new players impact

Hi everyone . I have a hypothetical question for all experienced operators out there, it is as follows . Carwash "A" is a poorly designed 4s/s and 1 iba , movement on the site is tight & access to the auto requires a 3 point turn, there is no c/card or dryer on the auto and few other features , a very basic carwash . It is however a very busy wash being the only one in a population of 25000 . Carwash "B" is about to open only 400 yards from "A" It is however a far superior layout in a better position with easy access and slightly closer to the residential population It will have many features eg- c/card on all bays,dryer,wheel scrubs It will be 5&1 and manned by the owner . My question is, assuming pricing is the same how much of 'A"s turnover will be taken by "B" in the medium term ie- will the break down be 50/50, 40/50 ,50/40 or other .I welcome your guesstimates Kind regards Glenn

Even though the population would seem to support 2 car washes of the same nature so close together, the 2 washes will be splitting the customer pie by at least 40% first 60% second wash. The first wash will ALWAYS have customers who for some reason or other use this site on an ongoing basis.

The second wash B in the beginning will draw customers away from the first site A. As customers get a feel for both sites, the split, let’s say 40% to 60% will happen. There will also be many customers who prefer site A and will NEVER use site B even though it may be superior.

Car washes are not like fast food chain restaurants. Building one next to each other is what it’s all about. McDonald next to Burger King Etc. etc.

People IMO view car washes to be the same. One is not 'better' than the next. We as car wash owners know this is NOT true. It is then up to us to make each wash experience a positive one to ultimately keep 'our' customers ours, not give them to the competition.

I've seen this several times and I still think it's hard to say what will happen in the end. On the surface owner B may eventually win out but it's hard to define what "wins"is. For some people winning is cash flowing, not for me. Owner A may be debt free and decide to screw with the owner of carwash B by dropping the bottom out of his prices to ensure B never cash flows. Then we have carwash C, an express tunnel that will open down the road and suck enough customers out of the market that no one will make money. Unlikely, you say? It's happened here in my town, and carwashes of all types are going under quite regularly. One wash closed last week, and another is scheduled to be foreclosed on this week.

Greg, You must be in Atlanta. We started putting a list together of closed & foreclosed car washes in metro Atlanta. The list already exceeds 40 Car washes.

Kind of a gutsy move to build a new wash 400 yards away from an existing wash. The new wash needs more revenue than the existing wash to exist.
Unless the existing wash is significantly run down, I would not have done it. Wash A, if debt free, can begin investing in his wash (since now he has a reason). Even with am modest investment with a few upgrades, wash A will still have a lower debt service than B. B can attempt to lower price to draw the customers, but a new wash can only go so far. Wash A could go toe to toe with Wash B on price for however long it take until the customers decide which one they will stay with. A better move would have been to try to buy out wash A initially and then renovate the place.

Mr Carwash, I'm in Birmingham. I guess looking at it, it only a few shutting down. There are quite a few washes limping along, but this streak of nine months of bad weather that the South is experiencing is pushing some off the edge. Time will take out some more if conditions don't change. A few operators have worked out arrangements with the bank to manage and keep the wash open while they are looking for buyers. I guess in the end it will be a healthier market for those left standing. But it's not fun to endure.

Crown, the problem I perceive with wash A is that it's on a tight lot. But I also wouldn't spend the money to build a new IBA/SS. With some investors dabbling with smaller markets for expresses I would be concerned a small express would be built.

They will split the baby. If the old car wash doesn't have everything in tip top shape then people will drift towards the new. If the old car wash provides strong chemicals more time etc. then the new car wash will have to match the old in splitting the baby. Tight lots will not stop me from getting my snickers bar. A clean car with the least amount of effort is what they want. Gregs right, This $3.00 express with free vacs thing, is hard to beat.

I really don't understand the logic in building a wash 400 yards from another. Jim Coleman Company is notorious for doing that here. There theory is if they don't build it someone else will, so it mine as well be them. However if the project is already in full swing. Keep the lot clean, and keep everything working. I have seen very few washes fail that do those two things consistently. It is almost comical how when someone buys a car wash and is new to the biz (I am talking existing one, so this doesn’t apply to you) they think because something is coming out that is working properly, 700 psi high pressure is NOT working properly. Learn how the equipment works inside and out when it is new the way it is supposed to work, and try your best to keep it that way.

Greg, I agree. I recently saw plans on a 6 and 1 self serve conversion in metro Atl. The operator is closing down his automatic and extending his tunnel 30 feet and installing a sonnys extreme express while keeping his ss bays intact. He conveyed that his total cost will be less than 250,000. It doesn't take many cars to make that investment work. I would hate to have a 3 million dollar express next to him.

Thanks for all the opinions guys a few other things that I should have mentioned are that both carwashes are debt free , the area is in a stongly growing population,carwash B is right alongside 3 large franchises in a shopping strip, A is not . Please keep in mined also guys that the carwash industy here in AUS is no where near as saturated as in the USA , it is still in growth stage ie- no shut downs here .Also (no braging here) but our economy did not suffer from GFC and is going gangbusters. Thanks fellas regards Glenn

Can I also ask fellas that if carwash A is not just busy but upon close examination over the last 2 years,extremely busy and achieving great pricing eg-$1=1.45 MINS &AUTO is at $10 $12 &$14 for top wash , surely there is room for a second carwash no matter if its 400 yards away or 4 miles away, as "B"s site is ideal and rates very high on site analysis questionaires provided by equipment companies(even when allowing -20% for margin of error ).Site "A' rates quite low Thanks again fellas Glenn

I wish all good fortune for carwash "A" and none for carwash "B". Homer, the quote "If we don't build it someone else will" must be a slogan for Jim Coleman distributors, because the Jim Coleman dist. down here says the same thing just before he builds a carwash next to yours.

Hell, they do the same thing to their distributors, if you can put up a sign you can sell their equipment.

I seem to have hit a bit of a nerve with some of you , especialy you AUTOSPA . I can appreciate how you would view my intentions as somewhat aggresive , especialy as an existing operator . However I can only view the introduction of a 2nd carwash as overdue and believe there is definatly room for both washes as "A"s volumes and prices are better than excellent. Believe me I would rather not be so close to existing carwash but as I am sure you are all aware of great sites that scream out at you are hard to find . Surely you are not suggesting this area of 25000 and growing population should only ever have 1 carwash with no competition. Kind regards Glenn

Personally I would never replicate the same format 400 yards from another. Why get a slice of the pie when there are plenty of opportunities to get the whole thing? Additionally, in certain markets, SS with automatics are like payphones, functionally obsolete. Get your self to the states and personally observe the express format. This is the way to go. I have seen too many multimillion dollar SS go bust when an express is built in their market. And there is nothing you can do to resurrect it. Heck, I own self serves and would rather take my car to an express. That should tell you something. Don't be surprised if competitor "A" tears his down and replaces it with a tunnel; or better yet someone else decides its time to put both of you out of business. I would never ever consider building a SS with automatics. Way too much risk.

Well Glenn, the frustration is palpable for a reason. Most existing operators around here have had to deal with new investors. They covet what they see, and they try to take it. They justify it by verbalizing that wash A is substandard location, old equipment, owners takes the customers for granted, more business than they can handle, etc. I've heard it all. In the end most seem less than thrilled with their ROI and wonder why their wash is not as successful as they thought it would be. By the way, the most recently closed wash here in my area was a "wash B". He built less than a mile away from a wash A, a 4 bay with self-loading tunnel which was going gangbusters. Wash B was a very nice 4/1. I distinctly remember B's owner telling me about six years ago "I just want his (wash A's)overflow business" Wash B just closed down, and wash A has become a neglected piece of crap as the owner has lost all love for the business. IMO. There were no winners in that war.

I will add Do not let long IBA lines deceive you. The low throughput can create lines of six-ten cars on peak days. The addition of a second automatic shortens the lines considerably but may not significantly increase overall revenue. I had a friend of mine who was consistently seeing lines of 5-7 cars on pretty days and sometimes as many as ten in line for the IBA. He added a second auto. The lines instantly shortened to an average 1-2 cars, but overall revenue jumped just 10%. It made for happier customers with shorter waits but on the surface the ROI didn't pencil out very well. I am trying to reinforce the likelihood that the pie will be split, but you may likely end up with two mediocre ROI locations in the market instead of one great one.

Glenn, as a SS/IBA operator for going on eighteen years, I agree with Mr carwash. I will not build another new SS/IBA. I may buy some used locations for .50 on the dollar but will not build new. It just doesn't pencil out anymore. You need to take a hard look at the express concept IF there is a bigger market you could serve(50K plus). It's quicker,does a better job, more efficient on water and a better value. The ones that got in early with the prime sites are doing very well here. It's the "me-toos" that are most often struggling. SS's will continue to exsist in smaller markets but they are waning here. Customer's attitudes towards their vehicles are changing and people want their car cleaned quickly and cheaply. Look at teenagers today. They don't care for their cars like teens did twenty years ago. They just want the coolest Iphone. Conssider how the shift in behavior towards cars will change in the next decade as they become drivers. THAT IS THE BEST ADVICE I CAN GIVE!

I cannot AGREE more with Greg on the issue of IBA's that SEEM to be busy. I've owned a 7 bay SS wash for 22 years. This location is not my best and not my worst as far as income. About 6 years ago some brainiac got wind from an IBA distributor that this town needed a monster state of the art IBA just 500 yards up the road from me. I thought, oh no this is it, I will lose 50 -70 % of my business. Flat out, it did not happen! The IBA location was a 2 bay stand alone with 4 6-1 vacs ($6000 a piece). The equipment was TOP OF THE LINE Millennium, about $175,000 per bay. The land was $300,000. The building, reclaim, site prep, concrete parking lot another $250,000. Oh, did I mention the new owner did all the "construction work" himself. Maybe saved $100,000 to $150,000 in total costs. To me that pans out to $930,000 less the $150,000 for a grand total of $780,000. Each bay takes between 6-10 minutes to do a complete wash from the customer putting in the $$ to pulling out of the bay. Priced at $6 $7 $8 and $9, lets say $8 is the average. If the cycle time is an average of 7.5 minutes (6-10 min) with 2 bays, that’s a whopping 15 cars per hour or $120 per hour. On a great wash day, let’s say the lines never end, 9-10 hours. That gives you $1200 on that day. We get maybe 20-30 days per year total that would create this scenario. The rest, you are either closed snow or rain, or not much throughput in the summer / fall months. I would guess we do not wash any cars for at least 1/3 to 1/2 the year depending on the weather. That means we get about 175 to 240 wash days a year IF we are lucky. So if 30 days are the BEST that would leave about 200 days as so - so. A so - so day in our area usually brings in let say 30% of the BEST day. That would be about $360 per day ($1200 * 30%). Let’s add it all up. $1200 * 25 = $30,000 gross: $360 * 200 = $72,000 gross for a total of $102,000 + some vac revenue let say $18,000 per year. $102,000 + $18,000 = $120,000 gross revenue per year. DO the math.... how you pay a $780,000 note with only $10,000 gross income per month. The note has to be at least $7500 to $8000 per month. You did not even pay one utility bill supply bill, or for that matter yourself. It gets better..... About 3 years after the first 2 bay IBA went up, he put in yet another IBA! Now the wash has 3 yes I said 3 IBA's all touch less side by side by side. I guess the distributor was sick of listening to him grumble about the revenue, and was convinced that a 3rd bay would make all the difference. So.... let's add another $175,000 plus some kind of building costs to reinforce the disaster. Like Greg said, lines can be deceiving at IBA's because of the time it takes to wash the cars 6-10 minutes. All this guy did was making it more convenient for the customers not to wait so long. 2 IBA's do NOT double your income and 3 well; you really have to be in the right market for that to even make sense.

Glenn the real question is, do you want to make money and get a return, or do you just want to have a business to run.

Did you ever talk to the guy?...maybe he was the distributor. Somewhere you will start to see IBA's are AT express washes. They can stay open 24 hours, or send labor home on rainy days, and still be "open"

Sorry to keep this discussion going guys but I am svery appreciative of your opinions .Just a little more info -Firstly , most days here are wash days as we have a warm climate nearly all year round ,definatly no snow ,as I have stated prior his wash is very busy but it is not so much his auto that is busy it is more often his 4 s/s that they are lining up for , to me 4 s/s is just not enough in a pop of 25000& growing .I am very mindful that an express will eventually arrive in the area , but feel this would be many years off as there are very few even in our capital cities here let alone in an area of 25000 .Please keep in mind that this is Australia here and carwashes are no where near saturation point as in the states Also just to give you an indication of carwash"A"s trade, which I have scrutinised in all weather conditions over a 2 year period carrying out customer counts on 53 seperate days , in all seasons , i have arrived at a weekly turnover between 15 and $17000, given that margins her are at around 62%,I can only conclude that it is time for another wash Thanks guys Glenn.

Weekly turnover of 15-$17,000, what does that mean? If it means what I think it does, you have made a gross miscalculation. Please don't think people are attacking you, because it seems like you keep trying to defend yourself. Competition is part of business, life would be too easy and unrealistic without competition. You are forcing wash “A” to be reactive instead of proactive, that is never good, and should benefit you. I wish you all the best of luck with your car wash.

Homer, the guy who built the 3 IBA's side by side is NOT the distributor. The distributor actually came to me about 15 years ago every 3 to 6 months telling me to do the same. Build it and they will come. Even if I had the idea of an in bay Auto, I would never spend $800,000 on a stand alone in my market. Just like the other blogs about Jim Coleman, build it before someone else does held true for this uneducated (in car washing) fool. I would never invest that kind of money for no return. The car wash doesn't run itself.

Homer , turnover =gross revenue , remember average auto spend here is $12.50 , average s/s spend=$7.00($1=1.45mins), vac & vending =$1.50 . This is all based on speaking to many operators in this part of the country.I have observed this wash over 2yrs & arrived at a customer count averaging 20cars per hour over an average 11hrs per day , 53 counts over all seasons day and night, this does not include between the hours 7pm-8am only hours 8am-7pm. Thus I arrive at an average revenue of $194 per hour(20 cars@$9.70) @11 hours per day @7 days per week = $14938 per week and does not include after hours revenue. I did mention this was a very busy wash all year round.Please let me know if you see any obvious flaws in my calculations Kind regards Glenn

yeah, 20 cars an hour 11 hours a day spending that much money. I just flat out don't believe that is an average day. Is there even enough time in the hour to spend that much money on 20 cars? 7 days a week? I thought the economy there was booming, don't these people have jobs?

Homer dont seem so amazed , remember this is a population of 25000(probably 17000cars)with 1 carwash , no express here. These numbers are true . Just think even if 50%of those wash every 6 weeks thats 1400 cars per week . We are in drought here and not allowed to wash cars at home and have been like this for years. This may change as drought eases but I dont think washing habits will change greatly .I have spoken to operators in areas that have had water restrictions eased to allow home washing again and they say volume change has been barely noticable. Carwashes here must use less than an average of 70 litres of water per car and thus touchless autos must have recycle system Regards Glenn P.S- OPENING HERE IN AROUND 5 MONTHS HOPEFULLY , WILL TELL YOU HOW WE GO.

Glenn, are you trying to tell us this location brings in over $750,000 per year!?!? $14938 * 52 weeks? I do not know of ANY car wash with 1 IBA and 4 SS bays that even comes close to that figure: try more like $130,000 / $150,000 tops. Don't take this the wrong way; you can only wash so many cars per day. I don't care if the sun is shining 365 days a year. Just like any business, you can only capture a certain percentage of the consumer. Do you honestly think you are going to wash 80,000 cars a year? 20 cars * 11 hours * 365 days. Totally impossible! You only have a calculation of 17,000 cars total. Again, you will only get a certain percentage to use your business, drought or nor drought, ban on home washing or not, period.

we have a IBA at our express tunnel- base wash $5 with free vacuum and that thing is humming all day long, it is definetly a great add on for a tunnel, damp days I have no probelm sending people home and letting the IBA pick up the business for that day. it wont wash 800-1000cars a day like the tunnel but we were tapping out this winter at 350carcounts daily in the IBA alone

Oh yeah, I forgot you had an Auto at your express. Now I know of 2.

Glenn, Thats a car pulling on to your lot every 3 minutes and spending 10 bucks every hour of every single day. Thats a strech armstrong to say the least, I hope the person selling you the equipment at least tried to give you a reality check.

You know, I just had this big long drawn-out post that I just deleted. Bottom line: If you are convinced those numbers are correct, you need to reconsider an express. If you don't, someone else will before you recover your investment. Perhaps it will be wash A's owner.

Your question is one that I frequently deal with in my line of work; estimating the amount of business that a new wash may "pull" from the existing washes in the trade area.

Typically, this is done using gravity models and spatial allocation models. Gravity models are derived from Newtonian physics based on the balance between store attractiveness and the distance between potential customers. The law of retail gravitation relates the share of customers that an outlet attracts is inversely proportional to distance they must travel (e.g. distance, driving time, cost to drive) and directly related to store dimension (e.g. building size, curb appeal, prices, variety, amenities, etc.). A similar model was developed by Huff to calculate a probability that a consumer patronizes a store.

How well these models work depends greatly on the circumstance at hand and the skills of the analyst because the models must be developed/calibrated from analogues of stores with history.

According to industry benchmark surveys for self-service, about one half of the respondents indicate that an express exterior wash has hurt their business. In the past, the question was always; does a free carwash at a gas site hurt your business?

My evidence suggests that the impact from a new wash varies greatly. If the market is inefficient or under-served, the potential impact tends to be rather small if the business models are similar. If the market is efficient or well-served, the impact could be significant.

Of course, the meaningful question is not to what degree a business may be affected but rather what can be done to keep it from happening.