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Executive Forecast
David Cerutti and Jimmy Sisk

Jimmy Sisk

David Cerutti

This year, Executive Forecast has gone bi-coastal. We asked two distributors from the bookends of the country - one from North Carolina, the other from California - to give us their take on 2006, and share their views on what may lie ahead for the car wash industry.

Jimmy Sisk is vice president of Car Wash Concepts, Inc. in Thomasville, NC, a manufacturer and distributor of car wash equipment specializing in turnkey projects in the Southeastern US. You can contact Jimmy at (800) 733-9760 or via e-mail at jimmysisk@carwashconcepts.com.

David Cerutti is owner of Crystal Clean in Modesto, CA, a developer of car wash projects and a distributor of car wash equipment. You can contact David at (209) 520-2441 or via e-mail at carwashdac@aol.com.

We asked our participants to consider four issues of general interest to operators of car care businesses:

The Economy - The outlook for 2006 and its impact on the car care industry.
Equipment/Format Trends (for example: Friction/Touch-Free, Conveyor/In-Bay Automatic, Full-Serve/Express Exterior) - What do operators demand, and how will consumer preferences change?
Market Saturation - Are we building too many car washes of a certain type in some markets, or just too many washes in general?
Operator Concerns - In your experience, what do operators consider to be their most important challenges?

THE ECONOMY

Sisk

This year the economy has been impacted by many negative factors, which will linger into 2006. With the catastrophic storms such as Katrina in the Gulf as well as the continued war in Iraq, events like these have affected many customers' disposable income and therefore kept revenues at washes lower. As for our market, I feel that 2006 will start slow and improve throughout the year as oil prices stabilize and people become accustomed to paying higher prices for all goods and services. The impact on us as distributors will not be affected as long as interest rates hold steady. The concern is that if interest rates continue to climb then investors will be more willing to keep their money in other investments rather than develop new car wash sites. The biggest sector that will continue to be harmed by the economy will be c-store washes. With gasoline prices still high, customers will be reluctant to purchase a wash at those sites and many oil companies have reported wash revenues down substantially. An additional concern for our market in 2006 is the lengthy drought, which has now begun to warrant severe water restrictions and possible closure of sites without reclaim systems.

Cerutti

I'm confident the economy will continue to thrive in 2006. Automobile sales continue to be strong in California considering the soaring price of fuel. The public continues to love their vehicles as proven by customer options and special accessories purchased. The growing number of car washes is fueled by public demand. Petroleum sites continue to add car washes to generate fuel sales. Full service facilities, exterior, and coin-operated washes continue to be developed in many areas. The housing industry in California is at an all-time high. The development of homes in small communities has created a need for new services including car washes.

EQUIPMENT/FORMAT TRENDS

Sisk

I don't think that this year will see many changes in equipment trends or formats. Touch-free will continue to be the wash of choice for the self service/automatic combination sites as well as c-stores. Cloth/friction washes will continue to dominate the full-service tunnels and express exterior washes. I do hope to see some locations in our market open with the express exterior format. I truly believe that this will be a new trend to minimize labor costs for existing operators and provide an exciting concept to new investors who may not want to dive into the full-service arena, but desire to own a tunnel style wash. Consumers will continue to wash in the car wash style they are most comfortable with, be it touch-free or friction. Until we educate customers better on the advantages or disadvantages of each wash type, I don't think you'll see many make a switch.

Cerutti

The trend in California is for exterior tunnels. These tunnels offer the consumer many options of washing at a reasonable price in a very short period of time. With the reduction of labor, smaller buildings and sites, they have proven to be very profitable. Coin-operated car washes continue to thrive with the addition of equipment options and services being developed by equipment manufacturers. Petroleum site tunnels have grown and are now of higher quality. The "free wash with a fill up" is a thing of the past. Petro sites have been forced to provide a higher-quality wash to become a profit center and compete in the marketplace.

MARKET SATURATION

Sisk

I feel that the problem is too many washes are being built in the wrong places. We do see that in some metropolitan areas, saturation or crowding of existing washes by new ones is occurring. But I find the biggest problem is that distributors are not advising new investors to build in locations that will be profitable. Some distributors seem to be more interested in equipment sales than making their investors become successful operators. I feel that even if an investor wants to build a wash and already has his land, that we, as professional distributors, should advise him if it's a bad location. If he still wants to continue with the project then we are willing to do so at his request. I also see washes being built based on what is currently around the location and not analyzing the property enough to find out if that location will be viable for 10 to 20 years. Just because Wal-Mart or other major retailers are there this year doesn't guarantee that they will be there next year. Look for the sites that give a customer a reason to stop. That is - retail shopping, fast foods, post office, etc. Just because we build it does not mean they will come.

Cerutti

I feel that car washes will continue to develop at a healthy rate driven by demand. The process of development, site acquisition, permits and fees, water and sewer, construction and improvements is very expensive. The costly process does not allow for mistakes. Creditable developers, manufacturers, distributors, banks, and appraisers should ensure the profitability of new sites and their locations. I do not believe we are saturating the market.

OPERATOR CONCERNS

Sisk

I think the biggest challenges facing today's operators are keeping up with the new technology that's becoming increasingly popular with customers. An operator, new or old, must be always updating his wash to meet the demands of his customers or risk the possibility of another investor coming into his market and building a wash. With the addition of bill acceptors in the bay, credit cards for the bays' vendors and vacuums, as well as high-tech information systems and realtime video monitoring, operators must increase their knowledge of these high-tech gadgets for purchasing as well as technical troubleshooting. Additionally, many manufacturers of these new systems fail to provide adequate training for both the distributor and technicians charged with repairing and selling these systems. I see that this will become even more of a challenge in the future as additional technologies from other industries will filter into the car care industry.

Cerutti

Challenges for operators today are numerous. They include dealing with competition in an ever-changing market. Finding good employees, dealing with workman's comp rates, and the high cost of doing business will continue to plague operators.