Just got back from a little vacation in Spencer, West Virginia. Town has about 2,000 people and is the county seat. There are two different operating washes now with a total of one auto and three self serve bays between them. Under construction is a twin automatic with four ss bays, and two equipment rooms. None of these people are going to make a decent return. Sad.
Overbuilding, it seems to be evrywhere
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Reds
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I have a similiar town about 8 miles from me. Same pop. and is the county seat. One auto with 2 SS bays, and one auto (one mile south of town) with 3 SS bays. My distributor has quoted 2 different people on equipment packages with that town as a target. I even considered it once for one reason - both washes are terrible. 20 year old worn out equipment, shabby facilities, poor service, etc. It would be easy to blow them out of the water, and I think that running a poor operation invites competition. The fly in the ointment is that a new wash down the street may motivate the current owner to upgrade his equipment and clean up his act, at which point you would both be sitting there making no money.
Reds
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One other thought - I have no pity on someone who opens up a wash in a town that's already obviously saturated. It proves that brains are not a prerequisite for having money. Some people's business strategy is to find someone else, like another wash or fast food restaurant, and get right next to them. If you run a good operation, have your finances in order, and support the community you should have the upper hand.
How do you stop someone from building a wash when they a) have the money or financing, b) are convinced it will work and c) will find someone to build and equip it?
I have seen several situations of overbuilding in towns and it seems that eventually the situation works itself out by either the older, established washes losing business to the new washes and closing or barely hanging on or renovating, keeping their customers and increasing business forcing the newcomer out or to struggle. In some cases I feel the established washes were their own worst enemy by letting their operation slip to the point that someone else felt they could make money competing against them.
As much as we all would like to be able to carve out our own piece of the pie in the form of a non-competitive market that is not how the real world works. The best one can do is to continually improve their business and make it difficult for someone to compete at their level.
I have seen several situations of overbuilding in towns and it seems that eventually the situation works itself out by either the older, established washes losing business to the new washes and closing or barely hanging on or renovating, keeping their customers and increasing business forcing the newcomer out or to struggle. In some cases I feel the established washes were their own worst enemy by letting their operation slip to the point that someone else felt they could make money competing against them.
As much as we all would like to be able to carve out our own piece of the pie in the form of a non-competitive market that is not how the real world works. The best one can do is to continually improve their business and make it difficult for someone to compete at their level.
I would think that the over-building trend will be coming to an end, as the economy tanks, and credit gets squeezed. Banks already don't like to lend on car washes as they are "single purpose buildings"; nowadays, it might be next to impossible to get a loan to build one or borrower might have to put down hue amount of capital. We shall see.
raisetheprice
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Tell me about it
Now HEB (A dominent grocery chain in TX) is putting in against us right across the street. We're stand alone double bay auto, they're putting in the same brand equipment we have, but a single bay of course tied to their cheap gas. So much for the distributor protecting one of their original customers...this chain is technically just another investor (no oil contract with the manufacturer). Chances are that the corporate decision maker 200 miles away has no idea that we're even across the street.
Lowering the price and going attended full time...or hopefully sell before they get open. New investors good luck, you'll work harder and more weekends/holidays than you ever dreamed...only to be F'd by the same people who you helped become a millionare (who are off every weekend and holiday btw unless you need them, then bend over for some more).
Now HEB (A dominent grocery chain in TX) is putting in against us right across the street. We're stand alone double bay auto, they're putting in the same brand equipment we have, but a single bay of course tied to their cheap gas. So much for the distributor protecting one of their original customers...this chain is technically just another investor (no oil contract with the manufacturer). Chances are that the corporate decision maker 200 miles away has no idea that we're even across the street. Lowering the price and going attended full time...or hopefully sell before they get open. New investors good luck, you'll work harder and more weekends/holidays than you ever dreamed...only to be F'd by the same people who you helped become a millionare (who are off every weekend and holiday btw unless you need them, then bend over for some more).
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MEP001
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Yeah, HEB put in an auto fairly close to us, close enough to make an impact. There's a double Laser that was already pretty slow that's between us and the HEB, and I'm sure it's worse for them. There's a good market in the area, lots and lots of houses and a bunch of apartments going up, but the area was already saturated with auto bays.
Earl Weiss
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The only saving grace I ahve seen is that often the huge corporation who put in washes do not oversee them as closelly as the indepoendant guy who has more riding on it's success . Unfortuneately they drain some demand, but over time the out of order signs go up more frequently and even when operating, their performance is less than optimal because they seldom have anyone on site wheo can correct or fix anything or even notice that something is wrong.
Earl is right. Large chains tend to drive away more business from their washes than they bring in. They do not take good care of the wash and they tend to either be in bad condition or closed most of the time. They may be a problem at first but in the long haul they tend to slack off and not be much of a factor.
washnvac
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The other problem is when one of these chains runs a bad show, this could potentially affect your market share. If a customer uses a rollover at the chain, and it does a lousy job, chances are next time he/she rides by your wash they may not stop because of the bad overall experience. I have Royal Farms C-stores opening washes in my area. They can not even run and staff their stores, and now they want to get in the car wash biz? Ofcourse, they give you 10 cents off a gallon of gas with a wash purchase. Nice incentive, huh? WTF!!
I don't think a bad experience has much of a negative effect on people using an IBA unless they are first time users. If people are accustomed to using an IBA a bad experience will probably keep them away from that particular wash but not IBA's in general. Actually I think it may expand the market with more people trying an IBA due to incentives. Maybe those trying it for the first time might be discouraged by poor results but not the regular IBA user.
raisetheprice
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I suppose all of HEBs washes are on maintenance contracts with our distributor...that's why they push them so hard to put in. They know the residual is WAY better than the typical investor can ever bring them. I read somewhere that HEB is the 5th largest privately owned company in America...so carwashing is chumpchange to put in and maintain for them.
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I wouldn't assume that those washes are on a maintenance contract. While c-store/petroleum companies seem to lean toward maintenance contracts, many of the big box stores do not seem to be inclined towards them. In addition I know many times distributors have a hard time getting paid on time or even within a reasonable amount of time due to the red tape often involved in their operations so they sometimes are forced to withhold service until they are paid creating problems.
Not that I wouldn't be concerned about having them as a competitor but even though they are a large company often times they seem to have a difficult time operating a wash.
Not that I wouldn't be concerned about having them as a competitor but even though they are a large company often times they seem to have a difficult time operating a wash.
P
Patrick H. Crowe
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In my view overbuilding is a complex issue. In the case mentioned here it is obvious there are just way too many bays for the population. Allow me to point out how my situation is very different.
In the Kansas City area (this includes two major counties in Kansas) there are clearly some areas that are badly overbuilt. Simultaneously there are areas where washes are literaly scarce and where owners have tried to put washes for years and failed to do so. Here's why.
Zoning is very tricky. Various cities will severely restrict where washes can be built. In Kansas City Missouri there are areas which are very badly over built, i.e., less than 1000 people per bay within a two mile radius and other areas with no washes for miles.
Our situation is additionally complicated by patterns of racial segregation and the plain fact is many whites will not get near what the percieve to be high crime (black) areas.
Certain 'burbs are zoned in a such a way that the government in effect dictates where washes can go and their choices are poor at best, e.g., no visibility from the main cross streets.
Overbuilding is a major concern and in a small town with just too few people it's a no brainer to see. In some ares, like mine, it's very political.
Patrick H. Crowe
In the Kansas City area (this includes two major counties in Kansas) there are clearly some areas that are badly overbuilt. Simultaneously there are areas where washes are literaly scarce and where owners have tried to put washes for years and failed to do so. Here's why.
Zoning is very tricky. Various cities will severely restrict where washes can be built. In Kansas City Missouri there are areas which are very badly over built, i.e., less than 1000 people per bay within a two mile radius and other areas with no washes for miles.
Our situation is additionally complicated by patterns of racial segregation and the plain fact is many whites will not get near what the percieve to be high crime (black) areas.
Certain 'burbs are zoned in a such a way that the government in effect dictates where washes can go and their choices are poor at best, e.g., no visibility from the main cross streets.
Overbuilding is a major concern and in a small town with just too few people it's a no brainer to see. In some ares, like mine, it's very political.
Patrick H. Crowe
