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I almost had to laugh when I read Mr. Waldron’s “perfect storm” comment in a recent Professional Car Care Online™ report which described the plight of carwash operators in the Midwest who are suffering this winter from a combination of unfavorable weather, a weak economy and a proliferation of low-priced exterior carwashes.
Unfortunately, this is not a funny matter at all. A 30 percent decline in sales volume is a train wreck for any business.
This is especially so for carwash operators who rely on winter business for the majority of their income.
Hopefully, this will at least serve as a sanity check for the drove of new investors who are jumping on the stand-alone, express exterior bandwagon.
Bigger is better
Barry Graceman, experienced carwasher and former co-owner of Grace-Lee Products and 3-G Enterprises, presented a paper on the economics of this business model at the International Carwash Association’s 2001 Expo.
During his presentation, Mr. Graceman described the two business models that his company relied on.
One version was a high volume gasoline and convenience store that featured an express exterior carwash with a self-loading touchless conveyor and auto cashiers.
The other version was a hybrid stand-alone exterior-only conveyor carwash with a staff of three persons and no auto cashiers.
Graceman stated that bigger is better when it comes to the self-loading version and that his business model relied on the revenue generated from gasoline and c-store operations.
Graceman also described his keys to success. This included choosing the right market, providing a high quality wash, establishing the right price-points, minimizing wait time and providing a higher level of customer service.
Location + traffic = ?
This calculus has not changed very much since 2001. In fact, the calculus has become even more exacting due to the continued rise in the cost of commercial real estate and the increase in the number of competing carwashes.
Consequently, a good location and adequate traffic flow are no longer a guarantee for success in the carwash industry. This is most evident in the self-service segment, where many markets have become overcrowded.
The situation in the Midwest is a good example of the risk that carwash investors are subject to, especially folks involved with express carwashes.
Not only do express exterior operators need to reach a high volume target, they need to continue to produce these high volumes year after year.
This can create a lot of pressure for any investor, when even a 5 percent to 10 percent drop in carwash volume can have a significant effect on pre-tax profits.
The Detroit situation also underscores the fact that operators should not bank on a mass exodus of driveway users just because they are offering a cheap price with free vacuums.
The proliferation of in-bay automatics at gasoline stations may have helped pull some folks out of their driveways, but a carwash is still not a commodity that consumers need to purchase daily.
A level playing field
Obviously, there are and will continue to be a number of success stories involving the stand-alone, express exterior carwash. However, new investors need to realize that locations capable of producing 100,000 or more cars per year do not grow on trees.
Don’t expect existing operators to roll over and play dead because you have decided to come into the market with a $3 carwash and free vacuums. Most experienced operators will do their best to level the playing field.
Carwash franchisors, distributors and equipment manufacturers will be more than happy to help you develop your carwash, teach you how to operate the equipment and provide you with marketing and technical assistance and support.
However, when the concrete has dried and you’re on your own, don’t expect any of these folks to stand around with an open wallet to help make your monthly nut.