Professional Carwashing & Detailing

Show me the money

October 11, 2010

After returning from the world s largest carwash exposition, investors and operators often face the decision of whether to buy, build or rehabilitate a carwash.

At this point, the big questions are usually:

  • Is it the right time?
  • Should I pull the trigger?

In some respects, this may be a good time to do so.

Times are changing

In the past, carwash experts often used the correlation between new car and truck sales to help explain the trend in carwash volume.

Although new car sales may help explain some of the demand for professional carwash services, there are also other factors that investors should consider.

The trend in consumer demand for professional carwashing appears to be getting stronger.

In 2003, the Office of National Statistics added carwash and use of professional services to the basket of consumer goods that is used to calculate the Retail Price Index.

According to Ray Milne, managing director, Halifax Financial Services, The changes made to the RPI basket over the past five years reflect the key changes and trends that have affected both society and the lifestyles of the nation. 

The good news

Many more communities throughout the country are banning driveway washing and other types of carwashes that do not conserve fresh water.

Americans also continue to have an unbridled love affair with the automobile and shoppers continue to be obsessed with the need for more convenient services, faster processing time and value.

Many of the industry metrics are favorable:

  • Average revenue for wand-bays has risen from $942 per month in 1991 to over $1,200 in 2004.
  • Average revenue and net profits for in-bay automatic has risen by over $1.00 per car since 1991.
  • In-bay wash volumes have trended upwards from an annual average of 12,100 cars per year in 1991 to over 21,500 in 2004.
  • Exterior-only wash volumes have risen from an annual average of 51,000 cars per year in 1991 to 77,300 in 2004.
  • Net profit for exterior-only has risen by over $1.40 per car since 1991.
  • Full-service wash volumes have increased by 2,000 cars per year since 1991.
Age and economy

The average age of the carwash fleet continues to grow older.

The average age for a self-service carwash has increased from 10.5 years in 1990 to 15-years-old in 2001 (a periodic growth rate of 3.7 percent).

In-bay automatic has trended upward from an average of six-years-old in 1990 to eight years in 2001.

The average age of an exterior-only carwash is now 15 years and the average age of a typical full-service carwash is expected to trend upward to nearly 20-years-old by 2008.

The economy also appears to be favorable. Some economists expect that the US economy will grow by over 3.5 percent this year.

According to the Federal Reserve, the latest economic recovery has finally begun to produce good job and income growth; however, small business usually lags about six to nine months behind an economic recovery.

A cooler housing market may drive more money towards the commercial sector and the stock market continues to make a land bank a more sensible investment alternative.

The bad news

There are also signs of weakness. The estimated cost to build a comparable carwash in 2004 is approximately nine percent greater than it was in 2002.

The cost for prime commercial property in some markets has nearly doubled in the last 10 years.

The average price for carwash equipment has risen by 2.8 percent annually since 1991 and utility and land use impact fees have risen dramatically in some markets.

A slow-down in the housing market and softer home prices could dampen consumer spending and interest rates are slowly inching upwards.

In the final analysis, investors need to consider not only the capital cost of investing but also the competitive advantages that can be created and the opportunity cost of waiting for the right time to pull the trigger.

Robert Roman is a former carwash, express lube and detail shop operator and is president of RJR Enterprises (www.carwashplan.com), a Clearwater,FL-based company that provides professional advisory services to the carwash industry. Roman is also a member of PC&D s Advisory Board.