Carwash Executive Roundtable Discussion

I was in Calgary for the C-Store Canada Trade show last week to give a seminar on Cashless Acceptance technologies, promotions, and marketing tools. The seminar went very well and I ended up holding several breakout sessions with attendees out on the plush leather furniture outside of the ballroom in the convention center.

The following day I attended the Carwash Executive Round Table Discussion which went very well. They covered a variety of issues and the talk centered around the current economic downturn in North America. I started taking notes by hand and realized that I just cannot write nearly as fast I could type, so I opened up my trusty MacBook and took a running transcript of the hour-long discussion.

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C-Store Canada - Carwashing Executive Roundtable Discussion ( 6/3/08 )

Attendees:


Mark Thorsby - Executive Director, International Carwash Association (Moderator)
Charlie Lieb - President, PDQ (Manufacturer)
Paul Fazio - President, Sonny's (Manufacturer)
Murray Kennedy - President, Mark VII (Manufacturer)
Vince MacNeil - Vice President, MacNeil Manufacturer (Manufacturer)
Richelle Matthews - President, thecarwash.ca (Operator)
Al McDonald - Operations Manager, Canadian Tire Corporation (Operator)

Q - Describe the current status of our Industry from your perspective.

Charlie Lieb - These are certainly challenging times. Increased prices in gas, problems with US financing and a general uncertainty in the marketplace is making for interesting times.

Paul Fazio - I would say this is a time of challenge and change. Both for retail and OEM we have got to be willing to accept NEW ways of showing value.

Murray Kennedy - We are in an industry that is changing. Those that can lower the cost of operation will win. It is so important to find new ways to differentiate ourselves.

Richelle Matthews - As an operator is is necessary to focus on branding. One of the ways to distinquish how we operate. It is more imprtant that ever to standardize the expereience,especially with multiple locations. Keep people coming back by using branding and take advantage of new ways of marketing to your customers. For instance, we are using washcards to get customers to keep coming back after the first time.

Al McDonald - Our industry is impacted by a lot of uncontrallable factors that we have to learn how to live with. We have an oppertunity to grow as operators. Using the resources at hand we have an opportunity for grow within our industry. The best thing as always is to focus on efficinecy of opperation.

Vince MacNeil - One word that describes the state of the industry is 'pump shock'. Gas is causing people to skip a carwash due to this 'shock'. The need for understanding our customers is going to be key in finding the value propositions for carwashing. Pump shock will go away as people normalize to the pricing (which is a temporary issue). The real question is to ask how are we going to be presenting ourselves to the end user? There is a lot of room to raise the bar in these difficult times when it's all about controlling costs.

Q- Is Green Here to stay? What are you doing from a company perspective?

Murray Kennedy - Green is here to stay for sure and will be driven by regulations and the consumer themselves that want to feel good about the experience. Power, chemical, water consumption are the obvious places. It is driving the trend towards more of a friction wash - the operatiors and the consumers will drive this change to friction because it uses less chemical and water. Wash businesses NEED to use green business to add a value statement - this also comes down to being proactive.

Paul Fazio - There are two sides - denpends on where you are - the econoics have to make sense for your business. Water in draught, marketing in others. Especially when you look at the Canadian market, it is far different than say the south in the States.

Murray - Going green goes a long way.

Paul Fazio - We have a lot of grounds to make up - people do not have enough of an understanding WHY it is so much better to go to a green facility.

Vince MacNeil - As an industry we need to take a more active roll in the eco-friendly aspect FROM the business level. Education happens at the community level. THere are huge marketing advantages in promoting ecological resresponsibley to wash a car.

Al McDonald - Insofar as how you are eco friendly, I get reugular inquires whether we reclaim, how it impacts the environment. the single most common question that I get which may be unique to CA - how much salt is in the reclaimed water when I wash my car? Whether there is salt left in the water doesn't really matter since it is rinsed away - so it is a matter of educatiing your customer.

Mark Thorsby (Moderator) - 4 years ago a local ABC affiliate did an interview about salt in the reclaim water - I was ready for a bad interview - ready for this reporter - this is going to be easy, the sample says that there are less salt in the reclaim than there is in the tap water of Chicago. Of course this will depend on your reclaim system - there are ways to assure your customers of your particular situation.

Q - what kind of things are we starting to see pressure on reclaim and water disposal without being dependant on sewer system.


Charlie Lieb - Our main focus as a manufactureer is to find out how to use less power and less water to get a clean car. Motors, nozzeling, smaller pumps. I tend to agree with Paul that in Canada you must ask whether it make economical sense. In the US it is a different ballgame due to local madates about water uses in areas of draught. I think that in the US there is a bigger push for reclaim from an economic viewpoint. It is a good marketing tool, but when everybody "goes green" how do you differentiate yourself from the other washes when all things are created equal?

Mark Thorsby (Moderator) - [What is your persepective?] You will see that we move forward with a larger "Green" movement - New Product displays for companies with Green products to showcase them. There have been significant discussions from a marketing standpoint that carwash owners could use to Self Manage this by promoting "eco friendly". You will see more in the next number of months.

Vince MacNeil - Lets talk about Untility Costs a bit - our future is about low cost of operations right? What do the other panelists think about this?

Al McDonald - "it's been a big focus for us - automated systems that control the heat for on and off, humidity sensors, lighting, this is to reduce the costs. The ROI is about 1 year for the payback on these systems. If you manage several sites and cannot be hands-on these systems are a pretty imporatnt tool to utilize.

Richelle Matthews - One of our carwashes - use all on-demand heating (no boilers), Big topic after the winter whether to make any changes. Technology is changing and must be closely watched.

Q- Solar Heating

Al McDonald - 40-60% of cycles, not enough full cycles in the sunlight for heat. Year round there is not enough power in solar heat to make a signficant impact for us. The Federal/Provincial paybacks are nice for breaks and assistance in implimenting. It clearly has an impact on marketing though.

Q- there has been a lot of marketing on waterless carwash - i don't even know what this is? Please explain - is anybody pursuing this as a product?


Charlie Lieb - we are not, although we are looking at the new technologies. My biggest fear is that somebody comes up with a technology in which you hook a batery and some cables to the car bumper the dirt will just jump right off!

Murray Kennedy - this is not a threat at this time, although you don't want to be Kodak making film and be broadsided by this new technology.

Q- Any changes in paint technology that impacts washing?

Charlie Lieb - indications are that paint technology will only make the vehicles more resistent.

Q - GM and Toyota are charging a premium for green cars - will the public be willing to pay more for an eco friendly car wash?

Charlie Lieb - I think it will be somewhat dependant on demographics. Some sections of the population will pay more, but in my opinion most of the population will vote with their pcoket book.

Murray Kennedy - It's up to you to determine what the value is to you and your customers.. Equal to equal you will have more demand at your carwash. it is a law of supply and demand so you COULD add more value to your wash - although I agree with Charlie that it depends on the value to YOU and the value to the community you live in. In some areas of thecontry they just don't care about eco-frienldy!

Susan Glander (comment) - offering a premium would be nice, enveronmental stewardship we just expect from our wash suppliers, charging more seems to be out of line.

Q - R&D in the next 3-5 years - how will Eco be addressed by manufactuers.

Murray Kennedy - The focus of our company is to reduce lower operating costs.

Paul Fazio - "Business economics" - is this top of mind with young people? Do they really care about this?

Murray Kennedy - My kids are very very concious of this.

Richelle Matthews - Not that I'm younger than any of these fine gentlemen I think that in my generation thingss like recycling and "green" are part of my mindset and I would look to the option of green versus less-green. As part of community you are a sponser, green, AND in thecommunity as an opoerator this is where it is important.

Dan Yarusso, WashCard Systems (Audience Comment) - How do you market to a younger crowd to the "disposaable generation" Kids don't seem to care about their cars like our generation did.

Richelle Matthews - When you market you need to get into the electronic age - start a facebook group *which may be strange* - keep the conversation going on FB group on CW chemicals it's a way to start to differentiate yourself. Younger generations require a different approach, that is to be sure.

(Comment from Audience) - Demographics makes a big deal but at what price? People would not pay more for green , i've experiemented with enviro chemicals but don't work as well - so your always going back. People are not ready to pay more for a lesser product.

Susan Glander, Ecolab Vehicle Care (Audience Comment) - I feel that is just not correct, sustaninable products are not a lesser product. I bet that if you ran a blind study you would be very surprised with the results. Whether people would pay more for for a green wash will depend greatly on your customer base.

Q - Proprietary Parts and Technology - some manufacturers are using proprietary parts and technology- does this build customer loyalty or does it create resentment? how does this effect the distribution channel?

Murray Kennedy - there are a lot of things going on in that question. You can have common parts till your blue in the face, but you will always have proprietary parts. You cannot get away from that since each company has its own shops. When you have a piece of equipment and a customer wants to service his own equipment it comes back to bite you years later (since a qualified service technician requires a lot of training and education, of which most of these guys do not have) and the company gets a bad rap for a lack of education. It's bad for the operators and the manufacturers too. In the US in least the change in ownership at C-stores is astounding. Change of ownership is one-third within the past year - this means different businesses are are getting different kinds of equipment. They want 1 person to do all of the service - we have the same challenge that the rogue service guy has by not having access to proprietary training, chips, programing, documentation, etc.

Charlie Lieb - As a manufacture you have an obligation to support your older models even after they are made obsolete. PDQ keeps and maintains parts for 10 years after they are no longer built. The big problems are from when dealing with distributors that are very willing to service customer but often times (on occasion) there is a dispute over getting paid for something and there is a reluctance to service the customer in the future due to lack of payment. At the local level this could mean that getting parts is going to be a problem since that distributor in the area is the only means of getting certain parts. If that bridge is burned the customer is put into a tight spot.

Paul Fazio - When i was an owner, proprietary did not bother me so much - but when a manufacture takes a standard part and makes a minor changes so you have to buy more expensive parts for no good reason. That really made me upset.

(left the room for a short break)

Q - Talking about Service and Repairs.


Murray Kennedy - with remote monitoring you will solve some big problems.

Paul Fazio - when we have a lot of really long distance problem we use Skype and a video camera and diagnose issues remotely.

Richelle Matthews - when we hire we look for a mechanically inclined individuals to do our own repairs. They are involved in the installation process if possible and are constantly being trained.

Paul Fazio - lots of the new investors want to be independent and want to do the service on their own.

Charlie Lieb - With the increase in technology it is being more sophisticated. Much more software driven so on the flip side, what kid is NOT computer literate?

Vince MacNeil - We use the internet to post service bulletins, tech notes, and documentation. This has changed significantly than in the past.

Charlie Lieb - We have a place on our website where you can register for a forum and access product information.

Q - As a manufacturer, how do you know when something is ready to go on the market, realizing that there WILL be issues and nothing is perfect in the 1.0 phase, how do you present this to your customers and early adopters?


Vince MacNeil - We move through a 24-step process in our R&D center first of all - where the process begins, what does the market need, proof of concept, prototype, final version, field testing, work with selected washes with agreements for ‘beta testing' and these are locations with high volume and we test with various environmental conditions, testing testing testing, during that process you hope that you get all the feedback that the product will experience in the real world. You anticipate further problems that may arise due to a variety of circumstances. As you go though that process you uncover alot of those issues. thinking about the customer that will OWN this equipment, see it from his position. Seed units, pre-production prototypes with customers that have agreed to use the product. if that gets the green light after the last minute changes, plenty of rushes things along due to a show date on the horizon. Many times salesmen have sold them, no documentation, no support, but we try and do the best job we can. There will always be the unforeseen thing that you just can anticipate.

Murray Kennedy - Finding the early adopters is easy and they are clamoring to be first, the challenge is in explaining to them that there WILL be problems. Hopefully find one that is local. Change is initiated by change and you work with them on that side knowing that there will be changes and this will be a team approch. You just have a team that is ready to get on a plane at the last notice.

Q - Rumors of plant downsizing, smaller booths, what will be future in 2009? What does 2009 look like in your crystal ball?

Paul Fazio - This is easily one of the toughest times I can remember, changes are taking place in different markets throughout the industry. Both the self-service markets and the OEM side is down as well as the in-bay market. More players in it (these markets) will mean that certain companies will be feeling the pinch. Its tough and it's a huge challenge and it's not going to change in the near future.

I see how the internet is effecting the way customers have been investigating there options, the information is freely available to learn a lot. There are big things changing on the OEM side which is effecting the distributor side. Serving multiple brands is going to be the only way to keep the company alive - this even means representing several brands.

Charlie Lieb - Business has been very challenging - raw material costs increasing - we cannot pass the cost on to the customers. We have to try and reduce our own own costs and still provide quality dependable products to the marketplace. I agree with Paul that tradeshows are not as important as they used to be because of the internet. The payback for a OEM at a tradeshow is becoming much less. Reducing tradeshow expenses, number of tradeshows, amount of equipment brought to shows, this is the only way to keep from increasing the prices on equipment. Tradeshows simply do not pay off like they used to. The only thing we see from our perspective is more shows, less attendance. We will be doign more web-based things here in the future. We are already focusing on putting more information online, product demonstrations, and using online technology to reach out to potential customers.

Murray Kennedy - We have had this discussion- I could have flown all my customers into Colorado and take them ALL skiing for the cost of ICA. The big question comes down to how we are going to handle [the rising costs of shows]? Reduce the money spent at each show or reduce the number of shows? Honestly, I would prefer to see fewer shows but make them BIGGER so you don't water down which shows to go to. Make the bigger shows bigger which makes it clear to operators which they need to go do every-other-year. This would give us an extra year to develop equipment in those off years!

Charlie Lieb - (Question directed to Mark Thorsby) What is the position on the ICA?

Mark Thorsby (Moderator) - ICA is studying this Charlie. / (abrupt subject change.)

Q - If times are tough now, what will likely come of these times?

Paul Fazio - Redoing factories to create efficiency has been big.

Charlie Lieb - I suppose the question does remain how much consolidation in the industry will we see?

Q - That then begs the question, is now the time ripe for mergers or failures?

Murray Kennedy - Both. Your seeing this in the change of C-stores AND the manufacture side of things.

Q - We got studies back that people usually washed in self service has declined by 12% since 96. What are you doing to address this?

Richelle Matthews - We have not seen a decline, we see sales increase every month. We do have pet washes which is another service that we offer to bring people in. Multi-site with friction or touch-less. We do a fully stocked retail store because we always have someone on hand which is important. The sale of additional products and the opportunity to upsell rather than a vending machine because you can then educate your customer. Goes into the added value services that you can get into. We are now trying to perfect our model of labor/ services. Shortage of labor in Calgary is down.

Richelle Matthews - We always promote washcards that causes the increase in our business. Everything we do goes into selling a washcard. It is always a way for us to have our name and our hand in our customers pocket.

Q - Touchless vs. Friction - trends?

Al McDonald - we have both kinds of washes and we have seen growth in our touchless washes in western Canada. To say one other the other we do not have enough control sites to point a finger. We built based on our regional services based on the market demand. It is easier to build based on demand rather than forcing the choice.

Murray Kennedy- We have control sites and the touchless line is longer. On the days in which the line is too long we have an employee wave customers out of line into the friction wash and we give them a free or discounted wash just to give it a try. Over time and given education the line to the friction wash (after given the free opportunity) people like Friction better. There are a lot of preconceived notions about how a customer feels about a particular kind of wash.

Vince MacNeil - Hybrid is a growing market where touchless and friction are both used. In-bays and tunnels are now offering a combination of touch and touchless. The quality of the product that is coming out is looking just fantastic.

/general discussion and comments from audience.

Vince MacNeil - Things were going great in tunnel until oil when up.

Charlie Lieb - In the US it is a dichotomy. Tunnel is touch and in-bay is touchless. With new materials introduced into the industry we are seeing a loss in touchless and touch is gaining some traction. Today it is 65% touchfree and 35% touch in the US. Canada in particular is committed to touchfree in the west. Not sure how this market would take touch. At least what we see up here (canada) there is not a lot of traction with in-bay touch. Some parts of the US market will have a clear dominance of one particular type of wash.

Paul Fazio - What is driving the growth in friction? What differentiates today from several years ago?

Charlie Lieb - We differentiate because there is so much touchfree out there and more locations are offering a choice - some of it is 2 bays of various kinds - also new technology that really has less threat of damage - lower operating costs of friction.

Paul Fazio - I see that as the price on the street goes down as the final product gets better for more money. Thanks to Charlie they have pulled a lot of people out of the driveway due to touchfree. I think today from a value proposition, speed will be a big component in what people choose for their wash. Consumers want (and expect) a level of convenience that comes from a fast wash.

Mark Thorsby (Moderator) - Consumer studies show a 28% increase in usage in in-bay usage. 20% of population washes in an in-bay. 21% uses express/tunnel. In research, the preference comes into whether people stay IN the vehicle they would prefer touchless. When you get out of the car they don't care whether it is touchless or touch (friction).

Charlie Lieb - The trend you see is that the equipment manufacturers are offering the full line these days.

Vince MacNeil- What makes it such a big significance is the foam brushes technology. The debate is pretty much dead as consumer confidence increased. Conveniences, speed, price, are going to be the thought process for the customer. The word value proposition is SO important moving forward - this is especially being done from a manufacture perspective.

Mark Thorsby (Moderator) - Between cleaning technology AND advanced paint technology on vehicles this combined effort has has done a lot towards improving professional car care.

Q/Comment - as a distributor selling the among of touch machines 10/1 as touchless machines the bigget thing to recoup is that are they accepted up here [Canada]? The biggest thing is excuses for the customer to try it. Getting the volume up here is important as well.

Q/Comment - Opportunities are good here up in Canada. The oil industry is the one that is going to be taking the hit in the industry because they have the high price of gas to make the customer sour. The need for car washing has NOT gone away so it is a good time for independents to take advantage of this.

/General comments on pricing, raising prices OR lowering prices.

Vince MacNeil - $3,$7,$11 pricing is the best so the average wash is 5.50, right?

Murray Kennedy - Having more than a few washes, wash types, and wash services means more options and gets more people out of the driveway.

Paul Fazio - Biggest problem of full service was to get the consistency of product and time. This is why automation is just killer. Being able to provide the SAME wash each time and at each wash location of the same company is SO important.

Charlie Lieb - What you will see at the biggest investor sites you will see more services on all on the same site. So you can appeal to the customers desire to the service that they want for that day.

Paul Fazio - "Uh oh, i agree with him (Charlie)". /laughter

Mark Thorsby (Moderator) - Our consumer study will be released in August. According to preliminary data 65.2% American motorists say that they USUALLY use a professional wash facility. Of the 34.8% that usually wash at home, how many of them never wash anywhere? 17% of 170 million cars does not wash. This is a shrinking amount of non-washing cars.

Q - Any final thoughts or comments from the panel?

Al McDonald - it's a downturn but its going to change for us "hold the line" "Chin Up".

Murray Kennedy - There is general agreement on these trends and on how they are going to address the issues. This should give us some comfort knowing that those that weather the storm will come out ahead.

Paul Fazio - I learned a lot about Canada! ... and if we do this again, i'm not sitting next to Charlie.

Charlie Lieb - I agree with Al, that although it is tough it is going to bounce back. There are a lot of cars out there that are dirty and need cleaning.

/ Applause and handshaking ensued.
Posted on June 10, 2008 and filed under Industry Talk.