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Everyone’s well aware that the merger and acquisition market is running hot in the carwash industry, but there are some carwashes that prefer to build rather than buy. Champion Xpress Car Wash, based in Lubbock, Texas, is one such wash, and it has set some lofty goals for new-builds.
In the May 2019 issue of Professional Carwashing & Detailing, I interviewed Derrick Merchant, co-owner of 7B Building & Development and Champion Xpress Car Wash. At the time, he said that Champion Xpress had the goal to build and open “20 carwashes by December 2020” and “50 locations by 2025.” In the following interview with Merchant, I checked in to learn more about how those plans got started and how they are progressing.
MK | Please explain your background and how your construction business and carwashes got started.
DM | I graduated Lubbock Christian University in 2008 with a business degree. As everyone knows, this was the year the bottom fell out and was the worst recession since the Great Depression. So, I went back to Texas Tech University to pursue my construction technology engineering degree after looking for a job for a couple months and not finding anything.
I was about halfway through that program when my dad called and said, “Do you want to go to work for me? We got our first job.” My dad had worked for another developer for several years prior to that, but in 2008 when everything happened, that company had become overleveraged, and after trying to ride it out for months without a paycheck, my dad knew it was time to start something else.
Well, I was tired of being broke and excited to work and learn from my father. So, 7B Building and Development was born in August 2009. We had several doors shut in our face the first months, but we never stopped pursuing our goal to be a commercial developer. In September 2009, we started our first commercial ground-up Dollar General in Texico, New Mexico.
We built that 9,100-square-foot building and developed that 1 acre in 45 days start to finish. We had to build and get the Dollar General open in 60 days or less, because if not, they were going to foreclose on my folks’ house.
That hunger and motivation led to us becoming very organized and very good at building at a fast pace, which led to more work than we could have ever dreamed of. That store led to 400-plus other commercial ground-up projects over the next 10 years.
From 2014 to 2015, we were very busy. I believe we had 89 commercial ground-up projects and were doing a complete gut and remodel on a 62-unit apartment complex. So, naturally, we felt it was a good idea to add another business to the workload.
My middle brother, Trey, said, “Guys, I really think we should diversify and start a carwash brand.” We kicked it around for a couple months and ultimately decided to do it. We opened Champion Xpress Car Wash in Roswell, New Mexico, in 2015. We fell in love with the business and have never looked back.
Our businesses are now run by all three of my father’s sons, since he has retired: myself (CEO of real estate and construction), Jordan Merchant (president of construction) and Trey Merchant (CEO of Champion Xpress Car Wash).
MK | What makes your carwash unique, and why are these differentiators important to you as well as your customers?
DM | I believe what makes our carwashes unique are our site locations. We are very picky. We won’t do a carwash unless it’s an A++ piece of dirt. We are very picky when choosing sites, as the access, visibility and functionality of your carwash site is so crucial to putting out volume and not getting out-positioned. We have over 80 years of experience on our team of picking real estate for clients, and we have over 90 years of experience on our construction teams in building sites and exceeding deadlines.
From an operational standpoint, we feel we offer an extremely good customer experience. We currently use a leading point-of-sale system with license plate recognition and quality equipment on all our sites. We have been blessed to team up with Big Man Washes out of the Dallas-Fort Worth area on our expansion, and Wes and his team have been a tremendous part of our success.
MK | What does it mean to create a positive customer experience? How does your business consistently deliver on that experience?
DM | At Champion Xpress, we tend to agree with Sam Walton — there is only one boss: the customer. And the customer can fire everybody in the company from the chairman on down simply by spending his or her money elsewhere. Therefore, from the moment you step onto our site, you should be greeted with a smile and a stress-free environment when maneuvering your car around our large sites, and you should be able to enjoy the scenery of a beautiful and clean site, and ultimately a stunningly clean and dry car with the option to use the free vacuums and free mat washers after the exterior of your car is clean.
MK | Earlier this year, you sold seven locations to Zips Car Wash. How did this sale impact and/or figure into Champion Xpress’ long-term plans?
DM | That sale allowed us two things. First, it showed all our bankers proof that this industry is real and thriving. And, second, it gave us the capital we needed to grow our wash brand.
MK | How has operating a construction business and a carwash business simultaneously impacted each of the two businesses?
DM | The construction business essentially allowed us to vertically integrate into so many different businesses. It allowed us to start a real estate arm, title company arm, earthwork and utilities arm, and now it has allowed us to use all those arms to focus on building carwashes. In 2020, we will use all our companies to exclusively develop and build carwashes.
We feel the market is severely underserved with quality real estate developers and construction companies that know what a successful carwash looks like and how it is built. We also feel that so many people are paying too much money when they are designing and building these washes, and if you haven’t operated a wash, you don’t know what the sweet spot is. We believe our experience and knowledge can save people tens of thousands — if not hundreds of thousands — by using our services if they really let us get in and value-engineer their projects.
MK | You have a lofty stated goal of 50 locations by 2025. What motivated you to set such high construction goals, and are you still on track to reach them?
DM | Like any business, we knew that in order to be really successful, you have to do volume and grow. Following commercial retail all over the country allowed us to see an extreme amount of underserved communities from the carwash prospective. We knew that we needed to regionalize our brand and have territories for growth so that we effectively get to our locations quick. That sounds a lot easier to do until you look at the geography where we started laying our carwashes.
At first we said, “Okay, we’ll go anywhere three hours away from the house.” Then we said, “Okay, five hours.” Then, next thing you know, we’re looking in five different states for carwash properties. If you take into account the first seven we sold to Zips Car Wash in January, we will have completed 27 to 33 carwash ground-ups by December 2020. We are on pace to reach 50 ground-up locations by December 2022.
Check out this follow-up interview with Derrick and Trey Merchant for more insight into what they feel has made Champion Xpress Car Wash and Dale Shine Car Wash become so successful.