Feasibilty - December 2006

In-Bay Automatics, Part II —
It's Just A Good Business

By Jack DeMarre

In last month’s issue of Auto Laundry News, we pointed to the evolving nature of the car wash industry and offered an overview of its development and segmentation. We paid particular attention to two wash formats — the in-bay automatic and express exterior — and how they came to compete for the same investor.

We stipulated that this article is an effort to demonstrate that there are factors that will justify one approach in one case and the other in another case. In Part I, we took a close look at demographics. Following, we’ll consider other factors you need to consider — in conjunction with the demographics — to decide which wash model best suits your needs.

OTHER FACTORS TO CONSIDER

As we pointed out last month, none of the demographic factors discussed in that issue stands alone as a means of justifying anything nor do they represent all of the things you should think about. Careful consideration of those demographics in combination with the factors that follow will help you determine the likelihood of success.

Labor
This is a real confusing factor. Many representatives of both models often speak in terms of unattended or at least minimally-attended sites. When surveying a broad base of owners, most sites that employ automatic equipment require some level of attention. This would seem to make sense, and it can be said that the more complex the site, the more attendant labor required. There also have been cases where city planning authorities have been more reluctant to grant permits to “unattended” businesses, fearing problems like vandalism, loitering, even violent crime, or other factors.

In-bay automatics often perform much better if there is a part-time attendant, usually present during the busiest times. Attendants keep traffic flowing, handle minor problems, and minimize customer confusion. This really stimulates overall business by building customer comfort, familiarity, and confidence.

Exterior sites typically require a labor force of three or more people. The number present might fluctuate depending on factors (like weather) that can impact business activity positively or negatively. If presented with the idea of an “unattended” site of any kind, it is best to talk to as many operators as possible — out of ear shot of potential equipment suppliers — and develop your own conclusions.

Labor Costs
It is easy to think of your labor cost as the amount you might pay an employee per hour or other unit of work. In reality the benefits, employee-on costs, hiring, training, and replacement drive this number much higher. Then there is the challenge of managing a team of minimum-income employees and of hiring competent supervisory personnel to help manage the business. It really falls to the goals and objectives of the investor: if you are building the wash as a secondary income source, personnel issues can be a real hassle. If you intend to be a fulltime operator and manage this yourself, it might be a different story. One thing for sure, no one will manage your business with the same attitude or attention to detail that you will.

Land Requirements
One of the biggest differences in the two business models is the amount of “ground” required to build a facility. Where a single-bay IBA can be located on a lot as small as 75’ by 100’, an exterior wash could require a 200’ by 400’ lot — or larger, depending on how it is configured and marketed. The size of the plot obviously has an impact on the cost of entry into the business, but the location of the lot is also a driving factor in cost. The traffic and population requirements discussed in Part I dictate that the lot required for an exterior site will probably be prime real estate, sought after by other businesses, and will come at a much higher price. It is common for such sites to range from $600,000 to $1,000,000, while the cost of the real estate for an IBA/self-service site often is less than half of these amounts.

Building Requirements
The buildings required for each model are very different. A single-bay IBA facility would range in cost from $125,000 to $200,000. An IBA/self-service combination wash with four self-service bays and one automatic bay will typically range from $300,000 to $500,000.

A facility for an exterior site will be in the range of $400,000 to $750,000, and sometimes as much as $1,000,000. This wide range is due mostly to length of the building. There are also huge regional variables in building costs that contribute to the wide range.

Equipment Requirements
There are obviously many variables, but these relative numbers should be helpful. A complete single-bay IBA package will range from $125,000 to $150,000. Adding a second bay will usually increase that cost to $225,000 to $250,000. Self-service equipment costs typically range from $10,000 to $20,000 per installed bay.

The cost of a complete exterior package will range from $250,000 to $500,000. Note that both packages include things like water heater, water softeners, spot-free-rinse systems, entry systems, vacuum cleaners, etc. They more or less include everything you require to successfully operate a car wash. The wide range in cost for the exterior package is related to conveyor length and features, which translate to vehicle throughput and income potential.

Development Costs
There are many factors that can impact the entry cost. Local fees can include water- and sewer-access fees, zoning fees, park or green-space assessments, to mention a few. It may also require costs incurred to bring adequate electrical service to the site, the availability of natural gas or other fuel source, architectural fees, landscaping, lot lighting, legal fees, etc. The list could go on and on. Careful investigation of these costs is crucial to the planning process.

BUSINESS MODELS

The business models in Table 1, below, demonstrate the relative costs and income potential for a couple of different sites. It is meant to demonstrate the difference in the two business models and to show that they are both sound in their own right. Rather than cover every possibility, the examples illustrate a dual IBA site and a 100’ exterior conveyor site. The object here is not to justify one approach over another, but to demonstrate that investment in a car wash facility is a good investment. Both examples are obviously good investments. The infrastructure that is required for one model compared to the other, the amount of the investment relative to the investment “power,” the objectives of the individual investor; the make-up of the market, and other factors all contribute to the final decision.

Notes: The information in the chart is relative. The operating expenses for the conveyor site include four employees at a cost of $12 per hour, 10 hours per day. Operating expenses include estimates for maintenance, repairs, utilities, etc.

CONCLUSIONS

So, what is right for you? Table 2, above, simply summarizes the differences. The decision is not whether one car wash investment is better than the other, but what model best suits your investment ability, the site that is available, the local market, and what your longer term personal objectives are. And, the decision is yours.

Jack DeMarre is director of sales and marketing for Powerain Systems, Inc. Powerain is a manufacturer of car washing equipment. You can reach Jack via e-mail at jackd@powerain.com

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