Reading that quote, I feel as if Walt and I have lived dual lives. And with so many new investors wanting to get into the game, I suspect Walt Disney would have had a tremendously good time competing as a professional car wash operator in today’s market.
Just the other day I got a call from a friend worried that, after years of struggling, he was now in a market that had taken off and was primed to attract new competition. With his business now booming, he wanted advice as to whether he should buy an existing car wash across town to renovate and re-brand, or build a new wash on an available lot with better demographics in an up-and-coming part of town.
I definitely understood his concerns because it made me realize how much the competitive landscape in our industry has changed over my career. Once a profession dominated by independent investors owning a job that managed a ton of labor, it has become an exciting business model requiring few employees with little inventory and the ability to pay down real estate.
Traditionally, investors owned no more than a handful of locations and tended to be family owned. Today, much has changed. The express-exterior and flex-serve wash models with free vacuums continue to attract a generous supply of entrepreneurs and investors looking to profit.
So how do you turn the problem of competitive encroachment into an opportunity to be your own competition? Here are some steps I recommend taking long before unwanted competitors show up on your doorstep.
1. Define Your Marketplace Capacity
How many car washes are within a 3-mile, 5-mile, or 8-minute drive surrounding your wash? Some owners only take into account the number of local car washes that match their business model. A better approach is to consider all types of washes in your area to get a better idea of how many total cars are being washed.
Knowing the total volume of cars being washed will give you much better insight into whether you should buy an existing wash, build new, renovate your existing wash, or do nothing.
2. Gauge Customer Satisfaction
Once you determine whether or not the market is saturated, it’s time to look into customer satisfaction levels. Are the customers in your market satisfied with the service they are receiving from your competitors? Have your competitors changed their service models?
There are a few ways to figure out customer satisfaction levels in your market. Both are fairly low-tech approaches. One way is to count cars at your competitors and measure their capture rates on typically busy days. Are cars lined up at their wash? Chances are if there are not a lot of cars being processed at their wash, they are doing something wrong.
Another way to gauge customer sentiment is to follow social media sites. These sites can yield gold mine’s worth of information because business owners typically can’t remove customer comments.
When the market is saturated, it affords you the opportunity to focus on the basics. Make sure you’re delivering an exceptional product with exceptional value and leverage all the latest tactics to make sure your cultivating raving fans. Ideally, you’ve already had them signed to a monthly unlimited plan — it’s your market to win or lose.
3. Assess Your Strategic Options
Assuming your market is not saturated, it’s time to look at your options.
• Do nothing and hope for the best. This isn’t a strategy; it’s akin to hiding your head in the sand and hope that nobody notices.
• Buy competitors. Surround yourself with your own washes and be your own competition. But first you’ll have to do the math to see if this is a financially viable option. Run a comprehensive demographic site analysis and obtain a concise, accurate pro forma from a qualified contractor with car wash experience.
• Buy property and build. Don’t just look at bare dirt. Look for the best site to support a growing car wash business, then do the math to calculate the property’s potential ROI. Banks and other buildings with drive-throughs should be on your radar. You may have to rezone but it can be worth it on the right property.
• Consider potential competitors. Are there c-stores or gas stations within your territory with the capability to expand, convert, or buy adjacent property for a car wash? Don’t overlook these potential competitors when looking to secure your position in your market. By purchasing or making deals with these kinds of insulating businesses, you may be able to eliminate or delay competition by essentially setting up a blockade.
• Brand strategically. Will you keep branding consistent with your other
washes? Personally, I feel there’s tremendous power in developing your regional brand but it’s not a firm rule. I know some owners that brand washes in the same market differently, thus becoming their own competition.
4. Be Prepared to Tweak Operations
Remain diligent concerning micro and macro demographics in each area or region you operate in because they may vary depending on market pressures. Be prepared to tweak operations and offerings at your wash to ensure maximum revenue is being realized. If you don’t, your competitors will be happy to step in and capture some of your customer base.
Don’t sell a lackluster-performing car wash before doing a deep dive into performance and operational issues. If you sell the business prior to careful analysis of how to improve, a competitor may buy the business and find ways to run it more profitably thereby putting pressure on your existing businesses.
5. How to Stay on Top
By now, you are probably questioning how you stay on top of micro and macro demographics in your area. You’ll be happy to know that it’s not rocket science but does involve a little sweat equity on your part. Here are some things to be on the lookout for:
• Monitor the volume and type of building and construction permits your city is granting. Sometimes these records are available online for the public to view. You may have to make a visit to your local permitting office and inquire directly. Take careful notes with either approach.
• Look for upticks in employment numbers especially in regional areas. This is a potential indicator that consumers will have more disposable cash to spend on things like visiting your wash.
• Check apartment occupancy rates. If they are high and housing starts are low, it could indicate lack of confidence among lenders. But it could also indicate a good time to invest in unimproved real estate.
• Obtain pro formas for any potential car wash sites — renovation and new build — and compare how each project would impact your locations in that market.
Remaining competitive not only demands continuous attention to your client’s on-site experience, but also careful and preemptive monitoring of the markets in which you operate. Never forget that if there is market capacity that you’re not going to satisfy, someone else will.
In the end, my friend opted to do a new build, renovate his existing wash, and buy a third existing car wash in another part of town. It’s a new era in professional car washing in which many of us are finding ourselves up against increasingly tough competition every day of our lives. Good thing that most of us wouldn’t know how to get along without it.
Good luck and good washing.
Anthony Analetto has over 35 years’ experience in the car wash business and is a partner at SONNY’S The Car Wash Factory. Before coming to SONNY’S, Anthony was the director of operations for a 74-location national car wash chain. Anthony can be reached at (800) 327-8723 x 104 or at AAnaletto@SonnysDirect.com.