Features

Conversion IBA to Express

By Robert Roman

08/01/19

From time to time, car wash equipment manufacturers travel around the country to conduct seminars and workshops and demonstrate their products and services.

One program that always gets my attention is the in-bay automatic to express conversion.

This is an upgrade and retrofit designed specifically to convert a rollover in-bay automatic system into a higher-end automatic car wash with greater hourly throughput.

According to suppliers, basic requirements are a building 38 feet long or longer and bay width adequate to accommodate the new equipment.

Since this is a rehabilitation rather than a teardown and new construction, building permits are often unnecessary.

The new wash would be equipped with all the latest bells and whistles and customers guide themselves onto the conveyor.

One OEM claims such conversions can increase traffic by 100 percent — with peak days putting out close to 400 cars. And while the advertisements for such conversions make it sound easy, this may not always be the case.

Conversion is the process of changing or causing something to change from one form to another form. For example, log mills convert trees into lumber.

With an IBA to express conversion, the car wash operator is also converting the business model. To illustrate, let’s consider a client I’m currently working with.

The subject property is a typical combination of several self-service wand bays, one IBA, some canister vacuums, and a vending machine. The wash has above average financial performance and is unattended 24/7.

As often is the case lately, at issue is new competition in the form of a low-priced express wash with free vacuums and a subscription program that is being built nearby.

What to do? Arguably, one strategy would be to select IBA to express conversion to keep up with the Joneses. Here, the current offerings appear to be well positioned for this purpose.

However, it takes more than an equipment package to convert an unattended IBA into a conveyor environment where things happen at a much greater pace.

In some respects, cost magnitude and change in management responsibilities for such a conversion is similar to that when adding an IBA to a wand-bay-only facility. In fact, IBA to express conversion should be viewed as a growth strategy rather than a simple rehabilitation.

The first step in any growth strategy is to step back and look for key indicators that the business is actually ready for growth. For example, depending on the extent of the renovations and equipment requirements, the cost of conversion may run from $250,000 to $350,000 or more.

Consequently, there are financial considerations such as whether to refinance, lease the equipment, or obtain a bank loan. If the project is going to be financed with external funds, a certain amount of equity will be required.

Moreover, the business will be at least partially shut down for six months or so during the conversion process.

Adding more capacity so a business can sell more of its product to customers is a form of market penetration. Market penetration is the amount of sales volume of an existing good or service compared to the total target market for that product or service.

Another market penetration strategy is product improvement. For example, experience shows businesses that attract and out-quality competitors’ products to match customers’ requirements eventually achieve more sales.

Consequently, there are considerations such as the likelihood a 38’ mini-tunnel can match the quality of a 100’ conveyor or achieve the per-hour requirement of the site at peak times.

Greater market penetration can also be achieved by offering customers promotions that are linked with pricing such as subscription programs (i.e. monthly unlimited). Here, considerations for conversion are full-time employees, personal selling versus digital car wash network, and website and mobile marketing strategy.

Penetration pricing is another strategy to gain market share by selling a product for a price that is significantly lower than a competitor’s.

Consideration for a conversion is the fact that a 100’ conveyor that competes on the basis of cost can wash a whole lot more cars than a 38’ conveyor can.

labor hours could increase significantly.Developing a new market also doesn’t come without certain risks. For example, it is not uncommon for such conversions to result in the cannibalization of a significant portion of wand customers or in the alienation of touch-less users.

Moreover, most operators will be parting with their bread-and-butter service that generally earns as much as or more than wands, vacuums, and vending combined.

In the final analysis, the IBA to express conversion can be a gigantic step-change for many self-service and c-store/gas station operators.

In many cases, the decision-making is almost as crucial as when first entering the business. For example, with a conversion, my client faces the prospect of increasing labor hours from between 20 and 30 a week to at least 120 to 130 hours a week plus some part-time help.

Where he once spent only $1,000 a year in advertising, he now faces $1,000 a month or more plus the need to create and maintain a website and customer app and to choose whether to create a marketing program or join a digital network and pay fees.

And finally, with conversion, he faces the prospect of an occupational business instead of a semi-absentee one.

 

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



LATEST ISSUES

click me