I have been evaluating whether to start a full service tunnel car wash in my city. Is there a way to determine if the city can handle another wash? What is the best way to size this up? There are several express exteriors around attached to gas stations but only a few full service washes. The last one was built about 15 years ago. I am thinking it might be a good time to add another but would like to know how to better assess this...
City capacity
- Thread starter JAEGS
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robert roman
Bob Roman
“Is there a way to determine if the city can handle another wash? What is the best way to size this up?”
There are “rules of thumb” like X number of people will support Y number of washes. However, these are old rules and have been blown clean out of the water after the wreckage caused by 2007 and 2009.
So, I would consider methods based on cause and effect. One method is index of retail saturation (IRS).
IRS is ratio of demand for a product divided by available supply in a geographic area.
IRS = (P X E) / S
P = population (i.e. number of households in area)
E = annual expenditures for particular product line per population
S = supply of particular product line (i.e. square footage of retail stores)
Another method is buying power index (BPI) which is often used in public needs analysis.
BPI indicates the market’s overall retail potential as a function of weighted measures of effective buying income (I), retail sales (RS) and population (P) in geographic area.
BPI = (0.5 X I) + (0.3 X RS) + (0.2 X P)
These equations and variables can be used to ponder market potential in the area.
Market potential is the total potential sales in an area. Once calculated, it provides an upper boundary of sales to determine the supportable number of stores.
To determine if an area can support a new store, the existing number of stores is subtracted from the supportable number.
The equations and procedure provided above are fairly simple but they must be specified and adjusted to the circumstances at hand.
Consequently, many investors engage a consultant to do this type of work.
There are “rules of thumb” like X number of people will support Y number of washes. However, these are old rules and have been blown clean out of the water after the wreckage caused by 2007 and 2009.
So, I would consider methods based on cause and effect. One method is index of retail saturation (IRS).
IRS is ratio of demand for a product divided by available supply in a geographic area.
IRS = (P X E) / S
P = population (i.e. number of households in area)
E = annual expenditures for particular product line per population
S = supply of particular product line (i.e. square footage of retail stores)
Another method is buying power index (BPI) which is often used in public needs analysis.
BPI indicates the market’s overall retail potential as a function of weighted measures of effective buying income (I), retail sales (RS) and population (P) in geographic area.
BPI = (0.5 X I) + (0.3 X RS) + (0.2 X P)
These equations and variables can be used to ponder market potential in the area.
Market potential is the total potential sales in an area. Once calculated, it provides an upper boundary of sales to determine the supportable number of stores.
To determine if an area can support a new store, the existing number of stores is subtracted from the supportable number.
The equations and procedure provided above are fairly simple but they must be specified and adjusted to the circumstances at hand.
Consequently, many investors engage a consultant to do this type of work.
soapy
Senior Member
I thought this forum was a place for fellow operators to share insights and perspectives, not a place for people to troll for business selling their services.
robert roman
Bob Roman
When someone “new-to-industry” like JAEGS has the sense to come here and ask a reasonable question about an important technical issue for a business concept that normally cost around $3.0 million, I believe he would anticipate getting more than a witty comment.
I suggested JAEGS steer clear of old rules of thumb. Regurgitated standard equations that are commonly used to solve the problem mentioned. Suggested consultant just like I would suggest that someone hire an attorney rather than self-represent in court.
What JAEGS does is JAEGS business.
I suggested JAEGS steer clear of old rules of thumb. Regurgitated standard equations that are commonly used to solve the problem mentioned. Suggested consultant just like I would suggest that someone hire an attorney rather than self-represent in court.
What JAEGS does is JAEGS business.
I appreciate everyone's concern for this forum and specifically this contemplated investment. Obviously, this is an important piece to the puzzle for me. How does the total demand shift when another store opens up? Are the potential market sales just redistributed among the existing and new stores? Is there some kind of unmet demand in a market that an additional store serves?
The IRS and BPI would be curious gages to understand but against what standard are they assessed to draw conclusions about in this specific market of car washes?
The IRS and BPI would be curious gages to understand but against what standard are they assessed to draw conclusions about in this specific market of car washes?
I.B. Washincars
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I don't think that was intended as a "witty" comment, but more a suggestion to the OP that to go in with both eyes open. I think RR should disclose in a signature or under his name that he is a consultant. Maybe it wouldn't raise an eyebrow as much.
robert roman
Bob Roman
“How does the total demand shift when another store opens up? “Are….sales…. redistributed among the existing and new stores?”
When a new store enters the market, part of its success in reallocating demand inherent in a stream of traffic (retail gravitation) is the overall design objective.
For example, Checker’s, a limited quick serve restaurant (QSR) targets mostly young adults who want grease, quickly and cheap prices. Most sites are double drive-thru, no inside seating. Average service time is 45 seconds.
McDonald’s is a full-service QSR and targets include moms who eat salads with kids who eat half a happy meal and throw toy out the window. Newer sites have long narrow building for more drive thru action, smaller inside seating, all have bathrooms, some have playhouse. Average service time is about 3-minutes.
“Is there some kind of unmet demand in a market that an additional store serves?”
Yes, it’s possible.
For example, I know markets saturated with self-serve and in-bay at gas sites but no conveyors or assisted-service. Markets like these have unmet demand and are also candidates for assimilation.
“The IRS and BPI would be curious gages to understand but against what standard are they assessed to draw conclusions about in this specific market of car washes?”
One standard is per capita. For example, based on recent census data, per capita spending for conveyor segment is $46.00. In IRS, this gives measure of E. In BPI, it gives measure of RS.
Another standard is same store sales. Based on census data, same store sales for conveyor is $550,000. In IRS, this gives measure for S.
In BPI, per capita income ratios (area / national average) give a measure of I.
Another standard is having an analogue of stores to base conclusions on.
When a new store enters the market, part of its success in reallocating demand inherent in a stream of traffic (retail gravitation) is the overall design objective.
For example, Checker’s, a limited quick serve restaurant (QSR) targets mostly young adults who want grease, quickly and cheap prices. Most sites are double drive-thru, no inside seating. Average service time is 45 seconds.
McDonald’s is a full-service QSR and targets include moms who eat salads with kids who eat half a happy meal and throw toy out the window. Newer sites have long narrow building for more drive thru action, smaller inside seating, all have bathrooms, some have playhouse. Average service time is about 3-minutes.
“Is there some kind of unmet demand in a market that an additional store serves?”
Yes, it’s possible.
For example, I know markets saturated with self-serve and in-bay at gas sites but no conveyors or assisted-service. Markets like these have unmet demand and are also candidates for assimilation.
“The IRS and BPI would be curious gages to understand but against what standard are they assessed to draw conclusions about in this specific market of car washes?”
One standard is per capita. For example, based on recent census data, per capita spending for conveyor segment is $46.00. In IRS, this gives measure of E. In BPI, it gives measure of RS.
Another standard is same store sales. Based on census data, same store sales for conveyor is $550,000. In IRS, this gives measure for S.
In BPI, per capita income ratios (area / national average) give a measure of I.
Another standard is having an analogue of stores to base conclusions on.
you can make things hard or you can make things simple. i would ask the following questions:
1. is the city itself growing and, in particular, is it growing in the area you're considering putting in a tunnel
2. is there another tunnel within 3-5 miles.
3. is the density of rooftops sufficient in the local radius
4. is the car count acceptable for the street you're looking at.
5. if you live in the town, where are you washing your car? if it's most convenient for you to wash at a self serve bay then the area isn't saturated.
1. is the city itself growing and, in particular, is it growing in the area you're considering putting in a tunnel
2. is there another tunnel within 3-5 miles.
3. is the density of rooftops sufficient in the local radius
4. is the car count acceptable for the street you're looking at.
5. if you live in the town, where are you washing your car? if it's most convenient for you to wash at a self serve bay then the area isn't saturated.
MEP001
Well-known member
There's also the question of if the existing washes are any good. It's easy to steal business away from someone doing a sub-standard job, but building too near a well-established and high-quality one would make it more of a challenge.
robert roman
Bob Roman
“you can make things hard or you can make things simple.”
“i would ask the following questions:” Is there growth, another tunnel within 3-5 miles, is density of rooftops sufficient, is car count acceptable, etc?
Then you check each factor separately for the proposed location and analogue stores used for making a profile of strengths and weaknesses of the sites.
Profiles are compared and a rating is produced based on empirical rules and weights.
The checklist method you refer to was developed in the 1980’s. The method is inexpensive but simple rule based methods are overly simplistic and subjective.
For example, what is the sufficient density of rooftops or traffic counts 10,000, 20,000, 30,000 or more?
Moreover, nominal economic growth is not necessary to grow a business if there is sufficient “unmet” demand in an area.
Also, it can be an advantage to locate close to the market’s most formidable competitor.
This is why the carwash industry developed analogue-based forecast models. These models are more objective and allow for inclusion of experience and intuition.
However, analogue-based models can’t answer questions about size of market, degree of saturation, re-allocation of sales, etc. This requires retail market analysis some parts of which I referred to earlier plus gravity (statistical) or spatial modeling (mathematical).
Single site analysis that incorporates these models is commercially available today through a limited number of vendors. Modeling alone (no carwash study) is $3,500 and up. The predictive model is proven. However, the problem is the data base used for modeling includes mostly convenience retailers.
This is why I mentioned consultant for this type of wok because the experienced ones are more attuned to the overall needs of the carwash industry.
“i would ask the following questions:” Is there growth, another tunnel within 3-5 miles, is density of rooftops sufficient, is car count acceptable, etc?
Then you check each factor separately for the proposed location and analogue stores used for making a profile of strengths and weaknesses of the sites.
Profiles are compared and a rating is produced based on empirical rules and weights.
The checklist method you refer to was developed in the 1980’s. The method is inexpensive but simple rule based methods are overly simplistic and subjective.
For example, what is the sufficient density of rooftops or traffic counts 10,000, 20,000, 30,000 or more?
Moreover, nominal economic growth is not necessary to grow a business if there is sufficient “unmet” demand in an area.
Also, it can be an advantage to locate close to the market’s most formidable competitor.
This is why the carwash industry developed analogue-based forecast models. These models are more objective and allow for inclusion of experience and intuition.
However, analogue-based models can’t answer questions about size of market, degree of saturation, re-allocation of sales, etc. This requires retail market analysis some parts of which I referred to earlier plus gravity (statistical) or spatial modeling (mathematical).
Single site analysis that incorporates these models is commercially available today through a limited number of vendors. Modeling alone (no carwash study) is $3,500 and up. The predictive model is proven. However, the problem is the data base used for modeling includes mostly convenience retailers.
This is why I mentioned consultant for this type of wok because the experienced ones are more attuned to the overall needs of the carwash industry.
JMMUSTANG
car wash owner
Is there a McDonalds, Panera's, Starbucks, etc. close by?