Well happy February everyone and here we are well into 2012. I'm sure by now you all are aware of the newest trend in full-service carwashing … unions! For those of you who don't know, as of late 2011, a carwash in Santa Monica, CA, was officially unionized. I am not talking about a locally sponsored union like the culinary workers union or even an offshoot, such as the carpenters union. Nope, I'm talking about the big boys: The steelworkers union(s) out of Pennsylvania. These guys are very politically connected at the national level. And while steelworkers in our country have decided that unions are acceptable, it simply will not translate to a better product or service for the carwash consumer. Soon to be long gone are the days of the $7.99 special or even the $14.99 basic. Instead what you will start to see in the not-so-distant future is a basic full-serve wash priced at $29.99 or higher in some areas.
Will higher prices = lower car counts?
While I agree that in some cases prices in various markets have been artificially low, partially due to less-than-legal labor practices by unscrupulous operators, having prices make that kind of jump in the market as a whole will start the clock ticking on the end of the dominate full-service model. The question for us now is can or will the consumer support this increase in pricing for the full-service carwash.
Enter a new contender for the heavyweight belt, the express/flex model. Here we have a completely different paradigm of the carwash industry whose original purpose was to offer an alternative and more efficient production method for the full-service carwash model. Now it seems to additionally offer a way to "roll with the punches" being dealt by the effect on the consumer based on a recessionary economy. Well, get your tickets and place your bets folks 'cause you're in for a real boxing match! Unfortunately it is not going to be a fair fight. The express/flex, with its leaner and not-as-attractive-to-a-union labor needs as well as custom blended and bundled carwash packages, will make short work of its full-serve opponent.
Property and the "new normal"
The real task at hand for our champ is finding a place to train, so to speak. By that I mean the ability to locate development property at a reasonable price (remember my December 2011 article and the headwinds facing the new investor) or to make the conversion from full-serve to express/flex for those properties with the right layouts and location demographics. My colleagues and I have been approaching this by circumventing the usually practiced carwash and real estate buying procedures. By doing so we are able to locate some great deals for our clients. On occasion we are even able to pick up properties for pennies on the dollar, but that's for another article.
We are in uncertain times, and we are in an economy that has been defined as The New Normal. Things are going to be different for a long time to come. The Old Normal is gone and things are not going to just go back to the way they were. Unions are targeting the worst offenders in the industry, and they are more attracted to the full-service business because of the number of laborers involved and the more union dues per site. In my view, the express/flex model has separation of operational entities, thus allowing a much more controlled, streamlined and limited labor force that is less susceptible to union pressure.
Again, here is what defines how a carwash is categorized:
Flex service is blend of both full-service and express exterior wash options while the express exterior is an exterior carwash only with free or paid vacuums.
How to gain success
Generally, the only way to successfully operate in this new normal climate is to seek out the attractive development projects, make the transition and begin an aggressive marketing campaign while "re-schooling the consumer."
Incentives for new development projects include:
- The downward pressure on re-prices may provide developers an excellent opportunity to acquire property for either flex or express exterior carwashing.
- Sites previously held back from carwash developers may now be available as landowners and commercial developers scramble to find income producing business opportunities for their empty lots.
- Cities are still tough on carwash projects but are also hungry for new revenue generated by new development or remodeling of an existing facility.
- Costs for construction are more reasonable and various trades associated with construction — such as contractors, architects, engineers and others — may be willing to negotiate a better deal during tough times.
- Chemical and equipment companies are in a greater competitive mode also providing more incentives allowing a reduction in the costs of goods.
Conversion projects including full-service carwash to flex service or express exteriors include:
- Both options offer the consumer a choice of services which are more competitive than their full-service only counterparts.
- Property must have the right physical attributes and location demographics to make the investment necessary for a profitable outcome based on the conversion.
- Investors must be prepared to "go all the way" incorporating the best solutions to include:
- New tunnel and vacuum equipment;
- New POS systems and other labor saving technology;
- Updated reclaim systems;
- Energy efficiencies for all systems, including VFD and solar systems;
- New signage and an updated and attractive image package.
These conversions can cost between $500,000 and $1 million depending on the current condition of the business and other site issues.
Handling a new brand
Operators should be prepared to establish a new brand and defend it.
Here is where your prize fighter comes into his own. A very personable approach is recommended here for the new operator. In other words, you will want to put a face to your new operation reflecting your new "trademark style" of doing business.
In conclusion, we are in a whole new era and with that will come a whole new style of carwashing. For those of you that remember back to the 1950s and 1960s, the big thing was the wash and "hot wax." In time that demand for services grew to online protectant, wheel and white wall cleaning, and eventually hand waxes and even full while-you-wait details. Well now things are going to change again and, just like in the past, it will be driven by consumer demand and in the case of express/flex, the economic spending ability of the customer.
Stay tuned folks … there is much more to come.
Until next time, get out your gloves!
Christopher C. McKenna of McKenna Assets LLC, based in Redondo Beach, CA, can be reached at 310-947-9711, or via email at [email protected]. You can also visit his website at www.carwash-consultant.com.
Chris would like to thank Paul Dadgar of the Irvine Advisory Group LLC for his contributions to this article.