Tunnel Vision vs. Open Air: Deciding on the Right Car Wash Design for Your Property

Published: 04-02-24    Category: Property Management

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

A car inside of a running car wash.

In the ever-evolving world of commercial real estate, car washes continue to be a steady and dependable investment. Their consistent demand, coupled with the potential for high customer traffic, makes them an attractive option for both seasoned investors and newcomers.

But before you break ground on your sparkling new car wash empire, a crucial decision awaits: tunnel or open-air?

Both tunnel and open-air car washes boast their own set of advantages and the optimal choice hinges on several key factors.

Let's delve into the world of suds and shine, exploring the pros and cons of each design to help you determine which one best fits your property and business goals.

The U.S. Car Wash Market: A Snapshot of Sudsy Success

The car wash industry in the United States gleams with consistent growth and profitability.

Here's a closer look at the current state of this dynamic market, providing valuable insights for potential investors:

#1 – Market Size and Growth

According to IBISWorld, the U.S. car wash services market size was estimated at a healthy $17.3 billion in 2023, with a projected Compound Annual Growth Rate (CAGR) of 5.5% between 2023 and 2033.

This steady growth reflects the increasing demand for convenient and professional car cleaning services.

#2 – Transaction Volume

The car wash real estate market is experiencing significant activity. According to Matthews Real Estate Investment Services, over 245 leased car wash properties changed hands in 2022, with a total market value exceeding $1 billion.

This high transaction volume indicates strong investor confidence in the car wash industry's potential.

#3 – Average Sale Price

Data from Gitnux suggests that the average car wash business in the U.S. generates roughly $14.21 billion in revenue annually.

While individual sale prices can vary depending on factors like location, size, and brand recognition, Matthews Real Estate Investment Services reports that the average sale price of a triple-net lease (NNN) car wash property in 2022 was approximately $4.48 million.

#4 – Leasing Landscape

NNN leases, where the tenant is responsible for most property-related expenses (taxes, insurance, maintenance), are a common structure in car wash real estate transactions.

According to B+E research, as of January 2023, the average asking price for a leased NNN car wash property was $5.19 million, with an average lease term of 18.4 years. This extended lease term offers investors a predictable and stable income stream.

#5 – Market Trends

Several key trends are shaping the car wash industry:

  • Sustainability: Environmentally conscious consumers are driving demand for eco-friendly car washes that utilize water recycling systems and eco-friendly cleaning products.
  • Technology Integration: Advanced technologies like touchless car washes, express wash options, and loyalty programs are enhancing the customer experience and improving operational efficiency.
  • Consolidation: The car wash industry is witnessing some consolidation, with larger companies acquiring smaller ones to expand their reach and brand recognition.

By understanding these market trends and key metrics, potential investors can make informed decisions about entering the car wash market.

The combination of consistent growth, high transaction volume, and favorable leasing structures makes car washes a compelling option for those seeking a stable and profitable commercial real estate investment.

Tunnel Car Washes: A Thorough Clean in an Enclosed Environment

Tunnel car washes, also known as automatic car washes, are the modern marvels of the car cleaning industry.

Imagine a gleaming metal tunnel equipped with a meticulously choreographed dance of high-powered jets, soft brushes, and foaming suds.

As your car glides along the conveyor belt, it undergoes a multi-stage wash, emerging clean and polished on the other side.

Benefits of Tunnel Car Washes: A Deeper Dive

Tunnel car washes have become a dominant force in the car cleaning industry, and for good reason.

Let's delve deeper into the advantages they offer, making them a compelling choice for investors and car owners alike.

  • Efficiency and Speed: Tunnel washes are renowned for their speed. The automated process can clean multiple cars per hour, maximizing customer throughput and revenue potential.
  • High-Quality Wash: Modern tunnel washes are equipped with advanced technology like undercarriage blasters, tire shines, and touchless washing systems that minimize the risk of scratches. They can offer a comprehensive clean that might be difficult to achieve in a self-service setting.
  • Minimal Labor Costs: Tunnel washes require minimal on-site staff. A single attendant can typically manage the operation, reducing labor overhead significantly.
  • Reduced Land Footprint: Compared to open-air car washes, tunnels require less land. This is because the washing process is vertical, utilizing the conveyor belt system to move cars through the cleaning stages.
  • Favorable Weather Conditions: Tunnel washes are unaffected by weather conditions like rain, snow, or extreme heat. This allows for consistent operation throughout the year, regardless of the climate.

Tunnel car washes offer a compelling combination of speed, convenience, consistent quality, and advanced cleaning technology.

Their water-saving features and versatility in wash packages make them an attractive option for both environmentally-conscious consumers and profit-minded investors.

Considerations for Tunnel Car Washes: A Closer Look

While tunnel car washes boast numerous advantages, it's important to be aware of the potential drawbacks before making a final decision.

Here's a closer look at some key considerations to factor in:

  • Higher Initial Investment: Setting up a tunnel car wash requires a significant upfront investment. The cost encompasses not only the land acquisition or lease but also the purchase and installation of specialized equipment like conveyor belts, wash arches, drying systems, and water treatment facilities. Additionally, the technology behind modern tunnel washes is constantly evolving, and keeping your equipment up-to-date can involve further investments.
  • Maintenance Costs: The complex machinery of a tunnel wash demands regular maintenance and occasional repairs. This can include servicing conveyor belts, replacing worn-out brushes, and ensuring the proper functioning of water jets and chemical dispensing systems. Having a dedicated maintenance team or a reliable service contract is crucial to keep your tunnel wash operational and avoid costly downtime.
  • Limited Customization: The automated nature of tunnel car washes offers limited customization for customers. The wash cycle is typically pre-programmed, and customers have little control over the specific cleaning agents or techniques used. This might be a concern for car owners with particularly delicate vehicles or those who prefer a more hands-on approach to car care.
  • Potential for Damage: Despite advancements in technology, there's always a slight risk of minor scratches or damage during the tunnel wash process. This can occur due to worn-out brushes, improper maintenance, or loose antenna attachments on the vehicle. Implementing a thorough car inspection protocol before and after the wash, along with clear disclaimers and liability waivers, can help mitigate these risks.
  • Space Constraints for Detailing: While tunnel washes excel at automated cleaning, they often lack dedicated space for detailed car care services like hand waxing, interior detailing, or upholstery cleaning. If you envision offering a wider range of car care services, you might need to consider additional space for detailing bays or partnering with a separate detailing service.

By carefully weighing the benefits and considerations of tunnel car washes, you can make an informed decision about whether they align with your investment goals and target market.

For investors seeking a high-volume, efficient car wash operation, tunnel washes offer a compelling solution.

However, if you prioritize a more customizable car care experience or are working with limited initial capital, an open-air car wash might be a better fit.

Open-Air Car Washes: A Do-It-Yourself Haven

Open-air car washes, also known as self-service car washes, present a different cleaning experience.

These facilities offer designated bays equipped with high-pressure hoses, foaming brushes, and vacuum cleaners.

Here, customers take the wheel, scrubbing and rinsing their vehicles themselves.

Benefits of Open-Air Car Washes

Affordability and Flexibility: Open-air car washes generally offer a more budget-friendly option. Customers pay for wash time rather than a pre-determined package, allowing them to control their spending and focus on cleaning specific areas of their vehicle.

This flexibility is particularly attractive to customers who might not require a full car wash but simply want to rinse off-road salt or give their wheels a quick shine.

  • The Power of Choice: Open-air car washes empower customers to take charge of their car's cleaning experience. They can choose the cleaning products they prefer, whether it's a specific brand of car soap or a specialized bug remover. This level of control allows for a more personalized car care routine, catering to individual needs and preferences.
  • A Sense of Satisfaction: For some car owners, washing their car is more than just a chore; it's a therapeutic ritual. Open-air car washes provide a space for this hands-on satisfaction. The act of scrubbing, rinsing, and drying their vehicle themselves can be a source of pride and accomplishment, fostering a deeper connection with their car.
  • Potential for Higher Profit Margins: Open-air car washes can potentially generate higher profit margins compared to tunnel washes. Since customers pay for wash time, extending their cleaning session directly translates to increased revenue. Additionally, you can offer premium wash bays equipped with stronger pressure washers or specialized cleaning solutions for an extra fee.
  • Upselling Opportunities Galore: Open-air car washes present a prime environment for upselling car care products. Strategically placed vending machines offering car wash mitts, microfiber towels, tire shine, or even vacuum cleaner tokens can incentivize customers to spend more and enhance their car cleaning experience.
  • Multi-Service Potential: The open layout of an open-air car wash allows for greater flexibility in incorporating additional revenue streams. You can add detailing bays staffed by professionals, offer car vacuuming stations with fragrance options, or even partner with a vending company to provide car care supplies and refreshments.

Open-air car washes cater to a specific market segment that values affordability, customization, and a sense of control over the car cleaning process.

Their potential for higher profit margins, upselling opportunities, and the ability to offer additional services make them a compelling option for investors seeking a diverse and potentially lucrative car wash business model.

Considerations for Open-Air Car Washes

While open-air car washes offer a unique set of advantages, they also come with certain considerations that require careful planning and management.

Here's a deeper dive into the key factors to keep in mind:

  • Land Requirements: Open-air car washes necessitate significantly more space compared to tunnel washes. This is because they require multiple wash bays to accommodate several customers simultaneously, along with designated areas for parking, vacuuming, and equipment storage. Finding a suitable location with sufficient land area can be a challenge, especially in densely populated areas.
  • Higher Labor Costs: Open-air car washes typically require more staff than tunnel washes. Attendants are needed to assist customers with equipment operation, maintain cleanliness of the bays, restock supplies, and address any customer concerns. Additionally, depending on your business model, you might need to hire detailers for dedicated detailing bays, further increasing your labor overhead.
  • Weather Dependence: Open-air car washes are susceptible to weather fluctuations. Harsh winter conditions like snow and freezing temperatures can deter customers and even damage equipment if proper precautions aren't taken. Similarly, scorching summer heat might discourage customers from spending extended time washing their cars outdoors.
  • Security Concerns: Open-air car washes are inherently more vulnerable to vandalism and theft compared to enclosed tunnel washes. Leaving valuables unattended in vehicles during the wash process can be a temptation for opportunistic criminals. Implementing robust security measures like security cameras, bright lighting, and well-maintained fencing is crucial to deter theft and create a safe environment for customers.
  • Potential for Lower Throughput: While open-air car washes offer flexibility, the washing process itself is typically slower than a tunnel wash. This can lead to lower customer throughput, potentially impacting overall revenue generation. However, strategic pricing structures that incentivize quicker washes or offering express wash packages for basic cleaning can help mitigate this concern.
  • Environmental Impact: Open-air car washes traditionally utilize larger amounts of water compared to their tunnel counterparts. While water recycling systems can be implemented to minimize water usage, it's still a consideration, especially in drought-prone regions. Utilizing eco-friendly cleaning products and implementing water-saving practices throughout the wash process demonstrates environmental responsibility and can attract eco-conscious customers.

By carefully considering the benefits and drawbacks of open-air car washes, you can determine if this design aligns with your investment goals and target market.

If you envision a car wash that caters to budget-conscious customers who value personalization and a hands-on approach, an open-air wash might be the perfect fit. However, if maximizing customer throughput and minimizing operational costs are your priorities, a tunnel wash might be a better choice.

Ultimately, the optimal design hinges on a thorough understanding of your local market, competitor landscape, and long-term business objectives.

Beyond Design: Additional Considerations for Success

Regardless of the design you choose, remember that a successful car wash goes beyond the glittering equipment.

Here are some additional factors to keep in mind:

  • Visibility and Accessibility: Choose a location with high traffic flow and easy access for customers. On-site signage and convenient entry/exit points are crucial.
  • Water Conservation: Implement water recycling systems to minimize environmental impact and reduce operating costs.
  • Eco-Friendly Practices: Utilize eco-friendly cleaning products whenever possible to appeal to environmentally conscious customers.
  • Membership Programs: Consider offering loyalty programs or monthly memberships to encourage repeat business and generate predictable income.
  • Customer Service: Train your staff to provide excellent customer service, fostering a positive experience that keeps customers coming back for more.

The world of car washes presents a rewarding investment opportunity, offering a steady stream of customers and the potential for high returns.

By carefully assessing your property, target audience, and long-term goals, you can choose the ideal car wash design (tunnel or open-air) that sets you on the road to sparkling success.

Remember, a successful car wash is more than just a place to get clean; it's a well-oiled machine that provides convenience, value, and a positive experience for your customers.

So, grab your metaphorical bucket and sponge, and get ready to wash your way to a thriving business venture.

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