Traffic Capture Rate

[TEEBOX]

This question is for Robert Roman.

On another board I noticed that you used a calculation of .007 as a capture rate for feasibility analysis on a new carwash site.

Is this an aggressive calculation? If we are not capturing at that rate then we are doing something wrong?

I'm on a corner lot with main traffic at 27K and other cross street at 12K.

Your calculation states I should have projected daily counts of 273 cars per day. (.0070 x 39,000) = 273

Is this how you do your napkin analysis?

Thank you in advance!

 

[robert roman]

"(0070 x 39,000) = 273….Is this how you do….analysis?”

Yes, this is how you do the math.

“…..you used a calculation of .007 as a capture rate for feasibility analysis on a new carwash site. Is this an aggressive calculation?”

No, it’s conservative.

0.007 is a benchmark to “test” viability. Likewise, 2 to 4 times gross sales is equation to “test” market value. However, tests like these are not definitive because they are based on rule of thumb.

Rule of thumb principle is not intended to be “accurate” or “reliable” for every situation. It is “easily learned” and “easily applied” for approximating or making broad determination.

“If we are not capturing at that rate then we are doing something wrong?”

Not necessarily.

Market share is a function of customer attraction rate (capture) and customer loyalty rate. To illustrate, when a carwash opens for business, there is no repeat business, all the customers are new. So, the loyalty rate is zero and capture rate is 100 percent.

After the business has been open for three months, there has been time for some of the first-time customers to come back as repeat business. So, at three months out, loyalty rate may be 25 percent and capture rate 75 percent.

After one year, customer base is fairly established and loyalty rate may be 75 percent and capture rate 25 percent.

So, interpreting capture rate depends on where the business is in the life cycle and also the definition of capture rate.

For instance, 0.007 is benchmark. Benchmark is simply a measure of performance of similar companies and should be viewed as naïve because they are not based on cause and effect. This is why consultants, developers and equipment dealers use models of sales assessment to estimate capture rate at a specific site location.

So, am I meeting my projections – becomes a matter of comparing actual capture rate with the predicted capture rate.

 

[Earl Weiss]

Aren't there other factors to account for?

Ease of access.

Proximity and number of competitors on same roadway.

Other?

I would think a competitor 1/2 mile down the road on any or all 4 approaches would make a huge difference. Same pie - more pieces.

 

[robert roman]

“Aren't there other factors to account for?”

Yes, access, competition, visibility, area composition, etc. are variables included in OEM checklist model to estimate capture rate.

Discussion was benchmark rate. Benchmarks are generalizations determined from industry surveys.

“I would think a competitor 1/2 mile down the road...would make a huge difference.”

In OEM models, the difference is not as much as you would think.

Reason is OEM models do not account for total potential sales in area or index of retail saturation.

 

[rph9168]

From my experience most capture rates turn out to be bogus. They are used by equipment sales people to sell equipment and to a lesser extent by lenders to justify approving a loan. I agree with both Earl and Robert. I think there are many factors to be considered. That's why I would definitely recommend hiring a consultant or talking to an experienced industry expert or operator that has no money in the game to help evaluate any project. Ultimately I think people experienced in previous successful projects develop almost a gut feeling on the possible success or failure of a wash site.

 

[Waxman]

I used 3/10 of 1% or .003 multiplier when i built my wash. we never did hit that figure for touchfree sales, so for me .007 would have been too high. if i had used .007 for sales estimates (gross revenue) and borrowed based on that, i would've gone broke.