Believing you’ll be able to save on skilled trades or shave other construction costs along the way is a tragic misconception that normally results in project delays and poorly timed grand openings.

 

#6 - It Will Be Easy to Get Permitting

Unfortunately, the stigma associated with car washing persists in many communities. Although a modern car wash is an automated marvel combining safe chemistry, minimal labor, and careful water reclamation to perform a valuable service, many townships still have our industry zoned with as much affection as an adult bookstore. This is changing, but the words “car wash” continue to conjure images of labor-intensive dirty tunnels that attract transient labor, or unattended 24-hour bays that attract less savory nighttime visitors in the minds of too many town board members. Believing your car wash project will sail through zoning and permitting without a hiccup is a tragic misconception that can cost thousands of dollars in unplanned delays.

 

#7 - Managing Staff Will Be Easy

As in all retail businesses, turnover can be astronomically high. Although gated entry systems and fully automated tunnels that eliminate labor from the wash process have lessened an owner’s reliance on labor, you still need a trained crew to keep things running safely and customers satisfied. For flex-serve and full-serve operators, plan to be part leader, part parent, and part babysitter. It’s not unheard of for a full-serve location to go through more than 300 employees in a single year.  That may not be the norm, but believing that managing your staff will be easy is a tragic misconception.

 

#8 - You’re Always Busy After Bad Weather

Most beliefs that connect car wash profits with weather patterns are old wives tales — stories with a foundation in truth, but not something to plan your business on. Sure you may see a spike after a storm, but only if it’s sunny a few days after, and not if there’s another stormy forecast on the horizon. Believing you can predict weather-related volume spikes is a tragic misconception; hence a hands-on owner needs to be present to “make hay when the sun shines.”

 

#9 - Equipment Alone Cleans the Car

Getting a consistently clean, dry, shiny car is an art form that marries chemistry, water quality, ambient temperature, wash material, road grime, and conveyor speed with moving equipment. The problem is that each part of the equation that delivers the consistent product changes seasonally, or even hourly. Believing that delivering a clean car is as easy as buying equipment is a tragic misconception that will result in frustration and dissatisfied customers.

 

#10 - A Car Wash is a “Cash Cow”

Your car wash business can generate increasing income for years, or even generations, but a cash cow? Ensuring wash quality and customer satisfaction is a daily challenge that demands hands-on maintenance, training, and procedures.  Attracting and retaining customers requires leadership, planning, and perseverance along with creativity and innovation — and success may be rewarded by competition entering your market. Over your career in this industry you’ll become part chemist, part computer programmer, part electrician, part maintenance person, and the level of your success will be directly related to how hard you work at it. The only thing I can assure any new investor looking to begin a career in car washing is that you’ll never be bored. Each day will represent a new opportunity to grow your business, which to me, is what I love most about this industry.

Good luck, and good washing. 

Washing cars for over 30 years, Anthony Analetto serves as president of SONNY’S The CarWash Factory, creator of the Original Xtreme-Xpress Mini-Tunnel, and the largest manufacturer of conveyorized car wash equipment, parts, and supplies in the world. He can be reached at Aanaletto@SonnysDirect.com or at (800) 327-8723 ext. 104.



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