Finishing Line - October 2009

Back to Life — Post-Recovery
Car Wash Development
By Robert Roman

Some financial gurus believe that we can now at least begin looking forward to a recovery, eventually, like maybe by the end of 2010. That’s not a very strong statement but it is certainly a more appealing notion than the diet of the last 18 months or so.

With this in mind, what might the frontier look like for car wash developers when a nationwide recovery finally rears its head? Would it be a stretch of the imagination to suggest that the car wash industry will experience something different than what occurred during the boom period of the ‘90s?

One reason to doubt that type of growth is that this recession has shaken many people and organizations to their roots. Consumers have lost tons in home value and savings. Consumer confidence has been trampled, spending is down and savings are up. Many people face job insecurity and meaningful job creation may be another year or two off. Many businesses have cut to the bone and more and more retailers are resorting to discounting.

I could go on, but you get the point. Many things suggest a slow recovery in terms of consumer spending and most likely different consumer behaviors to contend with. After all, when some of the Mercedes crowd resorts to discount stores and coupon clipping, it doesn’t bode well for a return to the days of free-wheeling consumer spending especially when the hypothetical family is facing the prospect of working longer and harder and saving more.

On the other hand, there is the possibility that all of this may not have that much effect on future car wash construction trends. For example, the bar graph below is my take on the composition of the car wash industry based on estimates of outlets in 1999 and unit sales in 2005 (in-bay also includes automatics within self-service).

I am not claiming any degree of accuracy with this portrayal, but the proportionality does suggests that the car wash industry appears to have a resiliency to trend, notwithstanding the current one towards express exterior in the tunnel category.

Once a recovery is in full swing and consumer spending comes back to life, “mom and pop” investors — sidelined by tight credit and their unwillingness to bet on future growth — will get back into the fray as will more of the investor class that is looking for a relatively safe place to park their money.

What these investors decide to build may not be that much different than what has occurred in the past.

After all, the basic premise of building a successful car wash is that its location, design, and mix of products and services will provide customers with a more convenient, more attractive, and more desirable experience than the competition. With a conscious, customer-centric operation, the car wash built on a site with these characteristics will have the greatest potential to become dominant in its trade area.

Quite frankly, the recession and what comes next may have little effect on this dynamic or the fundamentals of investing in the car wash industry.

Whatever happens, a larger share of the recovery period will belong to car wash developers that react in a positive and rational manner. With this in mind, one might question the wisdom of building a $3.5- or $4-million express exterior with only one profit center when the investor could have built a more economical site or at least a site that offers a host of complementary services.

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 bob@carwashplan.com.

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