Deciding whether to put a car wash site in a particular location involves many factors. And the process of solving the location problem is different for a single site, a regional or territory-mined operation, and a firm involved with network expansion.
For example, the pathway for a single site is to evaluate the market, select an area, and identify a specific site. Whereas the pathway for network expansion begins by deciding how many stores to build, when, and where.
The rules of the road have also changed. The industry is now focused on the subscription economy and automated car washing — exterior conveyor and in-bay. Pundits opine that this combination necessitates a change in our understanding of car wash markets.
For example, one consultant suggests the market range for express car wash is approximately 7,000 households within a 3-mile radius. From this, we can back out a population of approximately 20,000 or 714 people per square mile. According to our estimates, 20,000 people is the equivalent of about $1.5 million in wash revenues (excluding subscription revenue). This implies a threshold population of 10,000 or a wash revenue of $750,000, which is consistent with the breakeven point for prototypical express.
Another traditional assertion is that being ‘first-in’ will prevent ‘last-in’ from obtaining at least a fair share of the market. Conversely, experience has shown that this understanding can be shattered when firms build on top of each other to squeeze out competition.
Moreover, as a market matures and can no longer accommodate additional retail space, store sales volumes will plateau and decline somewhat. We see this with convenience stores/gas stations, quick service restaurants, and other support services, including car wash.
Consequently, it still makes sense to stick with the fundamentals. For example, when selecting an area, the demography and total purchasing power should be considered. After all, 7,000 upper-middle-class homes have greater purchasing power than 7,000 lower-class homes.
Another key criterion for a new car wash is public need, which can be determined by analyzing the demand/supply balance. If the analysis indicates the market is not under-served, it makes no sense to try and shoehorn a site and obtain less than a fair share.
Car wash success depends on attracting customers from existing pass-by traffic and nearby businesses and residents. Experience has shown that consumers are more likely to stop and buy convenience goods or car wash when going home from work rather than going to work.
Likewise, we might question a location on the going-to-work side of a six-lane divided highway where surrounding development includes a hotel, discount stores, mobile-home court, strip center, and self-service storage facility.
Shying away from basics can lead to a poor location when the market eventually gets crowded.
Bob Roman is a car wash consultant and can be reached at email@example.com.