While surfing the web, I came across a video that gave a tour of the most recent addition to the Quality Car Wash chain in Michigan. What grabbed my attention most about the company’s newest store in Waverly was the out-of-the-gate performance.
During the tour, one of the principals stated the wash had processed 100,000 cars in 86 days with the highest daily car count of 2,300 and highest single hour of 196 cars.
Prodigious to say the least. So, what does it take to generate 350,000 washes annually? Unlike the tour video that discussed mostly virtues of the car wash system and processes, it begins with the overall goals and objectives.
Quality Car Wash was established in 1969 and maintains six locations offering a variety of services. These properties includea mix of gasoline, convenience stores, express tunnels with vacuums, and one location with quick lube and an express car wash.
In December 2012, the company partnered with Tim Horton’s to offer a café and bake shop at two stores and a select line of Tim Horton’s products at two other store locations.
Quality’s stores are clean, bright, and filled with a variety of products, competitively priced. Washes feature the newest technology guaranteeing a clean, shiny, and dry car every time.
Quality is committed to high standards and acknowledges its people are its greatest assets and the biggest factor for the company’s continuing success.
Figure 1 shows Quality’s new property is strategically located along with its other c-stores, gas bars, and car wash locations to form a network of stores in the region.
The competitive objective of stores that are located, designed, and built in this manner is the achievement of trade area dominance. For example, c-stores are special-built properties not easily adapted to other uses. On the other hand, it is the special design features that create and influence the property value of convenience stores.
As shown in Figure 2, Quality consists essentially of multiple-convenience retailers — gas, inside and drive-through food services, convenience store merchandise, and car wash — operating on the same site. Multiple also means large.
C-store and food service franchises usually require an acre of land, 250’ of frontage, three parking spaces per 1,000 square foot of store, as well as enough room for access, circulation, and navigation. To this, add another acre for a long tunnel and parking spaces for vacuums.
According to a recent Appraisal Institute report, the typical cost to build a convenience store in an urban environment today is about $1 million or over $22 per square foot of land. Although shared land can lower development and construction costs (and annual operating expenses), the Waverly site obviously represents a large multi-million dollar investment.
Of course, such a large property needs to generate sufficient gross sales for loan pay-off and recovery of investor’s equity. This requires a conclusion there is unmet demand for products and services and that the property is reasonably convenient and useful to the general public.
This would be demonstrated by a strong segment, propensity for customers to combine shopping trips, and competitive advantage sufficient to merit a trip to the site. These criteria are categorically similar to those found in any shopping center development project.
Driving sales volumes is a regional population of about 135,000. There are also two major highway arterials that intersect at the site. Using standard trip generation rates, we would expect gasoline sales at the site to yield at least 60,000 washes annually.
Assuming a capture rate of 1 percent, the wash should attract at least another 125,000 washes. Quality also offers unlimited washing, so assume another 60,000 washes or so from this.
However, this still leaves another 100,000 washes or so to match the site’s current pace to reach 350,000. Arguably, it is superior appeal combined with superior convenience that allows Quality’s new store to reallocate demand inherent in a stream of traffic.
For example, Quality has been in business for 47 years. So, it is an established brand and well entrenched. Thus, we would expect the new store to benefit from a high level of trust even before the doors opened.
There is also very little competition — three self-service sites each with wands and multiple in-bay automatics. So, we would expect the new store to benefit from barriers to entry, customer-base sensitivity, social desirability, established customer base, and, perhaps most important, continuation of earnings.
After all, the Waverly site is one part of a chain of stores. Adding a new store to a chain of successful existing stores typically creates synergies improving the overall performance of the network.
Consequently, while it is important to have a super-efficient car wash system to produce two hundred cars an hour, such high volumes would not be possible without providing the most convenience, best image, and greatest value as compared to other stores in the trade area.
This, along with fundamentals such as matching development cost with market potential of the site location, is the key to success for multiple convenience retailers.
Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at email@example.com.