Finishing Line - October 2010

Mom and Pop —
Profitable Niche Market Opportunities
By Robert Roman

Small businesses are often re-ferred to as mom and pop businesses. A mom and pop business is one that is owned and operated by a family or individual that typically doesn’t invest for a living. By some estimates, mom and pop businesses are thought to account for about half the GDP and employment in the United States.

When these small-scale investors look to the car wash industry as a possible vocation, many of them find it daunting. Not only has it become more expensive to build and operate a car wash facility, the construction trend has shifted towards low-priced (for the consumer), express exterior conveyors. In some cases, investors are building larger and more elaborate sites. For example, Metro Express Car Wash in Nampa, ID, reportedly cost upwards of $4 million to build.

Mom and pop investors may demonstrate the character, capacity, and market conditions to succeed but they lack the capital and collateral to build a big beautiful car wash facility like Metro Express. Moreover, conservative lending practices are the “new norm” today, and obtaining a bank loan for a new car wash project is the single greatest hurdle facing people new to the industry.

One alternative to this dilemma is to consider pursuing profitable “niche” markets with car wash systems that offer great performance in smaller spaces.

A niche market is a subset of the market on which a specific product is focusing. A niche defines specific product features aimed at satisfying specific needs as well as price range, production quality, and demographics that it is intended to impact.

Consider Wal-Mart. When this company comes to market with a new super store and “every-day low prices,” it is often blamed for creating a vacuum that drives mom and pop businesses like grocers, hardware stores, pharmacies, building supplies, variety shops, and the like out of business.

Wal-Mart may harm mom and pops that sell hammers and nails or toilet paper, but its presence in a market also creates new opportunities for different types of businesses to come in and take the place of the fallen. For example, companies like CVS pharmacy and the Dollar Store have shown that design objectives and unique business models can be used to compete successfully in the shadows of Wal-Mart and Target super stores. The same logic can be applied to the car wash industry.

Let’s consider the prospect of building an entry-level car wash in the shadow of a big beautiful $3 express exterior conveyor. By entry-level, I’m referring to a small-scale wash that is both innovative and efficient.

A small-scale wash would be based on the drive-through, “in-car” experience. It would provide the finest quality “hand-wash” in five minutes, allowing owners to build customer loyalty and create cross-marketing opportunities like providing interior cleaning and express detail services, which many of the new breed of investor are not inclined to pursue.

The small-scale car wash would have a huge, growing, and highly profitable market. For example, there are 77 million baby-boomers in the country who are moving from DIY to DIFM services as they age; they represent a very lucrative market for car wash owners who are willing to cater to their needs.

The small-scale car wash would rely on the use of technologies such as pre-engineered buildings; a moving platform that is safe and unique and requires no excavation; high-efficiency dryers; touch-screen ordering; and environmentally benign chemicals, powered by electricity — no hydraulic oil.

A small-scale hand-wash would have the potential for exceptional cash flow. Built smartly on leased land, it can have an out-of-pocket of around $100,000. Targeted locations would include existing pad sites and outparcels or remnant land as small as 15,000 square feet. Conversely, a $3 million car wash with conventional financing would require an outlay of $1 million or more and have a break-even measuring around 65,000 vehicles instead of just several thousand for a small-scale hand-wash.

Small-scale car washes have flourished for decades in the United States in the form of in-bays at gasoline sites. In England, Australia, and Europe, the development of small automated hand-washes is trending upwards. Consequently, I believe this retail concept would be ideal for husband/wife, parent/sibling teams, or individuals who want to get their feet wet without spending an enormous sum of money and taking on considerable risk.

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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