Finishing Line - August 2008

Setting Sun?
Small Scale Might Be a Big Trend

By Robert Roman

Although some people in the car wash industry believe that the sun may be setting on new investors, we can also make the argument that the early bird catches the worm. By early bird, I am referring to new investors who are enterprising enough and have the foresight to see through the uncertainty of our current economic doldrums.

Economic recessions are necessary, they are painful and they are as inevitable as an economic expansion. As a precursor, a recession can provide opportunities that may not exist during periods of normal or rampant economic growth. This includes things like lower real estate prices and business valuations and lower construction costs and interest rates. A recession is also a time when the government is more willing to provide incentives like add-on depreciation and when suppliers are willing to cut a deal to prop-up sagging sales volumes. A weak economy is also a time when some companies will latch on to new trends as a way of moving their business ahead. One of these trends is the notion of building small-scale stores.

As many small business owners can attest, it has become very difficult to compete with big-box stores, which exist to sell us an endless supply of toilet paper. However, some retailers have discovered that shoppers are growing tired from information overload and the effort of getting through a 175,000-square-foot store and the parking acreage that surrounds it.

Companies like Dollar General and Walgreen’s have responded to this phenomenon by building small-scale stores in the shadows of Wal-Mart, Home Depot, and Target. Small-scale is based on the belief that a small assortment in a more efficient structure will attract customers who want to avoid the consequences of shopping in a vast warehouse.

The success of small-scale stores is not just small size. To compete with the Goliaths, Dollar General and Walgreen’s had to create an innovative advantage. This was achieved by designing stores with their customers’ needs in mind and using a close to home, quick, and no-lines approach to business. For example, Walgreen’s drug store chain, with a store size of typically 14,500 square feet, boasts that it only takes six minutes for customers to complete their mission. Small-scale also means less real estate and capital costs. This gives retailers an advantage in markets where real estate is in short supply and in small towns where the store will not have a large customer base. Being small also reduces the pressure to grow the business.

If we extend this notion to the car wash industry, it could include the opportunity to acquire and convert old, outdated, or under-performing self-service sites into multiple express in-bays, a mini express-exterior conveyor or, better yet, a small-scale flex-serve. There are several reasons why this strategy would be attractive for new investors.

A self-service site is already permitted for the intended use. Many self-service sites are located in neighborhood settings that are very close to lots of rooftops and value-minded consumers. Most self-service sites have utilities, which are sufficient to support any one of the business models mentioned. If the site has an in-bay, it may have the demographic and lifestyle attributes necessary to support these business models. If the existing structure cannot be utilized economically, it is not that complicated to demolish a simple self-service building and replace it with a pre-engineered one, and the removal can cost even less (as much as 33 percent less) if the building is deconstructed. Deconstruction is the systematic disassembly of buildings with the purpose of recovering valuable materials for re-use in construction, renovation or re-manufacturing into new products. And finally, the aforementioned business models are more in-line with the current needs and wants of consumers: faster process speed, shorter waiting lines, and greater quality and value.

According to famed trend-spotter Robyn Waters, “For every trend, there is an equally significant countertrend that deserves as much, if not more attention and creditability.” In the final analysis, as the sun sets on one horizon, it is surely rising on another. Don’t let the opportunity pass you by. New investors should consider exploring the benefits of building a new small-scale car wash, now.

Bob Roman is president of RJR Enterprises - Consulting Services (www.carwashplan.com) and vice president of Bubble Wash Buildings, LLC. You can reach Bob via e-mail at rjrcarwashplan@yahoo.com.

 

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