On The Wash Front

Strategies - Digital, Multi Unit, Express

By Robert Roman

11/01/18

Twenty years ago, a self-service car wash built with basic components required an equity investment of about $250,000. Whereas the last loan presentation I reviewed, the equity investment was around $1 million for an express conveyor.

I believe the tech industry may provide a way to help close this gap.

DIGITAL

What I’m referring to is the concept of creating digital car wash networks such as the one being pioneered by Superoperator (www.superoperator.com).

Superoperator (SO) has developed technology that transforms the classic car wash service into a modern, convenient, digital, app-based service. This is achieved with vehicle recognition, computer dashboard, and consumer application.

For example, Tommy’s Express Car Wash is one of several U.S. companies that is using the SO service to upgrade its chain of conveyor washes.

A digital network is a way of incorporating both digital switching and transmission.

Switching means establishing and maintaining a connection under stored program control where information is routed between input and output.

Transmission is the transfer of data over a point-to-point or point-to-multipoint communication channels (e.g., copper wires, fiber optics, WiFi).

To illustrate, shown above right, is the network that exists at the site level. Here, connectivity and transfer of data is between pay station (not shown), iPad, smartphone (mobile app), PC with dashboard, car wash controls (not shown), and remote monitoring.

As shown above, by adding a server it’s possible to create a network to capture and report real-time performance data from all wash segments and operations.

What SO is attempting to create is a network of nodes. Each color represents a different company and each node represents an individual car wash site.

As the network grows, the result will be a more uniform distribution of customers in a single market where products and services may be purchased.

To join this network, operators have to upgrade each site with SO proprietary hardware and software. However, the beauty of this is that after consumers acquire the mobile app they have access to every site and company within the network.

Consequently, getting a car wash would be as simple as using a smartphone to look up the closest digital car wash and driving to it.

The car is automatically recognized at the wash bay. The customer chooses a wash program, starts the wash with the application, and never needs to get out of the car or even open a window.

SO believes these attributes will also create opportunities for investors to build digitally managed, unmanned wash sites that are available 24/7. Arguably, these unmanned sites would not be part of building a kingdom but rather strategically positioned facilities that can respond to shifting marketplace demand.

Suitable Format

For example, conveyors cannot accommodate all vehicle types and most are not open more than 12 hours a day. Plus labor is required: seven to eight employees for an express.

The format that can accommodate most vehicle types and be operated 24/7 without an attendant is the in-bay automatic wash system.

One segment for an unmanned wash would be servicing small fleets, which represent about 22 percent of industry wash revenues (e.g., delivery vehicles, taxi cabs, and passenger vehicles).

The largest segment would be from servicing demand generated from the digital network (unlimited customers). And depending on location, there may also be some pass-by traffic to accommodate.

Envisaged Configuration

Instead of an expensive pride-of-ownership property, the unmanned wash would be, as one consultant put it, an impersonal sales-generating box similar to that of a vending machine.

Our vision is a half-acre lot with a 60’ by 60’ structure with automated doors, no interior divider walls, containing three express in-bay units (friction and touch-less). There would be no wands, vacuums, trashcans, or vending machines.

So configured, we would expect cost magnitude in the order of $1.6 million and an equity requirement of $320,000. This is certainly within range of mom and pop investors looking for an attractive occupation business and too small to be of much if any interest to consolidators or a regional chain.

To echo the sentiment expressed by several authors in the April 2018 edition of Auto Laundry News, the good old days of the car wash industry are just that, old.

IN-BAY ECONOMICS

Equipment or machinery is one of the largest investments for car wash operators. The selection process may include manufacturer, design, size, and options. A poor decision on any one of these factors may affect the profitability of the operation.

Fortunately, the car wash industry has in-bay manufacturers with established reputations for quality and durability of products and excellence in service to their customers.

Consequently, the decision to select machinery may come down to warranties and how well the manufacturers stand behind their products.

Design is crucial because the conveyor segment has significantly raised the bar in terms of process speed, finish quality, and added value. Today, in-bay operators can keep up with rim scrubbers, foam brushes, glow foam and lights, spot free, contoured or standing dryer, tire shiner, and high-quality chemical.

Since in-bays are unattended, processing transactions is another important design factor. For example, the POS should feature a user-friendly interface, card processing, loyalty and RFID options, and mobile app and built-in web interface for updating, reporting, and monitoring.

Size

Size is crucial because the overall level of investment in equipment can have an effect onthe ability of a car wash to produce at a price competitive with other washes.

For example, an express in-bay and 60’ bay can produce significantly more cars an hour than a standard in-bay and 40’ bay. On the other hand, multiple in-bays may be called for when property constraints exist.

Service and repairs, parts, and customer support are also important decision factors. Suppliers should be able to provide factory-trained, locally based service technicians, fast response time, and maintenance-service contracts.

Determining the appropriate level of investment in equipment also involves other aspects such as likelihood of improvements, operator comfort, ease of use, and potential environmental benefits.

Moreover, the color of paint and gantry panel coverings or simply the desire to have the latest and greatest can also be important decision factors.

Cost

Cost is another important decision factor. In-bay costs include fixed or overhead costs and operating costs.

Overhead is cost incurred whether the equipment is actually used or not. This includes insurance, rent/taxes, depreciation, and capital cost.

Capital cost is borrowing costs of financing equipment and building. Development costs are $50,000 to $75,000 for site work/permits, $125 per square foot or so for the building, and equipment is between $100,000 and $300,000.

breakdown cost includes cost of repairs and cost of lost time. Operating costs include credit card fees, chemical, utilities, repairs, and labor for housekeeping and routine maintenance.

Shown in the table on page 18 is an accounting of single, dual, and express in-bay business models that is based on information obtained from our internal files.

Here, cost per hour for comparing different equipment can be obtained by adding operating and overhead cost and then dividing by estimated annual usage in hours.

Since in-bay automatics are designed to be operated without attendants, another important aspect of the total cost of a machine is the down time. Whenever a machine is not available because of the need for repairs, the cost to the business is not just the cost of the repairs but also lost capacity or lost time.

All machines have breakdowns; it’s inevitable. However, quality of construction and durability will dramatically influence the repair costs for car wash equipment.

Cost of repairs can also be influenced by how well the equipment is maintained in terms of what is recommended by the manufacturer.

In the final analysis, the economics of an in-bay automatic makes sense. In fact, in today’s market environment, an argument can be made that multiple in-bays and the express in-bay make more sense.

 

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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