On the Wash Front - March 2009

Plan: Wall Street, Main Street,
and Recession Preparedness.
By Anthony Analetto

I’m no economist. I’m no banker. But I doubt I’m the only car wash operator walking around with his tingling sense that I’m either about to be sideswiped by economic forces outside my control or miss out on an opportunity of a lifetime.

With two washes in a hurricane prone region, I’m no stranger to hurricane preparedness plans — but what do you do to prepare for a prolonged recession? None of us needed the official announcement that we were in a recession to tell us that business was down. Unfortunately, none of the experts seem able to predict if the storm is about to respond to the bailout programs and dissipate, or is about to hit the proverbial fan.

Most every business right now faces the simple truth that revenues have dropped. I for one would prefer not to just hope for the best or begin blindly slashing the people and assets I need to survive. So, modeling the clear, calm, hurricane preparedness plans we have in place, I have begun to outline what I’m calling a Recession Preparedness Plan. I’ve structured the plan into three categories: First, take ownership of your customers. Second, take control over expenses. Third, take control of your finances. For the third part I called Kevin Rafferty, vice president and SBA regional manager for TD Bank. His interview and insights on financing for car washes during these turbulent times is at the end of the article.

Americans will continue to wash their cars regardless of the economy. Preferences may change, frequency may change, and expectations may change — but they will still wash. That’s what the first section is actually all about — so let’s get started.


In these times, you cannot afford to let a customer leave your site without trying to capture their contact information. There is a lot being written in the popular business magazines about what companies can do to come out of this economic downturn with increased market share. The general consensus seems to be that those that increase spending on advertising and new technology to improve customer service or decrease expenses will be the winners. Good logic if you’re not already struggling to make payroll or to pay your chemical supplier. Fortunately, the best marketing often requires more creativity and hard work than money. Increasing your marketing effort can pay off more handsomely than increasing your budget.

Everything starts with knowing your customers and getting their contact information. Welcome them to your wash. Thank them for coming. Ask them how they’re doing, and most importantly, ask them for their address, and ideally, their e-mail address. At one time or another you may have had a fishbowl on your counter with a sign saying “throw in your business card to win a free detail service.” Maybe you’ve had a tip box set up next to a sign offering to e-mail customers a free wash on their birthday, which can also be done at an express-exterior with a sign at the kiosk, the tip-box at the exit of the tunnel, or in the vacuum area. Look at your counter. Is the fishbowl sitting there with a picture of last month’s winner smiling next to a shiny car with a testimonial? Were all those names and addresses entered into a computer database? If you’re not actively collecting your customers’ addresses you have no way to affordably promote to them. Like I said before, people will continue to wash their cars but their preferences, frequency, and behavior may change in response to a changing economy. Wouldn’t it be nice to send an e-mail blast for a few dollars telling your existing customers there’s a new reason to visit your wash, and that you now offer exactly what they’re looking for?

Also, when you do advertise, advertise events whenever possible instead of discounts. Every day is an anniversary of something, be creative. It costs the same money to send a postcard or put an advertisement in the newspaper with some coupons as it does to promote your Anniversary Celebration Event. Maybe the first 50 customers will wash free, the first 100 will be entered to win one of three unlimited wash passes for the year, and everyone who washes that day will be entered to win a free i-Pod, TV, or other gift. Make sure your entry form lets customers know that winners will be notified by e-mail and you may end the day with a strong list to promote to. Don’t forget to put out a sign and some balloons announcing the event. If you’re able to pull customers to your site with direct and print advertising, passing cars looking at a line of customers and balloons may stop in to see what they’re missing out on. Now you’ve given them a reason to come, collected their e-mail address, and made them feel good about visiting your wash.

I just threw out two marketing gimmicks that can absolutely drive traffic. Unfortunately, nothing is as easy as it looks. These types of promotions should be part of an overall marketing plan that combines events, fundraising sponsorships, and advertising. The point I want to make is that all the experts saying businesses must spend more on advertising should really be saying that businesses must invest more in marketing. That means working harder to make sure the advertising dollars you spend have a better return on investment.


I know I’m not alone in keeping a running list of things I intend to do to reduce the variable expenses at my car wash. Every day there are new products, services, and practices that can shave electric, water, labor, and soap consumption. There’s already a lot written in the magazines on the subject so rather than throwing another list out there, I want to shift gears, and talk about actually getting these things done.

Living in South Florida, an amazing thing happens when a hurricane threatens our shores. One part of the population has invested the time and money for hurricane preparedness. They calmly close up their properties with pre-installed shutters, get fuel for their generators, and check the inventory level of supplies on-hand. The goal is to be able to recover quickly in the event they are affected. Another part of the population panics, runs to get disposable plywood, and ends up waiting in huge lines hoping to get a bottle of potable water before they can even think of beginning to repair their property. Planning wins every time.

Whether it’s a new training program, preventative maintenance schedule, or equipment upgrade, most money-saving projects require time, effort, and investment. Even a simple task such as replacing bathroom light switches to motion sensors takes time, and money. Call it recession preparedness planning or just common sense, but with so much uncertainty out there today, it is a great time to prioritize your list of cost saving activities and get moving. Even if the economy starts to take off again tomorrow, you’ll have a more efficient and profitable business to enjoy the good times with.


Talk to your banker. Can I still get money to expand or improve my business? What happens if I can’t pay my loan? Am I getting the best possible rates for all of my existing loans? Not knowing the answer to any of these questions, I picked up the phone and called Kevin Rafferty, vice president and SBA regional manager with TD Bank, who I heard had organized the financing for some recent car wash projects. Although this topic is highly specific to your circumstances and location, many of Kevin’s insights apply to everyone. Below are some excerpts from our conversation.

ANALETTO: I may as well just jump in with the biggest question: Is there still money available for me to improve my business or to open new locations?

RAFFERTY: Yes, money is available and deals are getting done via both SBA-backed and conventional loans. The real difference is that everything is more closely scrutinized. Banks are focusing on better properties and better locations. Marginal deals that may have been done in the past may not happen, but the better deals are getting done. A borrower looking to improve his odds of success must present a good property with a good down payment. Loan to value ratio should not exceed 80 percent and if cash flow is tight don’t be surprised if the bank wants a 75 percent or lower loan to value ratio. This is especially true if management is less experienced in the industry. Across the board, expect that every detail of your application will be closely analyzed. The ability to supply clear and easily verifiable documentation will give an applicant an advantage.

In general the process is slightly easier through the SBA. Although the fees associated with this type of loan may be slightly higher, the US Government guarantees 75 percent of the loan making it much more attractive to the bank.

I know veteran car wash operators who have been refused a loan, can you explain?

Right now, some banks are looking mostly at warehouse or office projects that they can resell as anything. Limited-service properties which include hotels, churches, bowling alleys, gas stations, and car washes, just to name a few, can be more challenging. Basically, these types of properties can only be resold for the use it was built, or leveled for another use. This means that a bank forced to resell the property will either have a limited audience, or will need to level the building and loose the value of the site improvements. Veteran car wash operators struggling to find a loan may want to consider applying through the SBA for the reasons I mentioned earlier.

What effect has dropping property values had on getting loans approved?

You see these problems with residential loans, but on the commercial side it hasn’t been a problem. Appraisals in my experience have not been coming in lower on car wash properties and are not causing problems with loan approval.

What relief can operators get if they are struggling?

Again, with an SBA loan there is more flexibility. The SBA has sent out memorandums to lenders encouraging us to work with borrowers to get through this fiscal cycle. At minimum, a borrower may be entitled to a three-month interest-only option. As a government organization I suspect they have more tools available to meet their goal of keeping businesses open. If you’re an SBA borrower and struggling, be proactive and call your SBA lender. For conventional loans there really is no standard and it depends on the institution. These are unusual times. Traditionally a bank wants to get a bad asset off the books as quick as possible, but some institutions may be more flexible in response to the current financial conditions.

Should a car wash try to refinance to take advantage of lower interest rates?

This is a tough question because many car washes are financed with an SBA loan that cannot be refinanced into another SBA loan. That means that any refinancing involves a conventional loan. A successful business that also has a low loan to value ratio of 70 percent or less may be able to reduce their rate. Conventional loans however often have a 5-year balloon where the loan can be recalled.

If an operator has a conventional loan for one car wash secured by another car wash, should he be concerned that the bank may recall the loan?

It is an interesting point. It is usually unlikely, but absolutely possible. An operator concerned about this may want to look at the security of long-term permanent financing with the SBA. These loans have no call features or balloons and the only way a bank can call your loan is if you stop paying. Even then there are often government assistance programs in synch with economic or disaster-related difficulties.

Comments or questions can be sent directly to Kevin at kevin.rafferty@yesbank.com.

Anthony Analetto has over 26 years experience in the car wash business and is the president of SONNY’S The Car Wash Factory’s Equipment Division. Before coming to SONNY’S, Anthony was the director of operations for a 74-location national car wash chain. Anthony can be reached at (800) 327-8723 x 104 or at AAnaletto@SonnysDirect.com.

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