A few things have not been mentioned so far in this discussion. From classes I have attended in order for a express to be profitable it needs to be built for 1.5 million not the 2.5 to 3 million that it seems many are now being built for. 2) The market area has to be of a big enough volume to justify the investment. Too many are being built in small markets that do not have the wash potential to pay for the wash even if they had 100% market share. 3) Colder climates make it even harder for a express to make it due to the limited number of wash days per year and the increased cost of doing business. If the wash was a dollar, people would still not wash on the cold, overcast winter days. Winter may be the big wash time in the some areas but for many the opposite is true. Applying what works in the southeast to the Northeast or Northwest is a sure way to fail. 4. Equipment retailers are selling some of these guys a bill of goods with over inflated promises. Due diligence is not being exercised by some investors. There are a lot of markets where only a IBA/SS can be justified.
Express Tunnel affect on SS and IBA
- Thread starter eaglewash
- Start date
JMMUSTANG
car wash owner
norton how's that express wash that open up by you doing?
What are it's price points?
Does it offer free vacs and if so how many?
What are it's price points?
Does it offer free vacs and if so how many?
I don't see anywhere close to the minimum number of cars needed for it to be breaking even yet. My best guess is that it is doing 1/2 of what it needs to be breaking even. 30 free vacs I think. Price point starts at $6 . Its only been 9 months though.
robert roman
Bob Roman
“Owners with long term amortizations have really painted themselves in the corner….. model of the 20-30 yr amortizations dies when real estate values collapse.” “Now they own an unprofitable wash and can't find a buyer that will pay the mortgage balance.”
If someone is upside down with loan for used car, the causes can be buyer paid too much for the car in the first place, bought a car beyond their means or didn’t buy gap insurance, etc. Being upside down has more reasons than condition of used car market or borrowed to buy.
Likewise, mortgage or collapse of RE market does not necessarily cause someone to become upside down with a carwash.
“people who lost their assets on the court house steps”…. and “their anguish and grief.”
I’d bet many of these folks borrowed on pro forma rather than a rigorous evaluation of market, business model, technical, management, economic and financial and exit strategy viability.
No one holds a gun to someone’s head that gets into this business.
“In my opinion, a SS/automatic car wash is a liability, not an investment.”
SS/IBA is also a business.
Business risk involves competition and operations; will the site produce sufficient sales and can management provide an effective operation.
Investment risk involves RE development risks which include, among other things, re-sale market risk – will future conditions allow sale to a 3rd party for expected price.
Business and investment risks are quite different but related. You need to cover both adequately to minimize risk of failure.
If this is over the head of folks who became upside down and failed, they likely had no business in carwash or any business for that matter.
“The only ray of hope I see is the pay-one-price concept unfolding in Florida.”
POP is not a bankrupt idea because it is showing to work and it can make sense mathematically.
However, like anything, the proponents say there are certain criteria should be met and, like always but not mentioned, there are consequences for actions.
Consider an area with four SS/IBA businesses with potential market of $100 in wash revenue.
Each wash has 25% market share or $25 annually. Here comes a recession which causes consumer spending to drop 40% which causes the total carwash market to drop to $60. So, each carwash business now has $15 annual wash revenue instead of $25.
Wash A says, forget you guys, I’m going POP. Doing so, Wash A results are wash revenue of $25 annually. This means the three other washes get to divvy up $35 ($60 - $25) or $11.67 annually.
By Wash A going to POP, the other three washes saw their annual wash revenue drop by another $3.33 ($15 - $11.67).
You can’t simply overcome logic, physics or math with BS.
POP (wash all you want) and $3.00 express free vacuums is simply price competition. If carwash owners tend to herd consumers toward lowest price, the market ultimately becomes lowest price.
If someone is upside down with loan for used car, the causes can be buyer paid too much for the car in the first place, bought a car beyond their means or didn’t buy gap insurance, etc. Being upside down has more reasons than condition of used car market or borrowed to buy.
Likewise, mortgage or collapse of RE market does not necessarily cause someone to become upside down with a carwash.
“people who lost their assets on the court house steps”…. and “their anguish and grief.”
I’d bet many of these folks borrowed on pro forma rather than a rigorous evaluation of market, business model, technical, management, economic and financial and exit strategy viability.
No one holds a gun to someone’s head that gets into this business.
“In my opinion, a SS/automatic car wash is a liability, not an investment.”
SS/IBA is also a business.
Business risk involves competition and operations; will the site produce sufficient sales and can management provide an effective operation.
Investment risk involves RE development risks which include, among other things, re-sale market risk – will future conditions allow sale to a 3rd party for expected price.
Business and investment risks are quite different but related. You need to cover both adequately to minimize risk of failure.
If this is over the head of folks who became upside down and failed, they likely had no business in carwash or any business for that matter.
“The only ray of hope I see is the pay-one-price concept unfolding in Florida.”
POP is not a bankrupt idea because it is showing to work and it can make sense mathematically.
However, like anything, the proponents say there are certain criteria should be met and, like always but not mentioned, there are consequences for actions.
Consider an area with four SS/IBA businesses with potential market of $100 in wash revenue.
Each wash has 25% market share or $25 annually. Here comes a recession which causes consumer spending to drop 40% which causes the total carwash market to drop to $60. So, each carwash business now has $15 annual wash revenue instead of $25.
Wash A says, forget you guys, I’m going POP. Doing so, Wash A results are wash revenue of $25 annually. This means the three other washes get to divvy up $35 ($60 - $25) or $11.67 annually.
By Wash A going to POP, the other three washes saw their annual wash revenue drop by another $3.33 ($15 - $11.67).
You can’t simply overcome logic, physics or math with BS.
POP (wash all you want) and $3.00 express free vacuums is simply price competition. If carwash owners tend to herd consumers toward lowest price, the market ultimately becomes lowest price.
Greg Pack
Wash Weenie
I have seen some slow starters due to a bad visibility location. They took two years for volumes to peak. But most I have seen are going at a decent clip at 9-12 months. And some just never do the volume. We've had a few in my area close.
Another thing I will mention here for those not very familiar with the express concept is that in most operators' eyes (in this region anyway) there is a difference between an express wash and an "old school" exterior tunnel. But I see some exterior operators describe their wash as an express. Automated pay stations and free vacs are in 95% of the express washes down here. I'd say 85% don't prep, but many have a place for the customer to self prep.
In our area a few of the EE's are now offering hand drying and window and interior cleaning at an extra charge after the wash. They are almost turning into flex serves. I am not sure but I have a feeling that they are not achieving the volume or revenue per car to make a profit so they are adding these services in an attempt to become profitable. It will be interesting to see how this develops and if others follow suit.
robert roman
Bob Roman
“They are almost turning into flex serves.”
It is not “almost.” They are turning into flexible service.
“I am not sure but…. are adding these services in an attempt to become profitable.”
Without a doubt, they are. Owners of virtually people-less, self-service businesses do not add assisted-services requiring labor unless there is a need to.
“It will be interesting to see how this develops and if others follow suit.”
It will most likely develop like the self-service segment did.
Once upon a time, people sold wand-bays to investors until a region became filled up with wand-only sites.
Then the in-bay came along. People then sold both wands and in-bays for new sites as well as backfilling a region by selling in-bays to the wand-only sites.
It is not “almost.” They are turning into flexible service.
“I am not sure but…. are adding these services in an attempt to become profitable.”
Without a doubt, they are. Owners of virtually people-less, self-service businesses do not add assisted-services requiring labor unless there is a need to.
“It will be interesting to see how this develops and if others follow suit.”
It will most likely develop like the self-service segment did.
Once upon a time, people sold wand-bays to investors until a region became filled up with wand-only sites.
Then the in-bay came along. People then sold both wands and in-bays for new sites as well as backfilling a region by selling in-bays to the wand-only sites.
Greg Pack
Wash Weenie
Multiple operators in my area are experiencing this:
- Owner Finances wash over longer term (20-25 years) to maximize cash flow, everything is going well
- Two years in-the wash booms, lines are out to the street. Wash is a cash cow. Perhaps the owner decides to pull out equity to build another car wash project or to get that house they've always wanted. Meanwhile, investors take notice of the successful wash.
- Five years in- Multiple New Investors have built either directly in market, or close enough to the borders to affect owners volume
- Ten years in- Owner has ten year old car wash. Property values haven't appreciably increased. The auto needs replacing, and revenues are down from the highs 30% or more, but owner still owes over 75% or even more of original principal.
The owner did everything right with site selection, operations, etc. But conditions beyond his control have put him in a negative equity situation, just when he was hoping to cash in. By financing over 15 years or less it does make cash flow more challenging, but he is much less likely to be caught upside down.
robert roman
Bob Roman
“The owner did everything right….”
“…. conditions beyond his control have put him in a negative equity situation….”
I don’t agree with either point.
1) You can’t pull equity out of an income producing property unless you obtain some cash (lease or sell it). You can over-leverage if you borrow on the potential equity in a property; market value less loan balance. Yes, R.E. market goes down, so does the equity.
2) Developers are supposed to plan for this eventuality; an area will build out until it can no longer absorb new stores.
3) Owners are supposed to retain portion of earnings (depreciation) to address obsolescence of equipment.
Every one of these conditions was under the owner’s control.
“…. conditions beyond his control have put him in a negative equity situation….”
I don’t agree with either point.
1) You can’t pull equity out of an income producing property unless you obtain some cash (lease or sell it). You can over-leverage if you borrow on the potential equity in a property; market value less loan balance. Yes, R.E. market goes down, so does the equity.
2) Developers are supposed to plan for this eventuality; an area will build out until it can no longer absorb new stores.
3) Owners are supposed to retain portion of earnings (depreciation) to address obsolescence of equipment.
Every one of these conditions was under the owner’s control.
