Finishing Line - July 2009

The Future — Perhaps not that Grim
By Robert Roman

No one can ignore the obvious pain that many consumers and participants in the car wash industry are experiencing as a result of the economic and financial environment. However, is the future outlook as grim as many people are making it out to be? Perhaps it is not.

Following the oil and energy crisis and stagflation of the ‘70s, the United States suffered through a severe recession during the ‘80s due to a monetary policy designed to control high inflation, which had soared to 13.5 percent. Unemployment soared and remained well above normal levels for several years and the prime interest reached 21.5 percent in 1982. Moreover, there was the S&L and banking crisis to contend with. The ‘80s was also not a good time for the housing, steel, and automobile manufacturing industries which were pummeled along with the businesses that supplied them. However, with the exception of the steel industry, common experience has shown that most businesses and consumers eventually recovered from this turbulent period to enjoy new periods of growth and prosperity.

In the mid-’70s, I made the dubious choice of going to work in the steel manufacturing industry. I did so because that is where the money was in my area for someone without a college degree. Due to the economic problems of the ‘80s and structural change, manufacturing in the United States began taking it on the chin. Since I believed that my employment would be permanently affected, I decided to change things. I sold my home, motorcycle, and truck to raise cash for tuition and gave up my personal life to attend college while working full-time. I graduated and moved to another state just before the bottom fell out. Steel mills closed, unemployment spiked to 25 percent and the housing market crashed. If you were lucky, you might find a job shuttling rental cars or working in a fast-food restaurant. I escaped to greener pastures but not without paying a significant price and suffering pain.

If history is any indicator of a possible future, then it is clear that change usually brings more change. However, if you’re a 30-something, you may not be that aware of the events of the ‘80s. If you are a 40-something, you probably are aware of them but may have little experience dealing with the consequences. If you are a 50-something, you may now be dealing with the same issues that your parents had to content with after the great depression. If you are a car wash owner or prospective investor, your current situation may comport to these age brackets.

Although the cause and effect of our situation today is very different than what occurred during the ‘80s, the challenges are no less serious. Many experts have no doubt that we will recover over time to some degree. However, with the exception of the very rich, the behavior and free-wheeling spending of many consumers may be forever changed. In fact, there is already strong evidence of this in many retail sectors.

Changing consumer behavior and the fact that consumers are increasingly more demanding is forcing some retailers to invest in smaller stores and bet on a proximity and quality-of-goods-and-services strategy. Arguably, this trend in retailing may have consequences and present new challenges and opportunities for car wash investors and existing owners.

The slowdown in hypermarket activity will most likely reduce the opportunity for co-locating new washes in some markets. The growth in smaller supermarkets and the fact that consumers are staying closer to home and are making fewer shopping trips may create infill opportunities for more compact wash formats on surplus land. The high cost of living in some suburbs is causing some consumers to move closer to big cities or smaller towns. This may present opportunity for existing washes to tap new segments, if they are prepared to do so. Similarly, distressed car wash properties may present new opportunity for redevelopment as another format.

Change is usually not welcome by most people because comfort tends to bred complacency: once in a zone, it usually takes quite a bit of force and willingness to move out of it. Nevertheless, change is upon us, like a big wave. Consequently, you can choose to ride the wave, you can choose to hold your breath and wait for it to pass, or you can give up and drown. In the final analysis, everyone has a choice.

Bob Roman is president of RJR Enterprises — Consulting Services (www.carwashplan.com) and vice president of Bubble Wash Buildings LLC. You can reach Bob via e-mail at bob@carwashplan.com.

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