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Formulating franchise growth

After forming a prosperous hand carwash, this father-and-son team turned to car care franchising.

February 21, 2013
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When it comes to a new business venture, many investors tend to stick with well-travelled roads. Knowing that so few businesses find true prosperity, owners often feel more comfortable following the roadmap of someone else’s success. Though the development process’ twists and turns may be marked in advance, there are still no guarantees that a new business will survive and succeed.

For almost five years, Team Blue Hand Car Wash has sought to create exceptional car care operations while forming their own roadmap. In 2008, the first Team Blue location was opened by the father-and-son ownership team of Jeffrey and Jason Haas in State College, PA. Even a cursory visit to this first location shows one of the chain’s most unique attributes: No automated washing equipment whatsoever.

A few years later, this original location was followed by a franchised Team Blue Center in Mechanicsburg, PA. Since the beginning, the Haas’ growth plan has never involved leasing or purchasing plot after plot of land and building new washes themselves. Instead, the company emphasizes expansion through franchising.

Birth of a concept

After graduating from Stanford University, Jason Haas and his entrepreneurial father, Jeffrey Haas, decided to start a business focused on their common passion for cars. Jeffrey Haas, CEO and director of franchise development for Team Blue Franchise System LLC, stated that after a year of research and development, the family’s first full-service Team Blue Hand Car Wash Center opened in May of 2008. Even without the typical tunnels, automated machines or conveyors, the Team Blue wash was immediately successful in providing customers with quality services and a valued brand experience.

“Personally, we never wanted to utilize typical automated tunnel carwashes. We always believed they provided an inferior wash compared to the wash we could do,” Haas said. “We believed there was a group of customers just like us and chose hand carwashing as a basis for our full-service carwash franchise brand.”

Even so, Haas does not want Team Blue locations to be confused with “mom-and-pop” style carwashes that frequently pop up in parking lots today. All Team Blue operations have purpose-built facilities and professional, organized operations designed for vehicle volume, customer service and maximizing profitability. In addition, the locations utilize marketing, advertising and an overall brand experience that attracts new customers and keeps new customers coming back.

Lending a hand

Haas explained that Team Blue’s hand carwashing system was developed prior to the opening of the first location. The system is simple and easy to manage, and it was created so future franchises could provide a quality wash that customers would trust with minimal labor requirements. Over the years, the system has continued to improve for efficiency’s sake, and it now can provide customers with a typical full-service exterior wash and interior cleaning in just 10 minutes.

“In terms of our franchise business model, hand washing does significantly reduce the initial investment compared to the investment in a typical full-service automated carwash,” Haas said. “Hand carwashing combined with our overall customer brand experience provides our Team Blue franchise owners with a significant and unique advantage in local marketplaces.”

Today, all of Team Blue’s services have proven popular, and customers use all of the hand carwashing and detailing offerings. The services performed at both Team Blue locations are purposefully limited to help ensure that customers always have a great experience when visiting the centers. “More services create a greater opportunity for a bad customer experience. Our goal is always a perfect customer experience,” Haas noted.

Franchising then    

After the original Team Blue opened in May of 2008, Team Blue franchising opportunities were made available to qualified individuals early in 2009. Haas explained that the timing of the opportunity was not good.

Team Blue’s original franchise business model was based on leasing and remodeling existing retail space. Unfortunately, the national economic downturn and the new restrictive lending practices by financial institutions that followed made it virtually impossible for potential franchisees to obtain financing based on leasing and remodeling existing retail space, according to Haas. Thus, new Team Blue franchises required an almost all-cash investment, which left few qualified individuals. As a result, only one franchise was sold and opened by the end of 2012.

During the economic downturn, the original Team Blue Center in State College, PA, continued to prosper financially. In fact, the location has turned a profit each and every month for the past four-and-a-half years, Haas said. Annual sales and profits have continued to increase every year.

Further, the Team Blue franchise in Mechanicsburg, PA, that opened in September 2011 has annualized sales volume approximately 25 percent higher than the original location with corresponding profitability. Now that the economy has improved and the two original locations have proven to be successful, Haas is seeing a new round of franchise growth for Team Blue.

Franchising now

Beginning in 2013, Team Blue introduced a Franchise Founder Program available for franchisees that have the vision to get involved with the company’s development. Participation in the Franchise Founder Program not only provides early-stage franchisees royalty and franchise fee incentives, but other incentives include the opportunity to earn a percentage of future system-wide gross sales volume for national and international Team Blue Hand Car Wash Centers. Haas said participation in the program is limited to a maximum of 18 franchise founders that will represent the next 18 franchise centers.

History has clearly shown that franchise businesses have a significantly higher success rate than independent start-up businesses, Haas stated. The initial franchise fee and ongoing royalty fees more than justify the likely alternative cost of failure from an independent start-up business — or as an independent business having to eventually compete with the franchised business. Team Blue franchises have a proven system of operations and are provided geographic protection and pre-opening, opening and ongoing support with one purpose in mind, the financial success of franchisees.

Team Blue’s physical business model has changed for 2013 as well. The new model significantly reduces the initial cash requirement by making the business model more attractive for financial institutions. Moving forward, franchises will be leasing half to three-quarters of an acre of property long-term, Haas said. Also, franchise centers will be remodeling an existing building or constructing a newly designed prototype center. Also, land purchase is at the option of the franchisee.

Potential properties can include:

  • Pad-sites;
  • Raw land;
  • Land with an existing building to be demolished or remodeled;
  • Conversion of an existing financially under-performing self-service carwash; or
  • Conversion of an existing financially under-performing full-service carwash.

This physical business model change provides collateral by bringing real estate into the equation and reduces the typical initial cash requirement to approximately $250,000, Haas noted. Franchisees that prefer to purchase property instead of leasing a property long-term will have a higher initial cash investment.

At the end of January 2013, Team Blue had already sold 15 franchises under a multi-center franchise development agreement. “With the now reduced initial cash requirements, our newly introduced Franchise Founder Program incentives and 15 franchises already sold in 2013, we are extremely excited about our future and the financial opportunities available for our franchisees,” Haas said.

Team Blue training

More franchises means more employees, and Team Blue franchisees look for reliable individuals with flexible schedules when making new hires. Although full-time hours are usually available, most employees are looking for part-time hours, according to Haas.

“Our franchisees provide their employees with a fun and exciting work environment that enhances their franchise’s financial opportunity and also ensures customers have a wonderful experience when patronizing the Team Blue Center,” Haas said.

One big part of providing Team Blue customers with a wonderful brand experience is employee retention, and this requires a proper employee-training program. Team Blue franchisees understand the value the chain places on employee training, Haas noted. The employee training system is hands-on and performed in conjunction with the company’s on-site management team. Simply put, Team Blue’s training goal is to always provide the “perfect” carwash for each and every customer.

Advertising, videos and VIPs

At this point in Team Blue’s development, they rarely purchase advertising, Haas revealed. Team Blue locations are fortunate in that their existing customers actually refer over 70 percent of their new customers.

“We strive to provide the ‘perfect carwash’ combined with a customer overall brand experience that keeps our customers coming back,” Haas said. “When we do advertise, the majority of our budget is spent on television advertising.”

As the franchise system continues to grow, Haas plans to dedicate more resources to local, regional and national television advertising campaigns. In the years to come, television-advertising campaigns will play a major role for the chain and provide franchisees with significant marketing advantages.

Currently, Team Blue’s website has a promotional video that was produced in-house. “The idea behind the video was to show potential customers the difference in our carwash compared to others in the marketplace,” Haas explained. The video is several years old, and Team Blue’s operations have changed a lot in the past couple of years. Over the next twelve months, the company plans to produce a new customer video as well as videos for the franchising website.

Finally, another marketing tool that Team Blue uses is the VIP Wash Membership. VIP memberships are Team Blue’s unlimited wash programs combined with benefits for other services that the washes offer. “Unlimited wash programs are nothing new. However, because of our overall customer brand experience, our Team Blue franchisees enjoy the financial benefits of a significant amount of their customers participating in the VIP Wash Memberships,” Haas concluded.

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