Finishing Line

New Approach - People, Planet, Profits

By Robert Roman

08/01/17

Unlike franchises and large corporations that have multiple operations in various locations, mom-and-pop shops usually have a single location that occupies a physically small space. The shop could be any type of business such as an auto repair garage, bookstore, restaurant, car wash, etc.

Since mom and pop can’t compete against larger companies’ buying power (cost strategy), they often attempt to create a sustainable competitive advantage by differentiating or targeting a niche market.

Mom and pop may also include investors who are usually not very experienced and only invest minimally to supplement their income. Such was the case with many investors who built self-serve car wash facilities between 1990 and 2007 or so.

Unfortunately, the number of self-serve establishments has tumbled from 32,500 to 25,500 units and, by some accounts, the numbers are still dropping. Today, many self-serve washes are not worth what it would now cost to build them and what has proven sustainable is beyond the reach of most mom and pop investors.

Traditionally, mom and pop investors were an important source of small business growth in the car wash industry. Car wash businesses were built by raising capital from within a family and reinvesting capital in business infrastructure to create opportunities for solid growth and limited risk exposure.

Today, growth comes mostly from established chains, the new breed of investor type, as well as structural change from within the convenience store industry. Consequently, to capture market share, mom and pop investors would need to develop business models with low overhead, low cost technologies, low cost communication, etc.

Other criteria would include a unique product, exceptional service, and personalized feel. For example, the equity requirement to build a combination self-serve wash back in 2007 was $350,000. Typical cash-on-cash return was about 35 percent. Today, the same wash may have cash-on-cash return of only 14 percent or roughly $50,000 — down from $125,000.

Arguably, the path to a car wash for mom and pop has become less attractive, mostly unattainable. What may be attractive to mom and pop in-vestors is the triple bottom line (TBL) approach to business — people, planet, profits. The goal of TBL is to please customers, employees, and stakeholders and create a workplace culture that provides more than a paycheck. 

The people or social aspect pertains to fair and beneficial business practices. For example, a TBL business may hire and train autistic adults to become hand car washers and detailers, paying fair wages and thereby giving back to the community.

Planet refers to sustainable environmental practices. TBL companies aim to do no harm to the environment. TBL companies minimize their carbon footprint and they carefully manage consumption of energy and non-renewable products thereby reducing waste as well as rendering waste less toxic.

The profit or economic aspect of TBL is the economic value created by a company after deducting the cost of all inputs including the cost of the capital. Economic value equals accounting value or internal profit (business worth) plus social benefits.

TBL companies attempt to capture share by reaching untapped market potential and adapting to new business sectors. For example, mobile waterless car wash and detail operators today are tapping into customers like Google, Uber, Enterprise Rent-A-Car, Porsche, etc. Unlike many new- and used-car dealers, these customers pay fair prices and pay on time.

TBL companies can also find financially profitable niches, which were missed when money alone was the driving factor. For example, the car wash industry continues to converge on the express exterior conveyor wash format or business model.

Express is a high-volume, lower priced, exterior-only car wash that offers free-use vacuums. There are conveyor attendants but no assisted-services or lobby. Most express washes feature unlimited wash programs.

Arguably, a TBL company with a unique product, exceptional service, and personalized feel could adapt as the number of these enterprises is growing.

Potential candidates for mom and pop TBL companies include location-based hand wash, express detail, reconditioning, and mobile operations.

A mobile operation is ideal to reach corporate business, gated communities, and other customers willing to pay premium prices for the convenience and customer service. Mobile services can incorporate a car wash, detail, paintless dent removal, windshield repair, factory paint restoration, headlight restoration, trim repair, window tint, de-odorizing, etc.

Reconditioning is specialized auto detailing that involves refurbishing the exterior and interior of vehicles of later model to near-new or original appearance.

A location-based hand wash provides exterior-only and full-service waterless car wash and express detail services. Express is detail services that can be completed within 20 minutes.

The most expensive location-based wash business has start-up expenses of $125,000 (low overhead). Thirty percent of this would equal $37,500 or about 11 percent of the amount needed for a self-serve wash.

Income potential of TBL businesses varies by scale, scope, and entrepreneurial effort.

For example, the potential pre-tax earnings for an owner/operator of a location-based waterless car wash are $125,000 or more whereas a one-person mobile operation might earn $50,000 or more.

The TBL companies we mentioned can use low-cost technologies.  For example, waterless car wash and detail products virtually eliminate the need for volumes of water to clean, waste disposal, and the need for expensive automatic equipment.

They can also use low-cost communication. For example, it only costs a few thousand dollars to develop a responsive website, webmail, phone app, auto-tag/GPS, smartphone payment, customer database, etc. In the final analysis, the mom and pop car wash investor of tomorrow may have little in common with the mom and pop investor of years past. For example, the cost of labor is on the rise as benefits expand and wage boards across the country fight to push wages to $15 and even higher.

Perhaps as important is finding help. As the economy grows and hiring continues to expand across all industries, there are fewer and fewer workers to staff the new stores. Consequently, a one- or two-person mobile operation, husband/wife team, small-scale store, and part-time help are attractive alternatives to operating a car wash business that requires a large number of full-time employees and management.

Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com.



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