Car wash owners often need to be convinced to step out of their comfort zone, especially when it comes to making a decision about improving their financial performance. In most cases, there is justification.
For example, it is not uncommon for self-service operators to consider converting a wash bay to another use. This may include converting a spray bay into an in-bay automatic or an in-bay into a mini-tunnel. Wholesale conversions would include repurposing a property as an express exterior or converting a property to the “pay-one-price” self-service format.
The conversion process should begin by examining how such a change would affect the business model. The value proposition remains the same: clean, shine, and protect the customer’s vehicle.
Converting a self-serve location to another format produces a big change in the market segment. Stepping up to in-bay automatic or mini-tunnel attracts the do-it-for-me (DIFM) crowd. DIFM customers are convenience-oriented and are willing to spend money to save time. They also expect a frictionless experience and mobile-friendly options. In other words, DIFM customers have different needs than do-it-yourself (DIY) customers.
The relationship between revenue, cost, and expense will change with conversions. Instead of selling time, operators will be selling exterior-only car wash services. Instead of choosing individual functions, customers will purchase from a menu of wash packages containing different levels of value-added products that help increase average per-car revenue.
Site conversion will also affect the value chain or the processes of producing a product or service, selling it, and distributing it. Instead of manual washing, an in-bay features a robotic device that automatically cleans the vehicle while it remains stationary, whereas a conveyor has the equipment arranged according to the cleaning process. Instead of coin boxes, automatic washes are equipped with high-tech self-pay stations (point-of-sale) with touch screens, video and audio prompts, and tap-to-pay options.
Customers will have high expectations. This means having a building with curb appeal, attractive signage, a bright, clean wash bay, some “show,” and a virtual store (website).
In terms of competitive advantage, I don’t believe anyone would expect a self-service conversion to put them on equal footing with a full-scale express wash. Nevertheless, an in-bay or mini-tunnel opens the door to a wider audience and greater profit potential.
Best Use
Investors must consider the property use that will result in the highest value. The four criteria for the highest and best use of a property are legally permissible, physically possible, financial feasibility, and maximum productivity.
Legally permitted implies that the improvement or proposed use is consistent with current zoning, building codes, and environmental regulations. If not, there should be a very high degree of probability that existing requirements can be changed in the near future.
Physically possible means there are no physical characteristics of the site, such as its size, shape, frontage, utilities, etc., that would limit the proposed use. Site factors that can influence in-bay and conveyor operations include lot position, visibility and accessibility, entrance stacking area, turning radius, and navigation across the lot. There are also nuances to consider, such as noise generated from air dryers, traffic impacts, and maybe environmental requirements (i.e., reclaim).
Financially feasible means the improvements or proposed use produces some net return to the property. This requires a realistic assessment of market demand as well as competitive uses, which constitute the supply.
Maximally productive means maximum return or the use that produces the highest residual land value. To illustrate, consider three scenarios, each passing the first three tests. This includes converting a spray bay to an in-bay automatic, converting an in-bay to a mini-tunnel, and repurposing the property as an express exterior.
The numbers in the table on page 56 are fictitious and provided to give a simple example of the type of analysis that can be used to determine the maximum return. Here, the return is estimated by going from an assessment of sales to net operating income less capital expense of the improvements. The “residual” row is the estimated change in land value based on the expected return on the property.
Special Considerations
Unlike an in-bay that can operate 24/7 without an attendant, a conveyor operation, especially one expected to crank some volume, needs on-site attendants. Attendants are needed to assist at the pay station, guide vehicles onto the conveyor, police the vacuum area, maintain the towel program, and assist with maintenance.
If the company offers a monthly wash plan, attendants can be involved in selling memberships. Moreover, consumers do not typically visit conveyor operations after normal business hours, so there are opening and closing duties to cover.
It’s also important to consider the increase in sales volumes from offering a monthly wash plan. For example, the data suggests the average redemption rate for members is between 2.3 and 2.5 visits a month. Consequently, this factor needs to be accounted for when making sales assessments. Otherwise, absent sufficient hourly capacity, the site may become overwhelmed during peak times. As for operations, both the owner and the staff would benefit from classroom training in maintenance, repairs, and management.
Marketing
Mirroring industry best practices is the best approach to driving traffic to the site. For some self-service operators, best practices mean taking a more refined approach to market strategy and tactics than they may be used to.
The basics include a website that renders well on mobile devices so the business can communicate with customers and a social media presence.
Operators can send consumers coupons by direct mail or post them online. From a public relations perspective, they should get involved in community activities or make financial donations to charity.
Conclusion
In the final analysis, converting an existing wash bay may seem straightforward. However, a number of factors should be considered before deciding the best way forward. The highest and best use of land is usually a “long-term” use that is expected to remain on site for the normal life of the improvements.
