3 million express tunnel

[rph9168]

Many of the first EE's in our area did pretty well. As they succeeded many followed and not only increased competition for customers but also kept the prices low. Ultimately some raised prices while others did not. None that I know of went to a flex serve platform as many of the original full serves did offering exterior only washes along with an aftercare program.

There is no doubt that the economy has also had a negative effect. I talked to one operator who told me that he felt he had not lost many customers to his competition but that their frequency had declined.

The story is still unfolding but most are really struggling to stay afloat right now.

 

[dirty harry]

I tried to fill in a couple of the blanks on Robert's comments. Robert, please correct any errors.

Earnings Before Taxes & Depreciation = (192,000 cars * $5.25/car revenue * 50% overhead) =$504,000 – $195,400 (loan payment?)
EBTD = $308,500 year left over

Is “this” considered good? I believe the answer depends on how you define “good.”

$300,000 is a nice number. You would need three of them to cover the initial cash investment.

A couple of years ago, a wash like this would probably list for about $5.0 million.

Pay off loan balance of about $2.0 million, add 3-year’s cash flow then subtract the cash investment.

This gives a 3-year average Return Of Capital Invested of 78%.

 

[norton]

As near as I can figure from this thread it looks like it takes about 125 cars per million dollar invested per day to break even in a EE. Does this seem acurate?

 

[tobaccofarmer]

Just saw coming soon sign for another 3 dollar express in same town. Other side of town but same guy doing number two location! I guess location one is good enough to build number two? Won't he just be cutting into his own business or is this to try and prevent another newcomer from trying to get a piece of this pie? This location also will end up around 3 million when all is said and done from the looks of things?

 

[norton]

I think you said earlier that town was 200K population with a 12% growth rate and 1 other tunnel wash. It looks like there is enough population to support another location since another 25K people have moved in within the last year. Now try putting that in a town of 50K that already has 2 tunnels and 2 express washes and it would make no sense at all.

 

[tobaccofarmer]

Yeah it made number 13 for the fastest growing city in america! Hard to believe but I guess its a good place to be for washing!

 

[dogwasher]

How is it that he is the only one in town?? I don't get it. Stop by the Chicago suburbs and you can wash your car for 3 bucks on just about every street corner. I'm being sarcastic of coarse but we have plenty of them!

 

[tobaccofarmer]

I guess more people here compared to there have figured out there are better places to spend 3 million dollars? Should there be one on every corner?

 

[tobaccofarmer]

According to an article I read the other day, this place is one of the highest volume express tunnels in Texas which would put it over 30,000 cars/month according to local reputable distributors. And seeing is believing that's for sure! This place is absolutely gangbusters.... but my question is with so much available land nearby/right across street, etc what is stopping someone else from duplicating the same setup?

http://www.drbsystems.com/public/resources/featured_owners/washfactory_expressexterior.cfm

 

[robert roman]

This express is the only game in town.

Years ago, I did work for a client looking to build there. Denton is a sleepy college town and the population of washes small and dominated by self-service and in-bays at gas sites.

This guy built large to have capacity to support $3.00 wash, create barrier and achieve dominance via convenience, image and value.

Now, he builds site two emulating chains that locate stores around beltway that surrounds a metro to create a network. Is this guy susceptible to competition? Of course he is.

Sustainable advantage created by means of cost, differentiation and niche strategy is what causes express to prosper in the shadow of self-service and full-service.

Is this enough to stop piggy-backing on to the leading retailer’s strategy – a practice commonplace in fast food?

There is no cost advantage. Operating expenses for a $3.0 mill express are the same as $1.5 mill. Large chains can create economies of scale in operations (i.e. chemical in bulk). There is no differentiation. A $1.5 mil express is the same as a $3.0 mill just smaller. Without other profit centers, the same niche is targeted.

What is to stop someone from building a $1.5 mill wash “across the street” from $3.0 mil? Nothing, it would just split the pie. Price war, doubtful, $3.0 mill express has big nut, $1.5 mill has lot less to cover.

30,000 washes a month sounds pretty exciting, times 12 equal 360,000, times $7.00 (probably less) equals $2.5 million gross.

There are 3 strong markets in Denton. If 30,000 a month is factual, this implies market clearing.

For example, building a new wash does not create new demand. All the people who go to the new wash where already getting all they needed someplace else.

So, with any future market intervention, the only direction his volumes could go is downward.

Several years ago, a guy who build a $4.0 mil express in Idaho, called me to ask if these express washes ever fail. Fearless.

 

[jtownathan]

2. $30,000 to $35,000 per month to breakeven @ $6.25 average

Is the 30-35K all monthly expenses on 1.5M wash?