Five Key Business Action Areas for Carwashes in 2010

I’ve always been an optimistic person. One thing I’ve learned over the years is that chaos and uncertainty affect people in one of two ways. One reaction is to bemoan the current circumstances and then hunker down and wait for conditions to stabilize. The other is to see chaos and uncertainty as an opportunity for those willing to take advantage of a shifting economic landscape.

I doubt anyone would argue against the notion that the last 15 months have been the most challenging in our lifetime. And while some of the most frightening scenarios appear to have faded, a palpable uneasiness seems to remain. High unemployment, spiraling federal deficits, and concerns over a falling dollar and talk of a loss of reserve currency status are real and legitimate concerns. And while residential real estate appears to have bottomed, a crisis in the commercial real estate sector may be looming.

I’m often asked how the economy is affecting our carwash business. The answer is I haven’t the slightest idea! In the Southeast, we have gone from a severe drought to one of the wettest periods on record. In Atlanta, our main reservoir was 20 feet below normal a year ago, and we were told it would take years to recover. Within 12 months, we started bursting at the seams because the reservoir is now above full pool. The last couple of months have been nearly catastrophic for carwash operators. By our measurement, we had 36 weather days in September and October. Because it rained so often, customers got out of their carwashing habit, anticipating it would rain again in just a couple of days.

As a result of these factors, operators and the entire supply chain are really hurting, and many are in dire straits. However, the current chaos provides an opportunity to distinguish oneself from the competition.

As we enter 2010, here are five key areas where opportunity abounds for those who take action:

Banking Relationships

The carwash industry is typically financed by regional and community banks. Unlike the national banks, many of these lenders are under continued pressure due to worsening loan portfolios specifically in the commercial real estate sector. Many of these banks are not in the lending mode and credit remains tight under almost any circumstance. Long-term relationships no longer have the influence they did just a couple of years ago. In the current environment, we are reaching out to many more banks because we simply can’t afford to place too many eggs in just one or two baskets.

New Development

Now is a great time for new development. Demand for sites from competing uses is dramatically lower, and professional firms and contractors are starving for business. We recently completed a project and the experience was terrific. We came in slightly ahead of time and under budget. We are under development on another project, and I am amazed how many calls I receive each week from interested contractors, many of whom would have never given us any attention just a couple of years ago.

Consolidation Opportunities

The most attractive opportunities may lie in the consolidation of weaker operators. Given the uninterrupted growth of the past decade, an industry shakeout is likely and probably healthy. As in stocks, a rising tide lifts all boats, and there are operators who survived based on strong economic fundamentals.

Now, many operators are in trouble (and the same can be said for companies up and down the supply chain). New developments always contain an additional element of risk, both in construction and the unknowns of a new site. Consolidation is likely to increase in 2010.

Operating Expense Reduction

Expense control continues to be front and center, and tough operating conditions force operators to focus on expense items that may have been overlooked for years. Every line item needs to be reviewed and there are probably significant savings to be had. We have spent a tremendous amount of time and energy on electricity savings but have also focused on expenses such as insurance, telephone and even waste disposal.

Customer Acquisition & Retention

One area where we are not cutting expenses is in customer acquisition and retention. Now is the time to differentiate from weaker competition. We are investing more money in the customer experience by adding and upgrading equipment to ensure we are producing the best quality wash. In addition, we are increasing our advertising and marketing efforts to attract customers. We like to think of it this way: If the customer can see it, we spend money on it, and if the customer doesn’t see it, everything is under review.

Current conditions make it easy to do nothing and wait for things to improve. But opportunities abound only to those willing to take bold action. Good luck to everyone in 2010.

Gary Dennis is owner of Ultra Car Wash and president of the Georgia Coalition of Car Washes. He can be reached at dennisjg@yahoo.com.

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