From The Dirt Up - When Disaster Strikes

By: Anthony Analetto
Originally Published in AutoLaundry Magazine

Are you prepared for a disaster? I recently had the opportunity to speak with Marcus Kittrell, owner of Marc-1 Car Washes. Last month, an F-4 tornado severely damaged his flex-serve wash located in Prattville Alabama. Fortunately the manager closed the wash and left about 10 minutes before the tornado hit and no one was hurt, but it forces every operator to stop and ask the question; am I prepared for a disaster?

Marcus entered the car wash industry in 1983 working at a full serve wash before opening several self-serve locations. In the mid 1990s he went to work for a car wash distributor, going on to buy his first full-serve tunnel in 2001 and converting it to flex-serve in 2002. In 2003 he purchased a 35 year old full- serve and converted it to one of the first express exteriors in the Southeast. In 2006 he built another flex-serve from the ground up, but it was his first location that was hit the tornado. Still in the middle of working things out with his insurance, below are some excerpts from a conversation where Marcus shares some insights on being prepared for catastrophe.

ANALETTO: People often comment that they pay too much for insurance, how much is enough?

MARCUS KITTRELL, OWNER, MARC-1 CAR WASH: It’s not that simple. First, I would recommend viewing a rehab and new construction differently. Second, there’s a lot more to consider than just the amount you’re insured for. I originally bought this location for 900K and have spent 300K in upgrades. Unfortunately I was way under-insured at only 700K. The policy automatically adjusted up by a fixed percent each year so after 5 years it’s at 777K but that’s still far less than I wish I had knowing what I do now. The insurance company has estimated it will cost 402K to repair and 419K to completely rebuild the structure. Our estimate is 588K to build brand new because of the electrical, plumbing, and slab/pit work. So you can see the difference in their numbers and mine. Fortunately we can salvage most of the equipment. If we had to replace the equipment we would come up way short on insurance money.

ANALETTO: It sounds like your coverage is reasonably close to your damages, why are you recommending having more insurance?

KITTRELL: This was a devastating tornado that knocked out a Walmart, K-Mart, bank, and nearly 800 homes. The problem is that my insurance company is looking mostly at the building, but in car washing, the big money is in electric, plumbing, and pit work.  Also, it has been determined that the property is over 50% destroyed. In our city that means everything has to be brought up to meet today’s standards. This location was built in 1993.  Upgrades to meet new ADA requirements and earthquake building codes alone may involve digging up the original footings and easily add on another hundred thousand dollars or more.

You don’t think about it, but each year adds more ordinances and potential upgrades you might have to do if something like this happens. We actually had damage to our parking lot. You may think that you’ll always have your slab – but it’s not true. Once the building shifts, you might have cracked footings, or even cracked water and sewer lines that you won’t know about until you reopen. Make sure you’re covered from the dirt up. In the future I plan to insure for 50% more than what I think total replacement will cost, just to make sure I’m covered for everything that can go wrong underground. Building and Business Personal Property insurance is relatively affordable. You overlook how little it is because the insurance bill is so huge, but some of that is coming from liability. I can’t recommend upgrading your property coverage enough. You might be fine, but why risk starring at concrete being pulled out with no way to pay for it.

ANALETTO: What about loss of income, how does this coverage work?

KITTRELL: Fortunately we had a policy for loss of income for 12 months. Even more fortunate is that we had very accurate financial records for the insurance company to use in determining payout. The insurance we have only pays for expenses including some salaries, but not profit. When something like this happens, the insurance company pulls your financial records and compares for the last 12 months. If your bookkeeping isn’t accurate, then you got your work cut out for you.

Another point I want to make regards real estate. In my situation, I have an LLC that owns my buildings and properties, with each wash operating as an S-Corp that owns the equipment but rents the location from the LLC. This is a pretty common structure for many car washes. It’s also normal for the Holding Company to make a profit on what it charges the Car Wash for rent. For example, if the Holding Company pays an $8,500 mortgage payment, the Car Wash might pay the Holding Company $15,000 in rent.  The reason I’m pointing this out is because it’s the Car Wash that holds the insurance policy, but you want to make sure that the policy names the Holding company as “additionally insured”. This extends your coverage to the Holding company so that in this scenario, you’d receive $15,000 instead of $8,500.

ANALETTO: Does your building and business personal property policy cover your equipment and signage?

KITTRELL: Equipment falls under our building insurance because it’s attached, basically, anything fastened down is covered. Our auto sentries got destroyed but since they’re bolted down they will be covered too. Signage, at least in my experience, functions differently. Our general policy has a very small allowance that wouldn’t even come close to replacing what we had. Luckily we have a separate sign insurance policy that will cover us. I’m sure this kind of detail varies greatly with the different insurance companies out there, but I recommend everyone check exactly what coverage they have. I know guys out there spending 80 to 90 thousand or more on their signage, it’s worth making sure your coverage matches the investment.

ANALETTO: Have the government and insurance companies been helpful; are you able to access any catastrophe funds?

KITTRELL: No, although there were 800 houses involved, I’ve heard that 95% were insured and that there is no FEMA money available. The SBA is supposed to offer some assistance program but I haven’t heard any details yet. So far, the insurance company has been responsive and put me in the right direction. The city has also been helpful and put us on a fast track plan that is part of their catastrophe program to bypass most construction bottlenecks. Everyone involved seems to realize that we have a shared interest in moving past this event and re-opening as quickly as possible.

ANALETTO: What recommendation would you make for other operators out there?

KITTRELL: Get with your insurance agent. Check your coverage for loss of income, signage, and make sure coverage extends to your holding company if you’re using this structure. Then, determine when you’re building was constructed and calculate from the dirt up, not the slab up, to rebuild using today’s building codes. Prepare for rising costs and don’t forget to account for possible sewer and water line upgrades.  Insure for the right amount, make sure you have good financial records, and you should be in good shape.

ANALETTO: What are your plans for the future?

KITTRELL: To be washing cars in 12 months or less before the insurance runs out. Since I got the property, the population has grown significantly, and a lot more retail has opened up in the area. It’s a more desirable location than when I first bought it, and the land has appreciated in value significantly. Selling the site is almost tempting. I’m definitely going to be shy on coverage. To rebuild the way I want is going to take an out-of-pocket investment, but long run, I think I can make more money washing cars. I’m trying to look at it positively. In a way it’s like taking a mulligan, or getting a do-over where I can change everything to take advantage of new trends and things that I’ve learned. This site will reopen as a pure express exterior with free-vacuums. It’s a great opportunity to explore new trends and formats to maximize the profitability of your property. Not exactly how I would have wanted it to happen, but I guess you have to take what you get and make the most of it.

Houston, We Have a Problem - Keeping Customers Happy When Computers Fail

By: Anthony Analetto
Originally Published in AutoLaundry Magazine

Every time some computer hiccup threatens to wreak havoc on my day, the famous quote from the aborted 1970 Apollo 13 lunar landing mission, “Houston, we have a problem,” pops into my head. If it’s related to my car wash, that thought is immediately followed by a deep breath, and a reminder to myself, that no matter what happens, don’t annoy the customer. Unfortunately, this simple logic is tragically forgotten by Fortune 500 corporations, and small independent business owners alike, whenever things hit the proverbial fan. Just last week I experienced two such failures back to back. The first, a delayed flight due to technical difficulties, was handled reasonably well, provided I assume it wasn’t caused by a failure in preventive maintenance procedures. The second however was a perfect example of what not to do. Late for my departing flight, I used my local airports valet parking service. Already 3 o’clock in the morning when I returned to pick up my car, I was told their computers were down. Unable to take a credit card or print a receipt, I paid the attendant cash. He gave me a handwritten receipt with an apology and I drove away. When I handed it to the girl at the exit, she said she couldn’t accept a handwritten receipt, refused to open the gate, and actually scolded me for not getting a proper document thus delaying me getting home by an additional 30 infuriating minutes. Would your staff have acted differently if they weren’t sure what to do?

To be fair, whether it’s expecting the computer to turn on when you flick the switch, or your phone to ring when someone calls, most of us are so consumed with completing our daily work when all the technology systems around us are functioning, that it’s hard to plan for unscheduled disruptions. You can’t plan for everything. Having lost my fair share of pictures because I forgot to back up cell phones I’ve broken, I certainly can’t stand on any soap boxes. But when it comes to your business, you have to prepare. When things fail unexpectedly, your staff can get frustrated. If you allow that to happen, your customers will become frustrated – and fail to return to your car wash. Below are some common best practices in place at most car washes. Let’s take a look.

Create Redundancy
Before I go into the nuts and bolts of keeping your gates open for business and a smile on your staff’s face when things are failing all around you, I’d like to first spend some time on bypassing that need in the first place. Most car washes have tremendous redundancy built into their equipment package. Items such as secondary air compressors and excess hydraulic power pack capacity are able to keep things running in an emergency. Within the wash, the convention is to have redundant equipment able to continue washing cars at a slower chain speed while repairs are performed overnight. Whereas most operators I encounter have both redundant wash and support equipment, very few have created redundancy in their payment systems. Fortunately this is simple to do and costs very little.

It’s hard to believe the world operated before the internet, but it did, and you can too. But most credit card processing systems these days require an internet connection, and when it goes down, which always seems to happen on a busy Saturday, it can cripple your revenue potential for that day. Securing a redundant internet connection however is very simple. Many operators maintain a cellular internet hotspot device available from their service provider at very low cost. Alternatively, most smartphones can function as an internet hotspot in a pinch. Stories abound of operators rescuing the day by running to an electronics store, securing a cellular internet service, and scrambling to figure out how to port it to their POS or gated entry system. My question is why would you do that? The model for success is to select a redundant internet service connection today, when nothing is broken. Configure everything in advance and create a documented procedure to switch over to it. Train your staff to make the switch, and prepare a schedule to operate off the redundant internet connection at least once per month. Before moving off this topic, if you don’t already have a redundant credit card processing terminal, I’d also recommend searching online for “smartphone credit processing.” There are several vendors you’ll find offering free dongles that attach to your smartphone, process the credit card, and deposit the money to your bank account. Fees vary, but this is another affordable way to help secure your business when technology fails. Just imagine, if the airport parking service had a redundant credit card processing service in place, and trained the attendants to use the system, I would never have thought of writing this article!

Maintenance, Spare Parts, and Backup
Sure we know to keep bearings greased, but computer components need preventive maintenance too. Digital signage, automated attendants, camera systems, these are all often computers in some form or another. They all need scheduled maintenance like any other piece of equipment at your site. I’m not talking about software, but the hardware itself. Review your owner’s manuals. I’m not an IT expert by any stretch, but there are four things I’ve learned to do over the years. First is to have someone who knows what they’re doing physically open all computers, especially those in an outdoor or dusty environment, and clean gently with compressed air at whatever frequency is necessary to keep dust from building up. Second, most computers have simple fans that run constantly, and are affordable replacement parts available at any computer store. These can be easily replaced periodically for very little money, and ensure expensive components don’t overheat. Third, if a particular electronic component or board ever fails, try to keep a spare on hand. This could be a purchased replacement, or occasionally you can find a local shop able to refurbish the failed part as a spare. Last, but certainly not least, is to backup all data as if your business depended on it, because it does.

Practice Running in Manual Mode
Collecting cash and sending cars through the tunnel isn’t the problem. Making sure it goes smoothly and you get all the cash you’re supposed to, that’s the problem. Automated pay stations and POS systems are one of the greatest things that have happened to professional car washing. But the day after a lightning strike knocks everything out isn’t the time to train your staff to work manually. Be prepared. Create a complete cash reconciliation process with cash bank, necessary change, aprons, windshield markers, receipt pads, cashier reconciliation sheets and everything you need to process customers manually. Train staff in handling cash and reconciling their cash bank at the end of the shift. On slow days, turn off the technology, and run the wash manually. Not only will you be prepared if a computer hiccup threatens to wreak havoc on your day, your staff will be ready to handle whatever challenges come their way, with a customer satisfaction winning smile on their face.

Georgia Saves Water - Interview with Zeev Josman Car Wash Services of Georgia

By: Anthony Analetto
Originally Published in AutoLaundry Magazine

Are you a part of the solution? I recently had the opportunity to speak with Zeev Josman, a vocal member of the recently formed Georgia Coalition of Car Washes, about their activities to protect the interests of professional car washers during the ongoing drought in the Southeastern United States. With over 50 counties enacting a level four drought response that prohibits most types of residential outdoor water use, many operators face complete shutdown. The coalition, in partnership with the Southeastern Carwash Association (SECWA), Below Zeev outlines some ideas you can use to help government officials understand the carwash industry, and hopefully, protect your business and our industry as a whole in the event of a drought.

ANALETTO: What is the main initiative of the Georgia Coalition of Car Washes?

JOSMAN: Our overall focus is to establish a self-administered car wash certification program in conjunction with the Georgia Environmental Protection Division and local municipalities. Right now, our most urgent task is working to change state legislation to specifically exclude professional car washes from general restrictions on outdoor water use. Having only started a few months ago, much of our initial work has been to assemble resources to help professional car wash operators defend themselves. Being highly visible consumers of water, we’re often easy targets for municipalities to single out for closure.

ANALETTO:  What resources have you put together for operators?

JOSMAN:  Mainly the coalition has compiled data proving that the restriction or elimination of car washing will not result in any measurable water savings, but will cause significant economic damage to the small business owners and the thousands of workers who depend on our industry. Overall we’ve documented that the entire car wash industry in Georgia uses approximately 1.8 million gallons of water per day, just 0.14% of the amount consumed per day for public use. Compare this to the City of Atlanta’s estimate that 15 million gallons per day are lost and not metered. That’s more than 8 times the amount of water our industry uses in the entire state.

ANALETTO:  So the coalition recommends taking a proactive stance with local governments?

JOSMAN: Absolutely. The goal of the government during a drought is to conserve water while minimizing any economic disruption. Although there is often a knee-jerk reaction to criminalize car washes, the numbers don’t justify singling us out. For example, did you know that, based on conservative data, it’s estimated that a restaurant consumes 5 to 10 gallons per meal served, and if you multiply that by the total number of meals, it indicates that restaurants use 10 times as much water as car washing does. The industry associations are working at the national and regional levels, our coalition is working at the state level in Georgia, but the truth is that local communities sometimes seem to interpret the law as they see fit. As hi-profile water users, we have to bring the fight all the way down to local government, which means proactively educating town officials.

ANALETTO:  What does the coalition envision the certification program you mentioned above looking like?

JOSMAN: The certification program we’re working to create mirrors a similar program that a coalition of car washers started in San Antonio during a drought 10 years ago. That program is a remarkable success, led by car washers, which contributed to per capita water consumption declining by 40%.

ANALETTO:  Can you provide an outline of what operators will have to do to gain certification?

JOSMAN: Car washes will have to adhere to a set of guidelines for water conservation and recycling based upon the type of car wash facility. For example, conveyor type car washes must recycle at least 50% of their water to meet certification requirements. The requirements are stringent, will be independently inspected, and must be met annually. We also have penalties to promote compliance. Once underway, car wash facilities can become certified only when drought restrictions are not in place. Once restrictions are in effect, non-certified washes must begin to reduce hours of operation.

ANALETTO:  Are you getting strong support from operators?

JOSMAN: Conveyors and self serves in the areas hard hit by drought have driven our progress, but we’re actively seeking pledges from all over the state. Most of the guidelines are things that a lot of operators are already doing. What politicians don’t know is that car wash operators treat water with a great deal more respect than many other businesses, because for us it’s a direct expense. They don’t realize that we’re computerized, reclaim water, can measure a car, and turn on only exactly what we need. We have to fight public perception. For an independent operator it can be a hassle just keeping up with what they have to do to comply with restrictions as they are enacted. Supporting the coalition gives them an opportunity to help establish standards, be recognized as a good corporate citizen, and self-police compliance. I think a lot of operators realize the benefit of the coalition, have seen that is has worked in other regions like San Antonio, and are willing to do what it takes to make it work here in Georgia.

ANALETTO:  What would you say is an acceptable number of gallons of water to wash a car?

JOSMAN: We encourage people to stay away from using gallons per vehicle (GPV) to measure conservation because there are so many variables, especially among the different wash formats. It’s more important to look at the percentage of water that is reclaimed and what percent is put back into the sewer system instead of being lost to evaporation or carried out. Personally, I’m trying to get my washes down to 20 GPV. The important thing is to know what your average GPV is off the top of your head before you ever experience a drought. Identifying water usage spikes should be part of your preventive maintenance. You should also know statistics on carwash water usage in general and what the industry as a whole is doing to help conserve water. Much of that information can be found at our website www.GaSavesWater.com.

ANALETTO:  What would you recommend to operators looking to use the information you provide when working with their local governments?

JOSMAN: First, make sure you understand who makes policy decisions on drought management before you invest a lot of time targeting the wrong people. Once you do find the right person, realize that this is going to be a learning process for them. It’s likely they have a preconceived notion that a car wash wastes a lot of water and pollutes the rest. Turning them into a carwash advocate who looks to you as a leader in water conservation will probably take a good amount of work. The single greatest recommendation I can make for anyone reading this, who is not already in the midst of a drought, is to build a coalition and create a certification program before it happens. The best time to educate is when there is no threat at all.