In the May 2022 issue of Auto Laundry News, Gary Wirges, president of Custom Kraft Industries Inc., penned an article on the state of the self-service segment.
Wirges noted self-service is thriving again and remains an excellent launching point for entering the car wash industry.
The reasons given for this resurgence are business models that have embraced technology and adapted to customers’ needs. In other words, many operators have stepped up their game.
For example, self-service operators have made it easier and more convenient for customers to pay. According to Auto Laundry News self-service surveys, credit card acceptance has increased from 51 percent in 2013 to 85 percent in 2022.
In-bay bill acceptance has increased from 26 percent to 41 percent, and 23 percent of operators indicate they accept mobile payment.
As shown in Table 1, there has been significant increase in the percentage of operators that offer value-added services that help increase margins.
In terms of market entry, buying a successful going concern provides immediate cash flow and minimizes investment and operating risk. However, expect a property priced to perfection.
UPGRADE OR BUILD NEW
Other options are to buy a distressed property and upgrade/retrofit or build a new store. Each of these scenarios requires a suitable location.
A suitable location is one that has the potential to generate sufficient gross sales. Consequently, it is best to avoid sites where surrounding development is mostly industrial as well as areas where employment, business counts, and/or population trends are in decline.
Areas to focus on would have few competitors, or no formidable ones, more renters than home owners, and available properties already zoned for car wash.
Sufficient gross sales require trip generation. Trip generation is a function of a property’s physical characteristics, traffic volumes, and an operator’s marketing prowess.
For example, a three-lane road can provide a more robust environment for impulse purchase than a four-lane road. Three-lane roads reduce vehicle speed and vehicle conflicts but not traffic volumes. Benefits are increased exposure time and it is easier to enter/exit properties. This is especially important for in-bay automatics that benefit from highway orientation.
Here, properties located along roads with daily traffic count of at least 10,000 vehicles make good candidates.
As shown in Table 2, operators are reporting some of the highest average monthly revenues in almost a decade.
In terms of profit, experience has shown a seasoned self-service wash is typically a 60 percent gross net business (net operating income).
In terms of cost, be prepared to pay more. Preliminary data shows inputs to new construction were up 20.5 percent from a year ago and final demand construction was up 12.3 percent from a year prior.
Table 3 contains construction cost per square foot for a one-story retail building in select cities by region (source: Cummings Insight).
These cost factors do not include professional fees, permits, FF&E, closing cost, or real estate.
Consequently, if new to the industry, don’t try to DIY. Advisors are crucial in helping to identify distressed properties and vacant land with potential upside to justify the cost of acquisition, development, and/or improvements.
Bob Roman is a car wash consultant. You can reach Bob via e-mail at bob@carwashplan.com or by visiting www.carwashplan.com.