There can be no doubt that 2008 through 2010 were very tough years for the carwash industry. Not long ago I was interviewed by a trade Journal in this sector and we talked about the future, specifically how the industry would fare in 2019 and if that was a good year to expand a carwash, and put forth more capital investment. My answer to this question is yes and no, and I think it deserves some explanation.
First of all, with all the subsidizing of alternative energy, and the over regulation on the coal industry by the EPA, and the potential future for carbon credit commodities trading in Chicago it would be hard for anyone to deny that energy costs in the future will triple. Full-service car washes which are automated with robotics systems use quite a bit of energy. Most of it is used in the actual mechanisms and vacuum cleaners.
And then there is some energy which is used for things like air conditioning, lighting, cash registers and etc. If your carwash is a full-service car wash with detailing bays and/or oil changing bays, then you have additional energy needs. Investing in ways to lower your overall energy costs and taking the tax credits that are available right now might be a wise choice. Of course, whatever you do, you have to make sure that it makes sense, and that the return on investment would pan out when accounting for the tax credits.
When it comes to Energy Costs and the fact that they might triple in the future, this should be cause for concern for every car wash nearby owner or company whether it is corporate, or a single unit. Let’s face it the reality is that most Solar panels often do not have a ROI worthy now, but that could change in the future if the costs go up or with increased solar conversion rates and innovations in that sector.
So it might be wiser to wait until solar panels are more efficient before purchasing them, to ensure a proper return on investment. However in the future with solar panels which can compete directly with other forms of energy in the return of capital surely the tax incentives will no longer be available, and that is something to consider.
How about expanding to another location, or building a secondary carwash?
Well, land is cheap right now, and there are ways to borrow money. And you could buy a franchised car wash – right now Franchisors are reducing fees, as well as giving deals to Military Vets and Women franchise buyers. In fact, there are lots of vendor deals, financing, and eager leasing companies willing to loan the capital needed. The biggest question however will be that of labor, health care, and other costs.
Will 2019 be the year to expand? It very well could be, and perhaps you should have a strategy moving into this year. If the economy keeps growing, the prices will keep going up and you may have wished in hindsight that you took the gamble of expanding right now. Please consider all this and think on it.