Commentary: Mr. Clean will Benefit the Carwash Industry

After several years of testing a full-service/flex-service carwash concept, Procter & Gamble has initiated a franchise development program. The company recently accelerated its progress by acquiring the assets of Carnett’s Car Washes and adding the Arnett father/son team to its already world-class management team. This is a combination of shrewd and strategic decision making by one of the world’s great brand-building companies. Procter & Gamble’s move into carwashing is all good for our industry. Yes, you heard me correctly — all good.

Who are these guys — P&G that is? If you open your pantry, purse and bathroom cabinet, you will be confronted by the ubiquitous presence of P&G and its brands, including Bounty, Cascade, Cover Girl, Charmin, Crest, Iams, Mr. Clean, Pantene, Pringles, Pampers, Tide and Vicks, just to name a few. No slouch brands here. The folks at P&G have built this laundry list into an $83 billion a year sales machine, producing a whopping $15 billion in cash flow and $3.6 billion in operating income.

You don’t need to be a Wharton-educated financial analyst to realize it has a very profitable business. By the way, those financial numbers are from 2008, which you might remember as the year we had a global financial meltdown and recession. If those numbers aren’t enough to motivate you, I suggest you read the company’s 2008 annual report.

This is a great company; a powerhouse of consumer branding, committed to innovation and growth. Look at what CEO and Chairman A.G. Lafley told shareholders:

“In last year’s annual report, I explained how P&G is designed to grow. We’ve designed a global, diversified business portfolio that enables P&G to grow consistently and reliably. We’ve developed the core strengths — consumer understanding, brand-building, innovation, go-to-market capability, and scale — that are needed to win in the consumer products industry. We manage the business with rigorous strategic, financial and operating discipline. We’ve built the most diverse, globally experienced team of business leaders in P&G’s 171-year history. These elements work in combination to ensure P&G can meet or exceed its growth targets reliably year after year.”

I purposely enumerated that long list of successful brands and the company’s awe-inspiring financial performance to illustrate that these guys know what they are doing, have a long track record of success and have the commitment, skills and money to be successful.

Mr. Clean Car Wash is coming, and this serves as a formal warning to arrogant, uninformed and asleep-at-the-wheel carwash owners. Sit up and take notice. P&G is going to change our industry ... largely for the good.

Specifically, I believe P&G will positively impact industry growth and professional carwashing’s image among consumers, planners and developers. I also believe P&G’s presence will influence the amount of capital available for investment and increase the industry’s overall quality of service delivered to consumers.

1. Growth: new sites and new customers.

Let’s look at this from P&G’s perspective. It has 24 brands that each generates more than a billion dollars a year. A new, wet-behind-the-ears MBA from Kellogg generally gets a $100 million brand (a small line of business for the new kid). Success at P&G’s level dictates a minimum amount of scale. As an exercise, how many carwashes would P&G need to get to $100 million in franchise fees?

Let’s assume that the average carwash will do $1.25 million in gross sales and that the company’s model is to charge a 7 percent franchise fee on gross sales. To get to $100 million in revenue, the industry site growth would have to be somewhere north of 1,000 new or acquired sites. That would be roughly a 10 percent to 15 percent increase in total conveyor carwashes in the United States.

Getting to a billion-dollar brand would require roughly doubling the number of sites (11,000 new or acquired locations) or some mix of new sites and increased franchise revenue through Mr. Clean sites. No matter how you cut the numbers, it is, as we say in North Carolina, “a whole bunch of growth!”

2. Image enhancement.

To get to any level of growth, P&G will need to flex its massive and experienced advertising muscle. The company’s brand-building and franchise launch teams will highlight Mr. Clean’s spiffy new facilities; professionally trained, tax-paying staff; convenient and consistent service; and the sustainable nature of its carwashing operations.

In fact, sustainability is part of P&G’s corporate philosophy. The company released its 10th annual sustainability report last year and says it is on track to achieve or exceed its stated five-year goals for reducing energy use, waste and carbon emissions.

The likely effect from its marketing muscle will be acceleration in the already declining trends of home carwashing, an increase in consumer awareness of the benefits of the professional carwash industry, and an