Car Wash USA Express opened its first exterior express wash on Highway 64 in Lakeland, TN in late August of 2007. The second such operation was scheduled to open in December that year on Austin Peay Highway in Memphis.
Both operations offered the only express exterior washes in the market (at three different quality levels) and free vacuums for those who want to clean their car’s interior.
In the December 2007 edition of Auto Laundry News, Car Wash USA owners mentioned they had their eyes on expansion, “We’re continuing to look at different locations. Our projection is that we’ll have five to seven by end of 2008. All will be in the Memphis area.”
By 2009, Car Wash USA had its fifth location up and running. In the 2011 edition of the Top 50 Carwash Chains, Car Wash USA was mentioned as having eleven locations. Today, the company’s website lists 18 locations spread across Tennessee, Mississippi, and Arkansas.
What’s interesting is not the company’s business model, rate of growth, or whose equipment or chemical they use, but rather how it got there.
Instead of building big, expensive car wash facilities to duke it out in competitive urban areas, Car Wash USA is deploying modest facilities in suburban areas. Owner Ray Holley said the company does a great deal of research to find locations far away from competitors.
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| Before |
The company’s store in Collierville, TN, was previously an eight-bay self-service wash, as pictured above. That building was leveled and the property was converted into a 90’ exterior-express tunnel, shown below, capable of washing 95 cars an hour.
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| After |
Repositioning a self-service property is a strategy that has been recommended for years by manufacturers and dealers, car wash consultants, and business brokers alike. Arguably, USA Express is one example that shows this strategy is viable.
Planning, implementation, and execution of this strategy require adhering to fundamentals.
The first one is to match development costs with the market potential of the location. A market is considered viable if it is of sufficient size and potential value and sustainable. For example, a rural area with 200 people per square mile and lots of pickup trucks, duallies, and farm equipment would not be large enough to support a 90’ tunnel.
Conversely, suburbs, satellite communities, and semi-rural areas often have the population density, incomes, and traffic to support a more substantial wash.
This is important because express, unlike self-serve, pulls motorists off the street. Many of these people come from thelargest untapped market segment — those who wash their cars at home.
Potential value is an estimate of the total amount of money that could potentially be spent by consumers in a particular market. Thus, it can be used to assess the size of the overall market available to all companies.
For example, companies planning to launch a new store or expand to a new geographical area will use this estimate to determine the market share they will need to justifyentering it.
Similarly, companies planning to launch a new product will use this estimate to determine if an investment is going to generate an acceptable rate of return.
Estimates of potential value are made by dividing the target market by demographics such as age and income, and lifestyle factors like marital status and home ownership, etc.
Usually, a combination of factors is needed to define a target customer profile. For example, express services cater to people who are on the go. So, the demographic for retail stores that offer express services might be local people between the ages of 30 and 60 who earn more than $35,000.
If we assume 30,000 people in a trade area meet this profile and the average person spends $80 per year on washing, then total market potential value is $2.4 million (30,000 X 80).
If car wash X needed $450,000 in sales to justify entry and ensure acceptable returns, it would need to capture 19 percent market share (450,000 / 2.4 million).
A sustainable market is one that generates positive, long-term economic benefits that are acceptable for the stakeholders who derive direct financial benefits from firms. For example, retail markets tend to fill up to the point where the area cannot support another new store.
So, as one car wash advisor put it, there are only so many customers in a defined area. An additional flashy express wash doesn’t create new demand, it just splits the pie.
To illustrate, consider the map shown above. In the southwest corner, USA Express is located near Sunshine Car Wash (a chain with self-serve, in-bay automatic, and lube), which closed to make way for a tire store. Due east is Boomerang Express, located only one mile from USA Express wash.
Nevertheless, developers and neophytes alike should consider opportunities to reposition self-service properties as well as other potentially suitable locations (e.g., former gas sites).
Otherwise, a USA Express, a Boomerang, or another chain may one day plop down and create what some car wash brokers describe as a large sucking sound as it drains away customer bases and pulls traffic from the streets.
Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com.