Carwash

Boot Camp

Presented by

RJR Enterprises

Carwash Consultants 2498-B Laurelwood Drive Clearwater, Florida 33763 (727) 723-9474 office rjrcarwashplan@yahoo.com www.carwashplan.com

COPYRIGHT 2009 by Robert J. Roman

All rights reserved, including the right to reproduce this book or portions thereof in any form whatsoever without the expressed written

consent of the author. The publisher disclaims any personal loss or liability caused by utilization of any information presented herein.

PRINTED IN THE UNITED STATES OF AMERICA

Table of Contents Introduction Why invest in a Carwash Economic Failure Categories of Carwash Business Model Market Location Capture Rate Site Planning Cost to build a Carwash Construction Operating Expenses Equipment Carwash Development Process Management Special Features Green Carwash Small-scale Carwash

Introduction The carwash industry is comprised of commercial establishments that provide car-care services such as exterior washing, interior cleaning, waxing and exterior and interior detailing. These services are provided to motorists, automobile dealerships, fleet operators and other businesses. Carwashes may offer a combination of facilities and services and are generally classified as self-service, in-bay automatic or conveyor carwash. According to the International Carwash Association, the U.S. carwash industry is comprised of over 101,500 retail outlets which gross in excess of $35 billion annually. It is this large amount of money that often makes the carwash business seem like a sure bet and attracts "new-to-the-industry" investors.

Why Invest in a Carwash? Private investors usually enter the carwash business to become self-employed, generate income and build equity for their retirement or to pass the business down to their children. Retailers will enter the carwash business as a way to broaden their customer base and generate additional revenue and profit from their properties. Individuals or group of investors who pool their money will enter the business to build single or multiple carwash sites (i.e. regional chain). Portfolio or passive investors may enter the carwash business as a commercial real estate investment play. Regardless of motivation, carwash is a capital investment. A capital investment is the acquisition of property that is expected to have a long useful life before it has to be repaired or replaced. This property (fixed assets) is what carwash owners use to produce income. Fixed assets include tangible items such as land, building and carwash equipment and intangible items like brand name, trademarks and customer recognition. Since fixed assets are not readily converted to cash, the carwash is in a less liquid position which entails the risk to profits if revenues fall. Carwash is a hard-asset based business. Building a carwash requires a large outlay of capital to acquire the fixed assets which can cost from $550,000 to $3.0 million or more depending on the category of wash and the scale and scope of the project. Because of the size of the investment, investors will usually finance a carwash project with external funding. Since debt can be used to finance almost all of a carwash assets cost, lenders will generally require the asset to provide collateral against the loan. There is nothing wrong with leveraging a build or buy scenario in this manner provided that the carwash operator can make enough money to cover the cost of debt financing and earn a reasonable return on the investment.

With this in mind, carwash should not be considered a low-risk business investment. Carwash is generally classified as a special purpose property. The barriers for entry are relatively modest. Carwash operators must bear labor costs and other operating expenses and fixed costs to establish and maintain a business presence and yet owners sell a non-essential service that can be difficult to differentiate. Price competition can be intense. Carwash can also be affected by the weather, time of day, weekday and season, competition and the local economy. Carwash is very resilient industry but it is not a recession-proof business. The keys to success for a hard-asset based business are cost leadership, uniqueness and prudent financing. Carwash operators that consistently deliver high quality products and services most efficiently will have a strong advantage and can achieve superior financial performance. Investors should focus on operating margins and return on invested capital. When limited assets are required to fulfill the delivery of a particular service, the ownership of those assets are key. A well located carwash represents a significant competitive advantage and barrier to entry when it is combined with an owner who is dedicated to the customer loyalty business model. Having a load of debt that cannot be easily financed by the cash flow of the carwash business is a recipe for disaster. When investors evaluate a carwash opportunity, they should always be sure that the debt can be serviced from the free cash flow even under a downside scenario.

Economic Failure According to Brian Head, an economist with the SBA Office of Advocacy, "As a general rule of thumb, new employer businesses have a 50/50 chance of surviving for five years or more." Although the experts always have opinions about what a business owner should and shouldn't do, it is a fact of life that a percentage of new small businesses do fail each year, carwashes included. Common experience has shown that the carwash industry has a much better track record than the national average for most other business types. The most common reasons for carwash failures are listed below.

Poor location Insufficient capital Poor planning Poor management Partnership breakup

One of the most important decisions carwash investors can make is where to locate an outlet.

Because convenience is so important to today's consumers, a carwash can prosper or fail solely based on its location. To accomplish the final store site choice, carwash developers need rational and formal use of information. Retailers have always understood location as paramount but understanding all aspects of store performance and site potential in addition to consumer behavior demands a great amount of information including geographical, demographic, lifestyle and competition data. With this in mind, trade area evaluation, the demand and competing offer, are keys.

Categories of Carwash Self-service carwash is a facility where motorists can clean their own vehicles in wash-bays equipped with hand-held spray wands.

A selector device is used by the customer to allow for various types of wash products to be dispensed and used on the vehicle being cleaned. Equipment is typically coin-operated but there are also code generated or credit means of system activation available. Self-service users include all age groups and income levels but primarily it attracts younger motorists with lower incomes. Many self-service facilities will provide one or two in-bay automatic carwash systems. An in-bay automatic carwash is a facility where motorists can have their vehicle washed without having to leave the comfort of their vehicle.

Once the customer pays at the automated teller (pay station) and pulls their vehicle into the wash-bay the machine automatically moves back and forth over the vehicle to clean it by using a combination of chemicals, brushes and/or high-pressure water spray. In-bays typically attract motorists who are older and have higher incomes than self-service users. A conveyor or "tunnel" carwash is a facility where an automated conveyor system is used to move the vehicle and it is cleaned by using a combination of chemical, brushes and/or high-pressure water spray.

There are two types of tunnel washes. Exterior conveyors provide motorists with an exterior only wash. Full-service conveyors not only clean the exterior of the vehicle but also offer valet services such as interior cleaning, waxing and reconditioning. Conveyors attract motorists who are older and have higher incomes than self-service users.

Business Model A business model is essential for carwash start-up ventures because it is an important determinant in how production inputs are used to create economic output, the profits to be made by the company. A good business model will describe how you are going to solve the customer’s problems, how you are going to target the needs of the different market segments, how the company will generate sales and target profit margins given its cost structure and how the company will develop a competitive advantage by means of a cost, differentiation or niche strategy. Quite frankly, there is no limit to what an investor can combine on a single carwash site. The underlying notion is that each business model has different levels of capital investment, management and skill requirements and associated risks. If you want to minimize your investment and don’t want to manage a lot of labor, a self-service carwash with wand-bays and in-bay automatic or a stand-alone mini-tunnel may be right for you. If you require more income, a high-volume express exterior might be the right model. If you want to service a broad range of motorist needs, a full-service, flexible service or a multiple profit center would be more relevant. Consequently, the challenge for investors is to determine what business model will help them achieve their goals and objectives given the dynamics that exist in the marketplace.

Market Generally speaking, all carwash markets are not created equal. With this in mind, it is crucial to determine if a market can support additional carwash outlets. This is often difficult because the supportable number of carwash outlets does not necessarily comport to the size of an area’s population. Like many relationships in marketing, the relationship between the number of carwash outlets and market share is usually S-shaped. Since we cannot be certain that the recommended number of carwash outlets is in reality the best, the best number often depends on a combination of market, economic, competitive, technical and legal-political factors. The appeal of a carwash market can be evaluated by looking at several dimensions that define the competitive environment.

Market size, growth rate, diversity of segments, sensitivity to price and overall demand Variety and strength of competition and history of failure, success and growth Degree of standardization that exists Environmental rules, zoning regulations and any union or special interest positions

Once market potential and the appropriate number of retail outlets for it have been determined, the next step is selecting a location for the new wash.

Location The basic premise of building a successful carwash is that its location, design and mix of products and services will provide customers with a more convenient, more attractive and more desirable experience than the competition. Offering a better customer experience is the design objective of any successful carwash business and location is the key to this offering. The objective of site selection is to find real estate that is superior to competing retail sites in terms of proximity, visibility and accessibility to traffic, businesses and consumers. If a site is superior to competing sites in these terms, it will be perceived as being more convenient by a relatively large number of motorists. A well-located carwash site involves many factors. A "pride-of-ownership" facility built on a site will make it inherently more appealing from a physical standpoint than nearby carwash sites. Excellent curb appeal combined with superior convenience inevitably succeeds in reallocating the demand inherent in a stream of highway traffic. A competitive advantage among retail stores (e.g. gas stations, convenience stores, carwash, fast lube, etc.) is the ability to attract women motorists. A modern, clean, active, well-lighted facility is the first choice of women motorists. Highway traffic also plays an important role. How much of it is residential and how much of it is transient and how fast is it traveling? Convenience retail sites depend on adjacent resident populations for the bulk of their business. Consequently, only one particular site will be the geographically closest site for any household. Location also depends on the density and composition of surrounding retail development which serve as attractors for the carwash. With a conscious, customer-centric operation, the carwash built on sites with these characteristics have the greatest potential to become dominant in their trade area. Recent changes in consumer behavior and the fact that consumers are more demanding has forced many retailers to invest in stores betting in a proximity and quality of goods and services strategy. Since this investment has long-run returns, it requires careful decision making. Critical aspects for the success of a carwash as the location, store dimension, services offered and targeting to specific market segments deserve special attention. In this context, decision support systems based on quantitative models assumes an increased relevance.

With this in mind, developers should consider qualified professionals who have experience with location assessment and mathematical models in locating good carwash sites.

Capture Rate The customer attraction or capture rate is the percentage of highway traffic that actually stops to patronize a carwash business. Once the average traffic flow is measured, capture rate can be used to prepare estimates and projections of the number of carwash customers that can be expected per day. Capture rate is one of the most important statistics for any carwash investor. However, investors often have difficulty in deciding what value to use because the attraction rate of a carwash can be affected by a great many factors such as visibility, travel speed, highway configuration, weather and competition, to name a few. Some experts claim that the daily traffic count capture rate for carwash varies from 0.45 percent to 1.5 percent. This assertion relies on rules-of-thumb developed by analysts that have applied a combination of experience, observation and trial and error to isolate the relationship that exists between sales volumes and the amount of highway traffic that passes by carwash sites. This method is relatively inexpensive to use and it may offer rapid solutions for location decisions but this simple rule-based method may be overly simplistic and subjective. Carwash site access studies generally assume that all highway trips to a new retail development are new trips which were not made prior to the development being completed. This incorrect since a portion of the new trips are already being made to other similar and existing retail developments. In this case, a route diversion occurs. A second assumption for carwash site studies is that all of the trips are primary trips being made for a specific purpose, to return directly to their place of origin. However, experience has shown that land use generators such as carwash, drive-in fast-food, gas stations, convenience stores and other support services capture trips from the normal traffic passing by the site. For many of these trips, the stop at the site is a secondary part of a linked trip such as from work to shopping center to home. A third assumption is average daily traffic (ADT) should be used as the activity factor. This is incorrect because ADT are raw 24-hour counts that have not been adjusted for seasonality or multiple truck axles. After correcting for these factors, the result expressed as annual average daily traffic (ADDT) may be as much as 25 percent lower than ADT counts. Given the importance that sales volume estimates and projections have in the process of determining the commercial viability of a new carwash venture, investors should make an attempt to avoid the consequences inherent in using the capture rate approach. This can be accomplished by seeking out qualified professionals who have extensive experience in the application of location assessment and mathematical-based site evaluation models.

Many national retailers have learned that the development of accurate sales forecast is central to successful retail site selection and the value of store location analysis is now well established. The use of techniques and methods such as analog-based procedures, gravity models, regression analysis and geographical information systems are now considered a competitive advantage.

Site Planning Once the investor solves the market and location problems, selects a business model and finds the right property to build on, the next step would be to develop a conceptual site plan that can be used to determine the commercial viability of the proposed carwash project. A conceptual site plan is a way to take the investor's business concept and place it on paper so that it can be thoroughly examined, quantitatively and qualitatively. Formulating a good carwash site plan requires careful attention to detail and should be approached in several steps.

Obtain a survey and legal description of the property Review the local planning and zoning regulations and identify applicable criteria Determine the cars per-hour requirements for the market and business model and

calculate the number and/or length of wash bays that are needed to handle peak demand

Identify carwash design criteria for length and width of property, building and equipment and operations

Determine the amount of useable space you have to work with Develop a scale drawing that complies with zoning codes, capacity requirements and

carwash design criteria Developing a conceptual site plan helps save time and money. It provides the commercial data to make a well-informed decision with your architect, engineer and equipment distributor.

Cost to Build a Carwash The cost to start a carwash business varies depending on category of carwash and scale and scope of the project. The final total cost is affected by overall size, architectural style, real estate market, building materials, labor rates, impact fees, environmental regulations, equipment, etc. Over the last six years, the cost to build a new carwash outlet has risen by 23%. Since carwash developers are not in the habit of publishing the final cost to build their projects, it is often difficult for "new-to-the-industry" investors to identify how much it can cost to build a wash. However, experience has shown average cost is usually within the following ranges. The typical cost to build a self-service carwash with five wand-bays and one in-bay automatic is $850,000 to $1,250,000 including real estate.

The cost to build an express exterior carwash with amble free vacuums is $1,800,000 to $2,500,000 including real estate. The cost to build a full-service or flex-serve carwash is $3,000,000 to $3,500,000 including real estate. The cost to build a high-volume carwash with gasoline stations and convenience store is $3,500,000 to $4,500,000 including real estate.

Construction With the exception of municipalities that limit architectural style, color and building materials, investors have a wide choice in carwash building design and construction. Today’s carwash facilities are built with split-face block, stucco, masonry-metal combinations and professional signage and landscaping. The appearance of a carwash can take a certain theme and many buildings are infused with glass block and neon or LED lights and signs. Besides conventional construction techniques, carwash can also be built with pre-engineered or modular building systems. Store design is only limited by the investor's imagination and budget. Carwash facilities would be designed to enhance their surroundings and be noticeable and inviting while being strong and durable enough to handle local weather and environmental conditions. The facilities would be of the latest, modern design with a very good functional utility. Motorists like “new and modern” regardless of their economic or social status. Carwash businesses that provide this offer will have fewer problems with attracting customers.

Operating Expenses The cost to operate a carwash varies depending on category carwash format, type of equipment, wash process, quality of materials (e.g. chemical, water), geographic area, environmental conditions and other considerations. Carwash operators face variable costs, semi-variable costs and fixed expenses in the production of carwash services. Investors should carefully consider what operating cost factors are applicable and the level of activity that is anticipated with the particular wash application and circumstances. The cost of goods should address expenses for credit card processing fees, chemicals, utilities, attendant labor, commissions and bonuses, payroll tax and workman’s compensation insurance, wash supplies and vending merchandise. Other variable costs include telephone, equipment maintenance and repairs, pit cleaning (lift service), auto expense, advertising, customer damage claims, laundry and uniforms, dues and

subscriptions, education and training, entertainment/travel, bank charges, website hosting and miscellaneous expenses. Fixed expenses would include management salaries and payroll expenses, employee benefits, liability insurance, property tax, garbage collection, building and grounds maintenance, rent/mortgage and lease payments. Other expenses would include depreciation and income taxes. For general planning purposes, the rule-of-thumb is to assume operating expenses of 37% to 40% of gross sales for self-service with wand-bays and in-bay automatic, 50% for express exterior conveyor (although 40% to 45% is achievable) and 75% for full-service conveyor.

Equipment Good equipment is crucial for the success of any carwash venture. The carwash system must be durable and capable of consistently producing a clean, shiny and dry vehicle. Equipment is essential for production capacity and operational efficiency. Some experts believe that selecting the wash-related equipment is the most important decision that a carwash investor has to make. However, the equipment does little to bring motorists and carwash owners together. If the motorist does not have a good customer service experience, all the equipment in the world will not make a difference. Selecting carwash equipment is often a challenge for "new-to-the-industry" investors. Quite frankly, most manufacturers make high quality carwash equipment. Consequently, the purchasing decision should be based on the quality of the equipment distributor since it is this person who will install, calibrate and service your business. Your decision should be driven by the level of comfort you have with the various distributors that are available in the area. When selecting equipment, there are a number of factors that should be taken into consideration. Some of the more important ones are listed below.

The distributor's proximity to the location is important because distance will have an effect on the service response time. If the carwash is not working, the business is not making money

The distributor should have hands-on experience with the type of wash format that is being considered

The distributor should be factory-trained in the installation, calibration and repair of carwash equipment

The distributor should provide references to support their qualifications Avoid distributors with a legal history involving customer disputes and law suits

There are also a number of technical aspects of carwash equipment that should be taken into consideration. Some of the more important factors are listed below.

The total price of the equipment should be within the project budget

The total price should include the base carwash system, ancillary equipment, delivery, sales tax, assembly and installation and start-up and testing

The equipment must capable of achieving the anticipated wash volume and quality for the type of services being offered

Information should be provided regarding per unit cost for chemical, water, electricity, fuel and maintenance and repairs

Information should be provided regarding "up-time" and longevity of equipment design Information should be provided on warranties for materials and workmanship

Carwash Development Process The list below describes the basic or typical process that most investors have to navigate in the development of a new carwash. Complete a thorough location assessment and select the most suitable property. Once the site has been selected, procure a real estate attorney and make verbal buyers approach and contingency contract. Procure a carwash consultant or civil engineer to develop a conceptual site plan. Procure a local architect and planners who understand the political climate and environmental issues. They should be familiar with planning and zoning codes and the review board process. Hire professionals who have experience with carwash or very closely related retail experience. Procure an equipment distributor and general contractor willing to submit not to exceed bids. Once the project team is assembled, you can finalize the image design. Get preliminary bids for site work, building construction and carwash equipment and begin the feasibility study. Approach the zoning review board for an informal review of the conceptual site plan. If there are no issues, develop final budget, complete feasibility and seek to obtain a term sheet from lenders. Once you receive a commitment letter, prepare architectural blue prints and master site plan. Start preparing a business plan and bank loan package. Upon approval and closing, file for permits, order equipment, complete construction, install and test equipment, train operator and open for business.

Management Carwash is a customer service business. In other words, carwash is a contact sport. If you not a people-person or don’t like having or being responsible for employees, this is probably not the right business for you. Even the owners of virtually “people-less” businesses like self-service and express exterior must interface with customers and some employees on a daily basis. How well the customer is cared for will ultimately determine the success of the carwash business. The loyalty business model is the foundation of the carwash industry. With this model, the quality of the products and services leads to customer satisfaction which leads to customer loyalty which leads to profitability. Since customer service is the most important aspect of the carwash business, keeping customers happy generates tomorrow's business. One of the keys to successfully managing a carwash business is to avoid indifference, the number one reason why customers don't come back. Carwash managers should provide good up front information, sales and communication. They should deliver on the company's advertising and reputation. They should maintain a good appearance and presentation. Managers should get to know customers by name and make them feel comfortable. Managers should go above and beyond average customer service and show customers that you're different than the wash down the street. A good carwash manager gives customers what they need and want and the unexpected. Carwash managers are usually responsible for cash management, customer claims and dispute resolution, personnel management and scheduling, routine equipment maintenance and minor repairs, housekeeping, inventory control, customer and personnel safety and recruitment and training. Tommy Hoffman, Jr., a very successful carwash operator, once described his formula for success in the carwash business as 20% of the right equipment and splash and 80% how you treat the customer.

Green Carwash With the advent of the “Green” movement, more investors have become interested in developing a Green Carwash. A "green" carwash is one that minimizes its impact on the surrounding environment and provides the developer with a good return on investment. Some of the typical environmental impacts from building a new carwash are provided in the following list.

Pavement and roof disrupts natural hydrologic function of raw land Contaminated surface water run-off Contaminated carwash waste water Noise pollution from forced-air dryers Contaminated supplies and garbage disposal Consumption of non-renewable resources used in construction and operation

Building a "green" carwash that minimizes these impacts and makes "money" requires a strategy that looks at how all the components of a carwash can be fashioned together as a whole. This can be achieved by adopting a sustainable "whole-building" approach to carwash design and construction. Design Process Interested investors should adopt a design strategy that makes the most of the ways that components and materials connect and interact with each other.

Establish objectives for conserving energy, materials and resources and reducing pollution

Establish design goals from the onset by developing a conceptual site plan

Identify viable integrated solutions from the exchange of ideas and information

Prepare a life-cycle analysis of potential solutions.

As shown above, the conventional approach is to design the carwash so the buildable area is used to the greatest extent. This means minimizing non-income producing aspects such as green space and maximizing the size of the facility. This is done to make it as easy as possible for as many customers as possible to use the facility. The end result is a large block building sitting on a large parking lot that consists mostly of asphalt and/or concrete pavement.

As shown above, the difference with the "green" carwash is the conservation of open land space and the overall reduction in the amount of impervious surface area. This is achieved with low-impact development (LID) techniques. LID includes designing narrower driveways and parking areas, paving with porous asphalt or concrete, installing functional landscaping and swales and installing grass or permeable artificial turf in the vacuum area. Sustainable Carwash Design Sustainable carwash design incorporates concepts such as low-impact development (LID), low-energy strategies, passive solar design and pollution prevention measures that can make carwash facilities more energy efficient, more comfortable, less expensive to maintain, more environmentally benign and more profitable. Low Impact Development (LID) is a storm water management approach that is modeled after nature. LID's goal is to mimic a site's predevelopment hydrology by using design techniques that infiltrate, filter, store, evaporate and detain runoff close to its source. This is achieved through small, cost-effective landscape features located at the lot level including rain water harvesting.

Low energy strategies would include things like electric-drive motors, variable frequency drive controls, low-emitting diode (LED), pulse-start metal halide lights and geo-thermal heat for entrance and exit pads. Passive solar strategies would include things like sun-spaces, insulated windows and see-through buildings. Pollution prevention strategies would include things like waste water reclaim, bio-degradable chemicals and low-noise forced-air dryers. Cost of Sustainable Design The cost of sustainable carwash design will vary depending on the strategies applied. Historically, the cost of laying pervious pavement exceeds that of conventional. Porous asphalt is about 10% to 15% higher than regular asphalt. Porous concrete is approximately 25% greater than regular concrete. Site preparation may also increase these costs. Annual maintenance cost for pervious pavement is about $200 per acre. The average cost of functional landscaping, natural vegetative swales and ground cover is about $4.00 per square foot. A roof-top rainwater harvesting system for a 3,000 SF building is $10,000 to $20,000. The average cost for waste water reclaim is about $35,000 plus the expense for underground storage tanks, plumbing and installation. In addition to the added cost for hiring LID and energy consultants, the Department of Energy estimates that an increase in design cost of 4% to 6% over that of conventional building is generally considered acceptable for sustainable whole-building designs. Benefits of Sustainable Design Sustainable carwash design strategies should be evaluated in terms of life cycle cost rather than sunk cost. Life cycle analysis accounts for the durability, energy and resource cost savings of components over their anticipated life, impacts on maintenance and replacement costs and waste disposal costs. For example, it may take eight to ten years to recover the cost of a rainwater harvesting or reclaim system. On the other hand, the cost of porous concrete, functional landscaping and low-energy strategies is often recouped in the first few years of operation. Low-impact development measures can help carwash developers achieve Leadership in Energy and Environmental Design, Green Building Rating System credits under water use reduction, water efficient landscaping and storm water management. LID can reduce development costs and storm water impact fees by 30% or more Day-lighting and sun-spaces can reduce annual energy cost for lighting by 40% or more. VFD controls can reduce energy consumption of motor functions by 30% to 40%. LED and pluse-start halide last five to six times longer than conventional light bulbs.

Geo-thermal can reduce heating costs by 25% to 50% as compared to conventional heating. Compact wash systems can reduce building footprint and construction cost by 10% to 15%. Pre-engineered buildings are economical and require less maintenance than conventional buildings Waste water reclaim can reduce the cost of using fresh water by 50% to 70%. Hyper-concentrate environmentally-friendly chemicals save space and reduce shipping and waste disposal costs. A 3,000 SF roof can collect up to 90,000 gallons of water with annual rainfall of 50 inches. In addition to the economic and environmental benefits, a "green" carwash could provide the developer with a site that is more marketable and aesthetically pleasing to customers and community than the conventional design and one that may be easier to get approved. According to the Low-Impact Development Center and DOE, an integrated approach to building design is worth the investment in effort and time because it has been shown that it pays off on the long-run. This approach can help carwash developers reduce their energy and material use, save money and preserve the environment.

Small-Scale Carwash The retail sector in the U.S. is going through a restructuring phase. In food retail, in particular, hypermarket activity has slowed down on behalf of smaller supermarkets that nowadays represent a larger dynamic. This change in consumer behavior and the fact that consumers are more demanding is forcing more retailers to invest in stores of smaller dimension. Companies like Dollar General and Walgreen's have responded to this phenomenon by building small-scale stores in the shadows of Wal-Mart, Home Depot and Target. The small-scale store concept is based on the belief that a smaller assortment in a more efficient structure will attract customers who want to avoid the consequences of shopping in vast warehouses. The success of small-scale stores is not just small size. To compete with the Goliaths requires an innovative advantage. This is achieved by designing stores with customer needs in mind and using a close to home, quick and no lines approach to business. For example, Walgreen's, a drug store chain with a store size of 14,500SF, boasts that it only takes six minutes for customers to complete their mission. Small-scale also means less real estate and capital costs. This gives retailers an advantage in markets where real estate is in short supply and in smaller markets where the store will not have a large customer base. Small-scale also reduces the pressure to grow and sustain the business. If we extend this notion to the carwash industry, it would include the opportunity to develop small-scale carwash facilities based on the express exterior carwash format. This potential development trend has caught the eye of commercial property developers that have remnant or surplus properties that are non-producing. An in-bay automatic or a mini-tunnel (short conveyor) would be an ideal candidate because it can go on sites as small as 6,000 to 13,000 SF. Similarly, a dual in-bay or dual mini-tunnel would work on larger sites measuring about 20,000 SF. A mini-tunnel is a compact, high-performance version of a full-sized conveyor carwash system. Mini-tunnels would provide owners with the opportunity to operate at 3 to 4 times the hourly rate as most in-bay automatic systems, allowing them to wash more vehicles on key money making days. Mini-tunnels also produce a better quality wash and dry than an in-bay automatic, allowing owners to achieve a much higher average income per wash. Since many people are staying closer to home and making fewer shopping trips, a small-scale express exterior carwash in a convenient shopping location would be a good fit.

A small-scale carwash format has a strong value proposition for motorists.

Convenience of a 3-minute wash, no long waiting lines and extended hours of operation Dependability of being open "rain or shine" Quality of a "spot-free" carwash at economical prices and no extra charges Ease-of-use of pay-stations, multiple payment options, no sales pressure and no tipping Value of extra "on-line" services and free use of vacuums Safety of a damage-free wash, remote surveillance and no strangers in their vehicle

A small-scale carwash format has a strong value proposition for investors.

Lower initial capital investment Absentee owner-friendly Good cash flow and re-sale value Lease-back opportunities for real estate owners Less pressure to grow and sustain the business

Development Cost In-Bay Dual Mini Dual Automatic In-Bay Tunnel Mini-tunnel Land (maximum) $150,000 $300,000 $150,000 $300,000 Site Improvements $150,000 $150,000 $150,000 $150,000 Building $180,000 $300,000 $180,000 $300,000 Equipment $150,000 $300,000 $300,000 $600,000 Soft Cost $75,000 $100,000 $75,000 $150,000 Total Cost With land $705,000 $1,150,000 $855,000 $1,500,000 Without land $555,000 $1,000,000 $705,000 $1,200,000 Target locations would include surplus land and pad sites passed over by previous real estate developers, franchises with leftover land, out parcel in a shopping center and free-standing property with excellent demography and highway traffic. RJR Enterprises has extensive experience in planning and developing small-scale express exterior carwash facilities. Please contact us to learn more about this exciting concept.