According to the CEO of Mammoth Holdings, “the universe of car washes in the United States could be double or four times what it is today.”
Arguably, that’s a fairly bold assertion to make considering the industry’s historic rates of growth and the myriad economic challenges we now face.
On the other hand, Mammoth’s site criteria recommendations give some insight as to the opinion for a doubling or quadrupling of the size of the car wash fleet.
Notable are the thresholds given for population: 15,000 within 3-miles, and traffic: minimum of 20,000 (average daily traffic). These thresholds are about half as much as what has been recommended in the not-so-distant past.
Some justification for lowering the bar for site-selection criteria is the unlimited wash option which provides much higher frequency rates. There is also the benefit from the continued decline in the percentage of consumers who wash their vehicles at home.
However, both of these factors have already reached a high degree of penetration. Consequently, even with lowering the bar, a doubling or quadrupling of the car wash fleet would seem dubious.
Let’s take a look at an area with a population of around 15,000.
Here, the subject market consists of two small towns and two townships with populations ranging from 1,100 to 6,500.
The competitive environment consists of one in-bay automatic at a gas site, a small self-service wash, and two conveyors. I have perfect information regarding demographics and financial performance of the washes.
Here, combined sales revenues of properties are a little over $1 million or roughly what we would expect given the relative strength of the market.
Moving to an area with a population of around 30,000 people, we find pretty much the same picture. Over time, the area has filled up to where it is unlikely to support additional retail space. Whereas in areas with 50,000 or more people, we find markets tend to be over-served in terms of the number of competing stores.
We can get a sense of saturation by examining industry trends.
First being the stream of product innovation manufacturers keep coming up with to help operators remain solvent and increase sales. Another trend has been the shift from pay-as-you-go to the subscription-pricing model.
Subsequently, another trend has been the increase in the use of digital marketing designed to increase an operator’s market range such as mobile marketing. Mobile includes activities that promote products and services via mobile devices such as smartphones and tablets.
The digital technology allows for mobile payment as well as tailoring of marketing campaigns based on an individual’s location such as geo-fencing.
Geo-fencing is a service that triggers an action when a mobile device enters a set location or virtual boundaries, essentially increasing a store’s attraction rate. These actions can include coupons, notifications, engagement features, and so forth.
Perhaps another reason for lowering the bar for site-selection criteria is nervous investors. According to financial pundits, more and more folks are investing in hard assets as a hedge against rising inflation.
For example, I’ve received multiple inquires from brokers looking for off-market opportunities to assist buyers in purchasing car washes. Recently, I got a call from a client only in business 10 months who has already received multiple purchase offers.
Arguably, given the economic outlook for 2022, we might expect a continuation of current investment trends as well as less stringent site-selection criteria.
Bob Roman is a car wash consultant. You can reach Bob via e-mail at bob@carwashplan.com or by visiting www.carwashplan.com.