2009 In Review – A record breaking year

[robert roman]

IBA’s are not dead.

IBA’s will continue to be a viable business model in emerging and fringe markets and the petro markets for the foreseeable future. However, there is an emerging and potentially strong trend away from touch-less in-bays.

According to the literature, at least one gas/c-store retailer is dumping touch-less IBA for friction; http://www.carwash.com/news.asp?N_ID=70176 I also know several other retailers that are leaning in this direction.

For example, I am currently working with a couple of developers who are planning to build free-standing multiple in-bays (high-volume friction units) configured as express exterior (free vacuums). These are in metro locations but the land is right, the sites are grade A and there are very few suitable properties for future competitors to build on, which is something that new-bees should consider before jumping into this business.

A moving platform or anything else for that matter (e.g. mini-tunnel, pre-engineered building) that can be used to improve the appeal, throughput or quality or reduce the cost of operating an IBA is something that operators should investigate.

One thing I learned in helping people build successful carwash businesses over the last ten years is that there is no single wash format that you can label as the “killer” application. Instead, I have found it more useful to help my clients identify killer “solutions” based on the dynamics that exist in the marketplace.

Quite frankly, if some distributors had exercised a little more stewardship in this regard, there probably would not be as many over build markets as there are in some areas.

 

[rph9168]

I would definitely have to agree with Robert. No sector of the industry is dead. Basically there is some shifting going on. Since there are so many IBA sites already in existence a demand for in-bays will continue for reloads although it may decline due to site closures and a decline in new builds.

I believe the shift to wards friction from touchless is real driven by several issues. First of all is the competition from friction express exteriors has made it critical at some sites to produce a more consistently clean vehicle. In addition, advances in equipment technology and media used have created better friction units. In some instances the cost of chemicals has also come into play.

While many areas have overbuilt there are still good sites available for all sectors of the industry. In rural areas IBA's are normally the sensible choice over an express or flex/full serve. In more urban settings, high traffic well exposed sites benefit from a conveyorized format. Self service seems to be the best companion to rural in-bays as well as most free standing sites in larger cities.
(continued)

 

[rph9168]

I am not sure I would lay all the blame on distributors. I have yet to see one use a gun on a potential buyer. While some may use overly aggressive sales tactics, ultimately the uninformed buyer bears much of the responsibility.

Future growth depends largely on a settling out of the current situation, improvement in the economy and more feasible options for financing. This is the third time in my experience I have seen this industry shifting gears. This is probably the most drastic in terms of length and depth of the situation. When the turn around hits full stride is almost any body's guess. I am seeing some of the in-bay business picking up in the form of reloads and the express movement driving tunnel sales. Self service seems to be experiencing a much slower turn around but this is usually the case. As long as the American people continue their love affair with vehicles car washing will be a viable business for the wise investor and quality operator.

 

[Waxman]

Good posts. Got a little tired of gloom and doom and just want to clean some cahz!!!

 

[Greg Pack]

Well, contrary to what some of my posts may indicate I don't spend my days in a dark room praying for the Lord to take me to a better place. However, I've been in this business since 1992. One thing is consistent with the my experience - lower net revenues and lower ROIs. When I started I had a POS SS in the ghetto that I had 50K in and charged 1.25 for four minutes. Now, seventeen years later I have people driving BMWs pull into my landscaped wash sitting on a 500k piece of dirt and bitch about a 2.00 startup. Look at the cover of Sonny's catalog- a fifty year old pic of a wash? and look at what they charged- 3.00 I think. So back when you could buy a coke for a nickel a car wash costs 3.00. To me, that speaks volumes.

Seventeen years ago when I started in this business the rule of thumb for my area was a decent SS wash will gross 1K/bay/month. Guess what most SS are averaging around here? The answer is "less than that". Sewer has gone up for some operators in the county next to me 5X or more. Utilities are swallowing 25% of the income at some low volume washes.

In the good old days of the mid nineties you can hammer out a 20% plus return. This is practically unheard of anymore around here. Anyone that has seen revenues decline 25% plus knows that they have seen a significant change in cash flow and value of their properties. Yes, many jackasses built expresses where they shouldn't and some have closed. But they are still there and will likely haunt us from here on out. When you talk to area operators many are in negotiations of some form with the bank to defer foreclosure. I'm sorry, but when you add all that up if that doesn't have an effect on your attitude, something is wrong. De nial ain't just a river in Egypt, baby!

Yes you can still make a living in this business but it takes more work for less pay and frankly I don't see a reason for it to improve. On the plus side, asking prices are coming down as owners and their banks are willing to get out.