Past Issue

Is Size It? - Express, Flex, What’s Next?

By Robert Roman

07/01/15

About 10 years ago, mobile car washer, futurist, and now think-tank blogger Lance Winslow predicted the car wash industry would converge on two types of operations: Most areas would be populated in the vision of Dan Hanna, Sr., meaning high-volume exterior washes at low and affordable prices and full-serve (and flex-serve) in the affluent markets.

According to the International Carwash Association’s latest estimates of the fleet and industry wash revenues, it appears as though Winslow may be right. Today, pundits opine that express exterior is the wave of the future.

Consider, for example, the latest express exterior extravaganza. According to an article in The Denver Post Business, Boise, ID-based Metro Express Car Wash is building a car wash facility large enough to clean 5,000 cars a day. Paraphrasing operating partner John Fery: There will be nothing like our wash in the nation.

Metro’s plan is to retrofit a 34,000-square-foot warehouse located in Sheridan, CO where customers remain inside vehicles as they’re washed. The wash will employ between 14 and 16 workers. Prices will range from $8 to $16. The facility is scheduled to open in late fall.

Arguably, such a large car wash or factory would be potentially disruptive like when a Walmart Super Store moves into town and displaces local mom and pop businesses.

However, the counter argument is that competition is good for consumers and the car wash industry.

In the Auto Laundry News 2015 Executive Forecast, Chuck Howard, CEO of Autobell Car Wash Inc., stated consolidators will need to build new locations in addition to acquiring existing ones…more locations will mean more cars being washed because of convenience and shorter lines.

James Burks, CEO of Boomerang Carwash, stated that current successful companies tend to get things right with regards to performance and quality and have systems in place to add locations that can perform at the same level. Consumers should benefit from this.

John Lai, CEO of Mister Car Wash, stated local operators may have a distinct advantage over national operators but “new blood” coming into the industry can only boost innovation and inspire every competitor to improve.

How much would it cost to develop a car wash factory like Metro’s? According to companies that publish construction-cost guidance, location alone can represent as much as 70 percent of the cost driver for a warehouse or office project.

This applies whether pad sites are available for sale (land secured investment), ground lease, or build-to-suit. According to Design Cost Data, average cost to renovate a warehouse is about $100 per square foot. Whereas RSMeans pegs the median cost to build at $165 per square foot.

Our SWAG estimate of what it would take to wash 5,000 cars per day is $2.25 million in equipment, $3.4 million in renovation, and $1.5 million for land.

So, depending on real estate development and investment strategy, cost might be $7 million whereas the typical express exterior would run between $2.5 and $3 million (1,500 cars per day versus 5,000).

Who might invest in a “car-washing factory?” In the Auto Laundry News report cited above, Greg Anderson, CEO of Wash Depot Holdings Inc., mentioned that consolidators might include private equity already attracted to this industry and foreign capital that currently has a large appetite for this industry.

According to Rick Lackey, CEO, Real Professionals Network, offshore investment in U.S. real estate is at an all-time high and these investors are more interested in capital preservation than chasing yields.

 

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



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