Iron Fox prides itself on the growing success of it’s entrepreneurs. We help those foreign to the car wash industry build and brand their company.
Iron Fox prides itself on the growing success of it’s entrepreneurs. We help those foreign to the car wash industry build and brand their company.
The Car Wash and Auto Detailing industry is already worth over $11 billion, and that number is expected to increase over the next 5 years. The highly fragmented nature of the playing field makes it an ideal investment opportunity for a variety of savvy investors. The right location, strategy, and execution can create one, or a string of, successful small businesses that generate large amounts of passive income. Just like every opportunity, these rewards do not come without risk though.
Car wash locations are marked as special use buildings which can make liquidity difficult. There is also the risk of over-investing in resources and inventory. What many first-time owners fail to understand is just how complicated opening a new location can be. The best operator on earth can’t fix a business in the wrong place.
There are several factors that can determine the success or failure of a car wash before the first customer ever arrives. The best way to mitigate risk is with a solid plan. In this post, we’ll cover some of the most common and vital areas of risk and what steps can be taken to avoid pitfalls.
The first step in creating a successful car wash is developing a nuanced understanding of the different available models. Will the location be full-service? Flex and exterior? Some models, like the exterior wash, will generate an increased competition for optimal sites. The answer to these questions will be extremely important for determining the class and quality of a location.
After deciding on an appropriate model that fits your investment profile and risk tolerance, it is important to map out how you will select your location. Start by weighing initial costs with expected returns, but create SMART (Specific, Measurable, Attainable, Realistic, Time-Based) goals to reduce the potential for over-extending and inviting potential catastrophes. Experienced industry professionals who have successfully opened and managed several locations often utilize well-funded real estate teams to analyze the viability of all new locations.
The next step is pricing out equipment and supplies. Be careful to take information from manufactures with a grain of salt. They will make money even if your location fails. Brokers want to maximize the sale or lease rate. Everybody has their own best interest at heart and might encourage you to open a non-viable location.
It is important to remember that success in the car wash industry is a mix of smart location and operational know-how. Consulting with experts can reduce the risks of overbuilding and poor design.
At IRON FOX, we help you avoid risk with complete and sophisticated volume analytics to help you make the best investment decisions. At the start of planning, we offer a free preliminary site inspection and analysis. Our many years of experience in retail site selection for carwash operations as well as operational knowledge allow us to assist you in decision-making to set your business up for success.
Historically, car wash operators have relied upon customer service and maintaining a small number of locations, if not a single one. However, the truth is that the explosion of exterior express platforms has exploded in popularity for entrepreneurs, with many opening multiple sites. There’s a lot to be said about a small business. But the hard truth is that one of the most profitable models is owning and operating many locations, and that’s only recently become viable. With better price points and attractive amenities bringing in the cash, investor interest is reaching an all-time high. Manufacturers, entrepreneurs, and private equity are noticing this wave of cash and getting ready to vacuum up as much as they can. The time is ripe, now more than ever, to enter the car washing industry.
Around a decade ago, industry experts predicted the development of two major operator types: cheaper, high-volume exterior washes that could work through a large volume of cars per day at a low price point, and a full-serve experience for wealthier customers ready to shell out. The experts got most of it right, enough to be useful, at least. With approximately 4 out of every 5 new car washes utilizing the exterior models, investors are chomping at the bit. This influx of private capital has offered entrepreneurs a way to exit their investments once they’ve reached maximum value. The truth is, entrepreneurs want to take advantage of a specialized industry like this one while minimizing their risk, and now that’s possible. But what’s all this hype for this new model about? Does it hold up to honest scrutiny?
An exclusively exterior platform is more scalable than full service as it avoids the need to manage a bunch of employees, reducing time spent micro-managing. Managers also don’t need to worry about liabilities and other expenses that add up quick. Interior services are notorious for nitpicky customers, so focusing on the exterior makes customer satisfaction easier to manage. Finally, while working on cash alone has advantages, shifting to card payment is the next big thing. Tracking data on services, expenses, and trends is useful when dealing with hundreds of locations across the country.
In an industry buzzing with new investor attention, Iron Fox sees an opportunity for experienced advice to serve the increase in business, consolidation, and innovation. Bigger chains means more consolidation. Business will quit dealing with employees to spend more time on equipment and operational issues. Iron Fox has credible experts to partner with new car washing ventures and old dogs in the industry looking to expand. It’s not enough to have tested methods and industry knowledge. Getting ahead of the competition requires an honest perspective that recognizes trends but doesn’t get too caught up in them.
To learn more, visit Iron Fox today at: www.ironfox.com
For entrepreneurs new to the carwash industry, it’s an almost impossible task when it comes to comparing equipment manufacturers. While polling existing carwash owners would seemingly net some type of popular consensus, existing operators tend to stay with one brand, and the majority of these operators only have one location, thereby limiting their exposure. Distributors will have a broader context of opinions; however, most are provided short-term incentives by equipment manufacturers, and tend to place more value on the sale than an extended relationship with carwash entrepreneurs.
The truth is, when the annual volume is less than 120,000 cars (which is the typical average for most new or existing carwashes), each manufacturer’s equipment will do an almost equally adequate cleaning job. Alternatively, the differences are more visible when the volume is over 120,000 cars per year because:
If you have recently opened for business and/or committed to a particular brand, rest easy. For the short-term, or at least for the first year or so, don’t sweat the $10,000 equipment deposit or the buyer’s remorse associated with new, shiny equipment. But if you haven’t already purchased, or committed to purchase, new equipment, read on for a comprehensive look at the pros and cons of the leading equipment manufacturers.
Sonny’s is the undisputed US market leader. They are often cited as the Wal-Mart of carwash equipment, but to be fair, this comparison is somewhat skewed—Sonny’s quality can definitely be ranked higher than Wal-Mart’s, and their pricing isn’t nearly so low. Overall, though, Sonny’s is a great option for most, particularly those with a build and flip mentality.
Pros: The equipment has a relatively simple design, and parts are plentiful. This can be a very beneficial advantage to keep in mind as all equipment requires regular maintenance, and Sonny’s basic design allows more people to perform service, decreasing downtime.
Cons: Unlike MacNeil Wash Systems (see below), cleaning the back of SUV’s requires additional equipment with Sonnys, putting their upfront costs at the middle of the pack, and a less effective option for shorter tunnels (less than 120’).
MACNEIL WASH SYSTEMS
Coming in right behind Sonny’s at the #2 spot in overall US market share is MacNeil Wash Systems. MacNeil is known as the heavy-duty choice, earning this accolade for their reliable performance, solid engineering, and innovative conveyor design. And their SuperFlex wraps have garnered MacNeil many enthusiastic client endorsements. With MacNeil, compared to similar tunnels producing similar wash performance, less equipment is required, keeping their pricing at about mid-range, and making them a good choice for shorter tunnels (less than 120’).
Pros: Without an operational conveyor, most carwashes are forced to close, making the reliability and durability of MacNeil a huge advantage. In addition, because they are engineered with additional joints that allow for complete coverage of an entire vehicle, including the back of an SUV, a MacNeil robotic SuperFlex Wrap-Around (also known as an articulator wrap) can perform the same job as the two sets of gravity wraps that are typically employed in most carwashes. This translates to less equipment, easier upkeep, and more usable space while creating an impressive short tunnel (less than 120’) wash performance.
Cons: Because SuperFlex wraps have more moving parts than most competitor wraps, when glitches occur, the services of an experienced technician or an exceedingly competent manager will be required. While the overall design allows for equipment consolidation, it also concentrates risk in the case of equipment failure—if one set of gravity wraps fails, during repair, you still have a working wrap that will allow for a partial carwash; if your single SuperFlex Wrap-Around fails, your entire tunnel shuts down until repairs are complete.
Belanger has been a respected name in the industry since 1969, and is known for their focus on engineering. While this puts them on the higher side of the cost spectrum, they are still not out of line with the competition. Operators typically like the brand, and Belanger tunnels are proven to stand the test of time.
Pros: Operators have been known to brag about Belanger’s QuickFire wraps which are capable of cleaning the back of an SUV at a very rapid line speed, making this a viable solution for high volume sites. They also boast an extremely solid research and development department, as evidenced by their SpinLite lineup which incorporates LED lighting into the equipment itself.
Cons: Modest operators, whose equipment package is the greater percentage of their total budget, may use Belanger’s engineering focus against them, claiming that the equipment is sophisticated for sophistication’s sake, and unnecessarily expensive.
TOMMY CAR WASH SYSTEMS
Tommy’s isn’t actually a manufacturer. It’s a national distributor for A.V.W. Equipment, which is then rebranded under Tommy Car Wash Systems. However, the methodical marketing within Tommy’s franchise-like structure, along with pre-designed buildings, and a unique product offering makes a distinct impression on new entrepreneurs.
Pros: Although not inexpensive to build, there is value with the intellectual capital of Tommy’s pre-designed building as it reduces potential costly design errors commonly made by new entrepreneurs. This can be a great option for those less interested in the branding associated with the building design process or less dependent on operational guidance after start-up.
Cons: Tommy’s incorporates a flat belt conveyor that when compared to a traditional conveyor, is approximately 2x to 3x more expensive both upfront, and for ongoing maintenance. This puts them at the higher end of the cost spectrum, making it a greater risk for those operators who anticipate more than average annual volume. In addition, while Tommy’s engineering reputation can be considered adequate, it’s not the superior engineering status found elsewhere. There is also the branding risk associated with competitors in nearby markets also employing Tommy’s design.
THE IRON FOX DIFFERENCE
Iron Fox takes a different approach than most distributors, viewing the initial sale as an opportunity to establish a long-term partnership built on honest advice, backed by experience. Although under agreement with MacNeil, we at Iron Fox encourage first-time operators to shop around. The Iron Fox value extends well beyond opening day, as we strive to go above and beyond the competition and operators’ expectations by offering maintenance contracts, training workshops for entrepreneurs and their managers, custom chemical packages, and so much more. Like our clients, we depend on repeat business and will not sacrifice long-term profit for short-term gains.
To learn more or start your journey contact Iron Fox today!
Historically, the conveyor carwash industry has been extremely fragmented, with a majority of operators owning and actively managing a single carwash. From the beginning in the 1950s through the 1990s, few operators had as many as 5 locations. Beginning at the turn of the century, this changed. There is an accelerating trend toward acquisition and consolidation. Since 2000, IMO and Mr. Wash have aggressively acquired existing carwashes. This trend is reflected in smaller operators as well with a number of smaller roll-up operators operating 30 to 40 locations. In 2013, there were only 43 operators with more than 10 carwashes. By 2016, there were 61. Private equity is actively seeking carwashes as sound investments, which creates exit opportunities for operators, entrepreneurs and investors.
As these shifts occur, the more entrepreneurs are looking to start ventures in the carwash industry. These new owners will focus on multiple exterior-only and flex-service sites. This will place a premium on distributor partners who can provide more operational, site selection and equipment expertise to entrepreneurs looking to expand quickly.
This shift is due in part to the explosion of the exterior-only operating model for conveyor carwashes. The exterior only model consists of a 90’ to 120’ carwash tunnel with an area for customers to vacuum their cars. The model requires very little labor compared to a full-service model, which has as many as 25 employees at busy locations on peak days. Exterior only operations are slightly less profitable than the full or flex-service models; however, the model is not as management intensive and is more scalable, allowing an investor to build multiple units. Equipment manufacturers and distributors have encouraged the exterior-only model. New investors are increasingly looking to create chains of 3 to 10 carwashes. Since 2010, more than 80% of new conveyor carwashes are exterior only models. Operators of exterior only models, with limited management and labor, will increasingly rely upon distributor partners, such as Iron Fox, who have the management expertise and staffing to address development, equipment and operational issues. Learn more about Iron Fox and its services.