On The Wash Front

In-Bay Automatics - Maximize Productive Use of the Site

By Robert Roman

11/01/16

In-bay automatic (IBA) car wash systems roll back and forth over a stationary vehicle to provide an exterior wash. There are touchless, friction, and combination versions.

At investor sites, customers select a wash and pay at an unmanned entry system prior to entering the wash bay. At gas sites, customers usually pay at the pump and use a code at an unmanned entry system prior to entering the wash bay.

IBAs are ideal for sites with limited space. Adding an IBA is a proven method for expanding the customer base for self-service wand facilities. IBAs can be unmanned, open 24/7, rain or shine.

Benchmarks for investor sites are 10,560 cars per year, $7.50 average per car revenue, and expense ratio of 50 percent of sales revenue. Benchmarks for gas sites are 17,600 cars per year, $9 average per car revenue, and expense ratio of 44 percent of sales revenue.

Combination facilities (wands and IBA) require between 18,000 and 22,500 square feet of land, and capital investment is between $800,000 and $1.4 million.

IBAs require between 2.5 and 6.5 minutes per wash, depending on the wash package purchased — the better the wash the more time it takes. So while IBAs offer many opportunities for up-selling and marketing promotions, the higher the average revenue, generally, the fewer cars that can be processed in one hour.

To illustrate, we examine two multiple IBA facilities. Wash A is an investor site with three IBAs and coin-operated vacuums. Wash B is a gas site consisting of two IBAs.

Table 1 – Financials

As shown in Table 1, depending on the market, an IBA can average $7 to $10 or more revenue per wash and 70 percent gross net.

Table 2 – Performance

As shown in Table 2, the gas site washes twice as many cars as Wash A with one less bay whereas Wash A has higher net profit per car because of price.

Although these are profitable businesses, each suffers from the same constraint namely available time on the machine. For example, the gas site has demand for 48 cars an hour and yet the maximum hourly production capacity of the facility is only about 24 cars. Consequently, on busy days, the car wash can’t keep up and the lines and average wait time grow exceedingly long.

Wash A faces the same dilemma. Here, average cycle time is about seven minutes, meaning the maximum hourly capacity of the facility is about 26 cars. So, on busy days, the car wash can’t keep up with the line and the average wait time grows exceedingly long.

Of course, car wash operators know when wait lines are long, they are not washing all the cars possible and business foregone today cannot be made up tomorrow. Solving this dilemma requires the same analysis as where the market value of real property is sought. That value must be based on its highest and best use.

One criterion of highest-and-best use is that the use must be maximally productive. In other words, the use must generate the highest net return (profit) to the developer. For example, installing faster machines or a conveyor would greatly increase throughput and profitability of each site.

Another requirement is that the proposed use of a property must generate adequate revenue to justify the costs of construction/renovation plus a profit for the developer. In the case of an improved property with limited remaining economic life, the question of financial feasibility becomes a question of the maximum productive use of the site.

Potential use must also be physically possible given size, shape, and other characteristics of the site. For example, a 60’ conveyor requires a lot measuring 150’. If the lot were only 140’, that use would fail the physical possibility test.

The use must be legally permissible. For example, conversion and retrofit may require larger water main and electric service as well as installation of equipment and building renovations that require permits.

And, finally, there is this question: Is it preferable to have a smaller but certain advantage than a mere potential of a greater one?

 

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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