Over the last 10 years or so, there have been a number of factors that have caused many investors to shy away from the carwash industry’s flagship business, the full-service carwash. This has included the rising cost of construction, labor, utilities, insurance and the availability and willingness of people to work.
By most accounts, full-service racked up the smallest portion of exterior carwash equipment spending in 2005 and yet the preference for this type of wash is expected to climb to 20 percent by the year 2011 (up from 16 percent in 2000). However, there is a business model that provides a complete solution to these issues: the flex-serve carwash.
What is a flex-serve carwash?
Start with an express exterior conveyor and add-on the stuff that grows ROI (return on investment). This means shrinking the free vacuum area down to one or two coin-op islands and building a high-performance, drive-through express after-care facility (detail shop) and customer care area (lobby). By doing so, you can create a business that surpasses the financial and operational performance of express exterior, full-service and self-service carwash.
With a good location, you can make more money with flex-serve that any other form of carwashing. With average revenue of $15 and per unit variable cost of $5.83, 100,000 washes would produce an NOI (net operating income) of $917,000. Depending on the cost of the facility, this could yield an ROI of 122 percent or more and a huge cash flow.
Flex-serve blends the characteristics of low and high variable cost plants, high volume, moderately-priced products, and lower labor content. This means investing your money mostly in high-performance assets and making only a modest investment in human capital. Construction costs will vary by scale and scope but the typical cost to build is about $3 million.
Why does it work?
Flex-serve represents a trend towards normalization where customers choose what they want and buy it when they need it. By combining the best aspects of express exterior, full-service and self-service, the operator has the ability to target all market segments. With a strong image and reputation for high quality, value-added services, flex-serve operators have the opportunity to clear the marketplace.
With the proper equipment, you can wash 110 cars per hour with a site manager and one employee. Personal selling or automated pay stations eliminates the need for cashiers. Centrally located labor eliminates the need for assistant managers and dedicated supervisors and reduces the labor burden by over 50 percent as compared to a full-service wash.
Is it hard to build?
In 2003, my company developed the layout, feasibility study and business plan for one of the country’s first free-standing, flex-serve carwash facilities: Liquid Highway Carwash in Mt. Pleasant, S.C.
Building a flex-serve carwash is no more difficult than building any other type of carwash. You will also see the numerous advantages that flex-serve provides customers and operators as compared to other forms of carwashing.
Some of the keys to success are:
- Strong entrepreneurial spirit and desire to succeed;
- Good location in virtually any competitive environment;
- Good people and management skills;
- Knowledgeable and reputable vendor and durable equipment;
- Build inexpensively but not cheaply; and
- Community involvement.
Bob is a president of RJR Enterprises – Consulting Services (www.carwashplan.com
) and is a member of PC&D’s Honorary Advisory Board.