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Risk tolerance

Ask 50 carwashing and detailing professionals about the sudden — albeit steady — increase in acquiring and building new wash locations over the past decade, and you might get a handful of different reactions, ranging from excitement about the trend and remarks about how it’s required for the future stability and growth of our industry to concerns surrounding the negative impacts of oversaturation.

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But, one thing everyone can agree on is that this trend is happening and is projected only to intensify in coming years.

“There are some corners in Houston [where] you can see four carwashes within line of sight on one corner of one street,” remarked Justin Alford during a recent PC&D Unscripted video interview.

In that same insightful interview with Alford, he also cited challenges around building and developing new carwash locations. Operators like Alford are confronted with higher costs and stricter zoning and permitting processes to build new these days.

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And, while the larger investor or private equity-backed chains might be able to fund these projects more seamlessly, operators with one or just a few locations may have more to lose, forcing many of these operators to remain conservative in their growth strategies and approaches to building or acquiring.

In other words, when acquiring or building results in elevated risk, risk assessment and tolerance become uneven among operators, regardless of profitability, years in business or the desire to grow.

“The risk is going up … when you start spending $5 or $6 million [on a carwash], you have to wash a lot of cars,” Alford noted. “The return to make it work is a lot different than it was when you were building a facility for $1 million 20 to 25 years ago.”

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In addition to securing adequate and substantial funding to build today, Alford also stated that developing on the local level is becoming more complicated these days compared to decades ago.

But, while these challenges and others are causing many operators to halt or reconsider growth opportunities, the good news is that experts say there is enough volume to go around to support any well-run carwash type or location, regardless of how many sites the operator owns.

The larger, regional chains that support membership programs will have stronger buying power and customer influence by offering convenience. However, the small and mid-sized operator with a strong market presence and reputation still has a secure future in the industry.

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