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Building for Tomorrow

Investment Opportunity:

Car Wash & Tire Change Centre

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Building for Tomorrow

Car Wash/Quick Lube & Tire Change Centre

Opportunity Overview:

As part of the Town of Bon Accord’s

overall effort to realistically build on its

competitive advantage and in so doing support

a further diversification of local industry, a Car

Wash/Quick Lube & Tire Change Centre has

been identified as a viable business opportunity

within the community. It is proposed that this

initiative while satisfying several

complementary needs in the community, will

necessary need to be multifunctional in order to

be viable and sustainable. It is expected that

while the potential of the local market will be

sufficient to cover over the basic financial needs

of the proposed business, longer term growth

will require accessing traffic from highway 28.

At its anticipated minimum this

initiative will require a capital investment of

$150,000 to $250,000 for suitable on-highway

or high visibility commercial lease space,

equipment and inventories to accommodate

the proposed enterprise, i.e. a minimum of two

drive through car wash bays, a single drive

through bay for oil change/lube service

together with tire change, a small retail/parts

area, and an appropriate allocation of land for

limited parking. In terms of staffing, in addition

to the entrepreneur/manager, two to three

employees would be anticipated.

Location, service quality, price and

innovative marketing/positioning will be critical

precursors of success not only in meeting and

capturing the needs of the local and regional

populace but in retaining this critical market

niche. As well these same attributes (location,

service quality, price and innovative marketing)

will be essential to the long term growth of the

proposed venture through the attraction of

vehicle traffic off of highway 28.

Industry Overview and Trends

As presented the proposed business

opportunity broadly encompasses three sub-

activities, all of which exhibit similar

possibilities and challenges.

In terms of the automotive oil change

and lubrication industry across North America

there are about 5,000 companies with

combined annual revenues of about $5 billion.

These businesses can be found in most

communities though in smaller centers they are

usually combined with complementary

operations (as proposed for Bon Accord).

Major services are oil changes (about 75

percent of sales) and other preventative

maintenance. Some locations provide limited

repair services and routine maintenance like

adjusting tire pressure, changing windshield

wipers, replacing light bulbs, and topping off

auto fluid levels. The industry itself tends to be

fragmented with the 50 biggest companies

generating about 35 percent of all revenue.

The Car Wash industry has grown from

as simple as hand wash to sophisticated high

impact pressure jet wash technology. The US

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Building for Tomorrow

car wash industry includes about 15,000

establishments (single-location companies and

branches of multi-location companies) with

combined annual revenue of about $6 billion

Again the industry is highly fragmented: the 50

largest companies hold just 15 percent of the

market That being said, according to the

International Car Wash Association there are

approximately 22,000 car washes in the United

States and Canada, nearly 90% are operated by

the owners who are small business persons.

Thus clearly owning and running a car wash

these days can be quite lucrative.

Major services are exterior wash,

exterior and interior cleaning, waxing,

underside cleaning, vacuuming, and premium

detailing. Detailing services consist of intensive

interior and exterior cleaning, as well as waxing

and polishing by hand. Some facilities offer

vehicle maintenance and repair and safety

inspection services and sell automotive

products.

Those who own a car or truck tend to

spend a lot of money on tires. From time to

time, they need to have tires pumped up,

repaired or replaced. Add to this the normal

seasonal requirement to change tires and you

have a pretty active marketplace. Tire changing

and balancing equipment technology has

changed dramatically in the past ten years and

in the midst of these changes qualified tire

technicians must be able to dismount and

mount tires quickly and properly.

Entry Barriers

Clearly in all cases overall demand for

the proposed services of a Car Wash/Quick

Lube & Tire Change Centre is determined by:

the numbers of vehicles in the

community/region; the amount of driving that

consumers do; the conditions in which driving

occurs (i.e. good/bad roads; paved/unpaved

roads; summer/winter conditions and the like),

and the relative conscientiousness of

consumers to properly maintain their vehicles.

In turn the profitability of individual companies

depends on convenient location ( poor location

is among the chief causes of all small business

failure)s, quality service, good pricing

(competitive pricing) and innovative marketing.

In terms of barriers to entry there are a

number of notable considerations, in addition

to those inherent in determinants of demand.

Specifically:

large chains have an advantage in name

recognition;

tire maintenance and tire changes are

often within the standard services offered by

large tire retailers who most often provide

the service free or heavily discounted to

their customers;

for new vehicles often times

manufacturers limit the use of independent

oil change operations;

operations tend to be labor-intensive

which will require recruiting in a highly

competitive labour force market. Given that

margins are often tied closely to cost savings

in labour this will be a considerable, though

not an insurmountable, challenge.

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Competition

While there is certainly an opportunity

for a Car Wash/Quick Lube & Tire Change

Centre within the Town of Bon Accord the

competition to this service will most certainly

come from Edmonton based facilities, especially

for those who regularly work/shop in

Edmonton. Clearly a startup business will face

intense pressure from entrenched chain

competitors so it will be important to

differentiate the offering and service. That

being said a multipurpose centre as is proposed

will satisfy a variety of consumer interests for

local residents more concerned with

convenience and accessibility.

Markets

Research affirms that consumers are

keeping their cars for longer periods and

spending more on preventative maintenance.

But above this and above all else, the Car

Wash/Quick Lube & Tire Change Centre is

convenience-driven. In the short term the

primary market for the will be local/regional

residents and arguably in the long term the

operation will rely on local customers for the

majority of its business. Most customers are

also accustomed to buying additional services

like total fluid replacements and tire rotations

when they come in for an oil change and these

value added services, as proposed, can be quite

profitable. Building on this local market

segment could be enhanced through the

addition of innovative service offerings such as

the increasingly popular mobile oil and lube

service. In the longer term, given a high

visibility location, quality services, reasonable

prices, and a concerted marketing effort, it is

expected the business will benefit from

additional traffic being attracted off of Highway

28. This additional traffic draw will be

especially prominent during times of seasonal

tire/oil changes (as a consequence of

oversubscribed Edmonton facilities).

Start-up Requirements

A typical oil and lube location performs

about 1,200 jobs per month. Most locations

operate two to five bays in a drive-through

building, and many use basement construction

so that oil can be changed below while other

services are being completed above. However,

to keep capital investments low and offer quick

building relocation, vehicle lifts can be used

rather than basements and the facility itself can

be built on a relatively small piece of property.

The oil and lube operation flavored for the

Town of Bon Accord (in association with the

proposed car wash and tire repair service)

would encompass a single dedicated oil and

lube bay with a vehicle lift.

In terms of car wash there are three

options:

1. Self Service Carwash –

Customers wash their own

vehicles in individual wash bays.

These bays can either have self

serve equipment or in-bay

automatic equipment in them.

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2. “Stand Alone” Automatic

Carwash This model consists of

one or two in-bay automatics

and a vacuum and vending area

3. Full Service Carwash – This

carwash business option is a

conveyor wash system with

attendants.

The carwash business model favored for

the Town of Bon Accord (in association with the

proposed oil/lube and tire repair service) would

encompass a self-service car wash with two

equiped wash bays. This arrangement would

offer the advantage of low labor costs and can

be open twenty four hours a day, seven days a

week.

In the case of tire repair/change a more

modest opening is proposed that would

build/complement the oil/lube facility but still

be capable of handling a broad variety of

balancing/changing needs.

Additionally we would propose that a

small automotive supplies area (windshield

wipers, oil, power steering, antifreeze, window

washing fluids, selected cleaning supplies and

tire parts and the like) be added to

complement activities.

In terms of total start up costs this

opportuntiy will require somewhere in the

order of $150,000 to $250,000 in capital and

operational funds.

For any further information on this business opportunity or others in Bon Accord,

please contact:

Gale Schwenneker

Economic Development Manager

Town of Bon Accord

Box 779, 5025 – 50 Avenue

Bon Accord, Alberta T0A 0K0

PH: 780 921-3550

townoffice@town.bonaccord.ab.ca