Finding the barn burner

While reading through an old magazine, I came across an article where the author discussed the merits of using intuitive reasoning rather than conventional location theory to select a site for a new express lube operation.

The author’s argument was that superior customer service may actually be more important to the ultimate success of a car-care business than having a good site and may also be a useful strategy to combat the rising cost of acquiring and developing commercial property.

But is it true?
Although it’s possible to argue this point given the success of the business that was referred to in the article, I doubt there are many carwash investors willing to take the same risk by building a $1, $2 or $3 million carwash on a piece of property that can’t be seen by passing motorists.

If this idea makes you nervous, it may be wise to stick with the fundamentals.

In site selection, the location is the trade area where you intend on competing and the site is the piece of property on which the carwash will be built.

Depending on the scale and scope of the business model, a location could include a region, county, city or neighborhood and it can be measured in terms of radials, driving time, zip codes, census tracts or traffic analysis zones.

There are three basic types of settings.

1. Rural or semi-rural: Housing densities are very low. Folks must drive long distances to acquire goods and services. The location or market may be as large as a 10-mile radius or a 30 to 45-minute drive from the site.
2. Suburban: Housing densities are much greater and goods and services are usually provided in a centrally located business district. The market is usually a 10 to 15-minute drive from the site.
3. Metropolitan: Housing and businesses are extremely concentrated. The market could be as small as a 1 to 2-mile radius or 5-minute drive from the site.

Site analysis worksheet
One of the tools that investors often use to evaluate a potential market is the site analysis worksheet.

In general, these worksheets include a list of variables and a rating system that is used to measure the potential success of a carwash site.

The variables usually include things like:

• Traffic count and flow;
• Speed limit;
• Lot position;
• Ingress/egress;
• Region and climate, and;
• Visibility, land use, growth vectors and competition.

The investor selects the description that best matches the actual conditions at the site and the black box spits out a score that can range from “no-go” to “barn-burner.”

Unfortunately, most of the site analysis tools that are used today were developed when the carwash industry was very different. In today’s marketplace, things have changed considerably.

Consumers are more convenience driven and they have more options on where to clean their vehicles. Many markets have become far more competitive in terms of the number and types of competing carwashes.

I set up several of these site analysis models based on a fictitious site in my market and the black boxes told me I had a “barn-burner.”

To test the sensitivity of these models, I maximized the competitive density factor and held all other variables constant.

In all cases, the models told me that I still had a “barn-burner.”

Don’t go it alone
Since these types of analytical models are used as the basis to select a site and justify the capital expenditure for building a new carwash, investors should examine the results with a very critical eye and should consider getting outside help.

In other words, don’t try to do it alone. You will soon discover that the best investment in your carwash business may actually be the time, effort and money spent for professional help to look over your shoulder before you spend any real money.