In the August 2015 edition of Auto Laundry News, the article “One Hand Washes the Other” describes how the owner of Squeaky’s Car Wash withstood an onslaught from new investors who build two big, high-powered washes within one mile of his location.
Squeaky’s owner survived this disruption because of personality. The owner’s involvement in the community created considerable goodwill and the owner provided adequate staff and management to ensure a customer-centric operation.
This strategy worked for Squeaky’s, but the staff at many other types of washes does not provide assisted-services. Instead, they perform housekeeping duties, routine maintenance and, in some cases, loading conveyors and customer service.
So, the act of building a big, high-powered car wash very close to an existing wash, while frowned upon by industry pundits, is probably occurring more often than not.
After all, this is the nature of competition. A better mousetrap comes along or a product with better taste and/or lower price and it captures significant market share.
For example, when express exterior came about, the typical site at that time was a 100’ tunnel, two pay stations, 20 free-use vacuums, a “no-frills” building, and very low-priced.
Find a good location with a 30,000 vehicles-a-day traffic count, keep start-up expenses under $1.5 million, and it was possible to make good money washing 70,000 cars a year. Subsequently, express exterior was prospected in other areas with even greater market potential.
Here, it was necessary to acquire larger, higher-quality, and more expensive sites and build more elaborate buildings and longer tunnels with more equipment. Today, start-up expenses of between $2.5 and $3.0 million are the norm.
Moreover, express prices have trended upward from between $3 and $9 to between $5 and $15. Average per car revenue has trended upward from $5 to $8.50, and average volume has trended upward from 70,000 to 90,000 cars.
To intervene in a market where express exterior is present (i.e., building close by), an entrant would need to develop a sustainable competitive advantage by means of cost and/or differentiation strategy. This involves how revenue is generated, cost structure, and target profit margins.
For instance, some years ago, an equipment manufacturer proffered the idea that the modern mini-tunnel makes it possible to put a car wash on virtually any street corner. We estimate it would cost $1 million to place a mini-tunnel capable of 50 cars an hour on a half-acre lot or street corner in Average City, USA.
The decision about store size and layout is straightforward: 1,500-square-foot building (30’ by 50’) and 10 parking spaces for free vacuums. This leaves the decision about what services to implement.
For example, if we thumb through the industry journals, the pages are filled with ads for big colorful arches, LEDs, illuminated brushes, glowing lava, vibrant paint sealant, hot wax, buff and dry, etc.
Although these items are meant to provide customers with a more pleasant experience, they do drive up the average price and total cost to clean, shine, dry, and protect vehicles.
What allowed express exterior to pull motorists from the streets and driveways initially was the low $3 price for the basic wash or about the cost of a gallon of gas or a hamburger. In other words, it was a product for the masses.
Of course, it’s difficult to make money with a price between $3 and $9 because average sales tend to be low ($5 or $6). Moreover, experience shows the mini tunnel needs a full-time attendant to maximize performance and, at this level, it is a lifestyle business.
So, to create a sustainable competitive advantage by means of cost strategy, our entrant would need to reduce costs. Logically, the alternative to mini tunnel would be a tunnel on wheels or the five-brush rollover in-bay automatic.
However, since four in-bays would be needed to produce 50 or more cars an hour, the machines would need to be calibrated to clean, shine, dry, and protect in four minutes.
This is doable with the chemicals and machines available today and without giving up much of the tunnel glam. It can also be done at lower variable unit cost as compared to a mini-tunnel. Moreover, an in-bay does not need an entrance attendant. So, labor expense is 60 percent less than for a mini tunnel.
Our cost estimate for this multiple in-bay site is $1.3 million.
Would the model work?
With four separate queues, the multiple in-bays would have the same waiting line characteristics and average guest time on site as a 50’ mini tunnel.
As for the profitability of multiple freestanding in-bays, experience has shown proven money makers that are fully operational can command cap rates of around 19 percent.
What is required is a mindset to operate an in-bay in an unconventional manner (express format) and with an aggressive price strategy ($3 to $9) to drive volume.
However, a touchless format would not work because the process uses too much chemical, water, and energy and cannot produce the hand-finished quality that is possible with modern friction washing materials.
In the final analysis, this model may be another way for mom and pop to get back in the game.
Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at firstname.lastname@example.org.