When Disaster Doubles Your Car Count

By: Anthony Analetto
Originally Published in AutoLaundry Magazine

Interview with Marcus Kittrell by Anthony Analetto

“When everything seems to be going against you, remember that the airplane takes off against the wind, not with it.” – Henry Ford

I sat down today to finish writing a column for this magazine on evaluating the effects of adding an express exterior lane to a full serve when I received an interesting e-mail. Regular readers may recall an interview that appeared in Auto Laundry just over a year ago when an F4 tornado severely damaged one of Marcus Kitrell’s three car washes near Birmingham Alabama. At that time, Marcus was trying to make heads or tails out of his insurance policy and determine if he would be able to recover. The e-mail I just received contained a series of before and after pictures documenting Marcus’s completely renovated facility. Having re-opened only five months ago, Marcus is washing nearly twice as many cars as he was before the tornado.

Recovering from a natural disaster that closes your business for 10 months is no small feat. Reopening to increased revenue and profitability is truly remarkable, even for a seasoned car wash veteran such as Marcus, with over 26 years of industry experience under his belt. Although in the middle of site selection for his fourth location, Marcus agreed to share some of his insights on insurance and disaster recovery. Below are some excerpts from the conversation that I’m sure will get you on the phone with your insurance agent.

ANALETTO: Looking at a picture of the new site, it doesn’t look anything at all like the original full-serve. How much of the building were you able to recover?

MARCUS KITTRELL, OWNER, MARC-1 CAR WASH: Zero. Nothing of the original building was salvaged. Enough of the building was destroyed that I had a choice: to try to repair what I had or rebuild everything from scratch. I had an opportunity to convert my dated full-serve wash into a completely new express exterior and decided to go for it.

ANALETTO: Did you have enough insurance?

KITTRELL: No, not entirely. The insurance policy I had only covered $800,000 and the entire project cost $1,050,000. I had to put in the other $250,000 myself.

ANALETTO: So you were underinsured on the property?

KITTRELL: Yes and no. I was certainly underinsured if the tornado had leveled my entire facility. We were lucky however and many parts of the property were salvageable. If I had to, I could have rebuilt my facility to the same level it was before the tornado within the $800,000 coverage. The only reason I even had the option to build a brand new express exterior for $250,000 was because I had a loss of income insurance policy – something I don’t think you can be without in this business.

ANALETTO: Could you explain what a loss of income insurance policy is?

KITTRELL: Whereas property insurance is required if you have a mortgage, loss of income is usually optional so you have to make sure you have it. The policy I had paid my ongoing expenses including rent and payroll for a few key employees for up to 12 months while we rebuilt. During the 10 months we were closed, they paid the actual incurred expenses. We reopened with two months left on the policy, so they paid us a makeup on the sales we would have had if the disaster had not occurred for the those months. I don’t remember the exact numbers but basically if I did $20,000 the month I reopened but the year before I had $40,000 in sales, then they sent me a check for the difference. We were able to provide the insurance company with very accurate records and they made calculations from them that were fair.

I really can’t emphasize enough how important it is to make sure you have this coverage. Without the policy, I would have had no choice but to reopen as fast as I could, with whatever I could, just to make my mortgage payment. Instead I was able to step back and evaluate my options. 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: Why did you decide to change to an express exterior and not a flex-serve or even stay as a full-serve?

KITTRELL: As the only full-serve in town I was hesitant to change. The decision was even harder, because if I stayed a full-serve I would not have had to invest $250,000 of my own money and could have reopened several months sooner. I did play with the flex model and had some site plans drawn up for property, but ultimately felt that the express-exterior model fit the location and my market best.

As a full-serve, my base wash was $12 and we averaged $18 washing between 2 and 3 thousand cars per month. I also had 20 employees and labor accounted for 38-40% of my revenue. To move to express I lengthened the tunnel and added more equipment so I could deliver a clean car without prep. Now I only have 4 employees and produce a cleaner car. After four months I’m already averaging 5,000 cars per month at $8, and labor is only 15-16% of my revenue. The bottom line is that I’m making more per month with a lot less headache. Volume is growing each month and I expect to recoup my initial investment in less than 24 months. Also, if I ever choose to sell the property, an express-exterior is more appealing to a larger base of investors.

ANALETTO: How did your customers respond to the format change?

KITTRELL: Great. We’re offering free vacuums and putting out a great car. Once we explain the difference, customers really appreciate the value. There were definitely some questions at first but the price is appealing, not to mention the convenience and speed.

ANALETTO:  Did you have any difficulties with the city, contractors, or the construction process?

KITTRELL: Not really. We sat down with the city and the city planner and worked very closely with them. The most important thing is to not rush into anything. Take a second to analyze the situation from every angle and get your ducks in a row. We took a hard look at fixing the building but realized we had to reposition it by a few feet to make the express format work. That required a variance which I had to make sure we could get before moving forward. Once you start either knocking things down or repairing them you really can’t go back easily.

ANALETTO:  What misconceptions do you think people may have about their insurance policy?

KITTRELL: Mainly that you’re not in any way obligated to rebuild what you had before. You certainly don’t expect to have a tornado wipe out your business, but if you’re properly insured, you can turn it into an opportunity to build a better one. Not only did I upgrade my equipment, I improved the overall efficiency of my entire location. I was able to change the motor voltage from 208 to 480 which will lower my electric bill. The tunnel controller is also new and dramatically better than what I had before. It’s helped me reduce my detergent, utility, and water consumption. Even maintenance is easier and less expensive with improvements like a self-cleaning conveyor pit. Overall, I’m producing a cleaner car than ever before at a lower cost in every aspect. One other thing I did was to install underground reclaim tanks. Our water situation doesn’t warrant me adding a reclaim system right now but if that changes it’ll be an easy conversion. Those are the type of things you have to keep in mind if you’re ever forced to rebuild your wash due to an unexpected disaster.

ANALETTO: What recommendations would you make to other operators to be better prepared for a disaster?

KITTRELL: First and foremost get with your insurance agent every year to review your policy. Make sure you know how much it will cost to replace things from the slab up and check that you have enough coverage. Also verify that you have a loss of income policy structured to cover your holding company if you’re set up that way, I can’t emphasize that enough.

Next, go to trade shows, talk to operators, and know what’s current so that you can make intelligent decisions quickly. When I went to rebuild this wash I already knew what wash format and equipment I wished I had if my tunnel were just a bit longer and the property laid out differently. I never expected it to happen this way, but I did have an idea of what I would do with the property if I had the money to do it.

Why Did the Chicken Cross The Road? - Navigating Hydraulic vs. Electric Motors for a Profitable Conveyorized Car Wash.

By: Anthony Analetto
Originally Published in AutoLaundry Magazine

Sometime in the early 1940s, electric drive conveyorized car wash equipment hit the market. Sometime in the mid 1970s, the industry shifted to hydraulically driven motors. Now, sometime every other day or so, I get asked the question “which is better, electric or hydraulic drive?”  It brings to mind the classic joke – “Why Did the Chicken Cross the Road?”  My favorite answer has always been – “to get to the other side”, but just like car washing, there are many responses that can make a straight-forward proposition more complex.  Before going down the path of deciding that you believe in exclusively using either electric or hydraulic drive components, first define what it is you need to find on the other side of the road to maximize the profitability of your business. The choice may just be a means to end, but it’s no joke.

As with most engaging arguments, both sides have their pros and cons. However, in consideration of hydraulic vs. electric use in a conveyorized car wash, those strengths and weaknesses change as different variables enter the picture. Although this makes for a lively debate or discussion, it’s often confusing when trying to select the best equipment for your car wash business.  So, let’s take “best” to mean the solution that delivers the highest quality product at the lowest possible cost with the least maintenance and greatest reliability – and examine your choices.

 

Not Your Father’s Electric Car Wash

The first tunnel carwash that my dad built had an electric drive conveyor, wraps, side brushes and wheel brushes. These were still the days when a brush was simply called a brush and the only computer managing the wash was its owner.  Needless to say, this wash also predated today’s advanced VFD motor controls, sealant technology, and other engineering improvements that make electric drive technology relevant to the modern car wash operator.

Our back room was stocked with spare electric motors, sprockets and chain. The ratios of the gear boxes were limited so different size sprockets and torque convertors were used to set the speed of the equipment.  At 17 years of age, commuting to my local college, I would often remove and replace a motor between 6:30 and 7:30 am, go to class, drop off that motor and pick up the one that had just been rewound before returning to the wash. If you ever have a chance to visit the Henry Ford museum in Naples Florida, you’ll see a fully operational machine shop from the early 20^th century. One main electric motor is driving many pieces of equipment via an ingenious series of leather belts and pulleys. Speed was adjusted by moving the belt to a larger or smaller pulley. Seeing the whole thing run reminds me a lot of the early electric car wash equipment.

I know some of you veterans may be laughing at your own memories right now, but these early wash systems really highlighted the underlying truth that electricity and water just don’t mix well. With the introduction of hydraulic motors to the car wash industry in the early 1970s, operators began converting to the then new technology in droves. A single hydraulic power pack could be located in the equipment room away from the wet environment.  This configuration was more reliable, easier to maintain, and improved the safety of the wash.  One power pack could be sized to drive multiple pieces of equipment at different speeds with the ability to adjust them with the turn of a knob.  Toss in the fact that the initial purchase price of a hydraulically driven component is normally less than a comparable electric drive component and it’s no wonder that to this day, hydraulic is still the preferred technology for most car wash operators.

Hydraulic - By No Means Perfect

If hydraulic was perfect, there would be no debate. The first drawback is energy loss. As a rule of thumb, it takes 1.5 horsepower from an electric motor running a hydraulic power pack to deliver 1 horsepower of energy to a hydraulic motor.  Second, hydraulic motors can leak oil into the surrounding environment when not properly maintained.  Although water-based hydraulic fluids in part nullify the latter weakness, the energy loss issue is an inescapable fact. Until recently, the additional electrical cost of hydraulic motors was relatively minor and easily justified by their lower purchase and replacement price. The new reality is that utility prices are rising, dramatically in some areas. Another consideration is that many municipalities have imposed escalating impact fees for larger electrical service capacity. That means that if a location is able to run the wash with a smaller incoming service by using electric instead of hydraulic, there is a potential savings not only on monthly consumption, but on the service connection itself.

Electric - By No Means Perfect

 

What’s spurred the comeback of electric drive components to the carwash? Mainly the dropping prices of variable frequency drive (VFD) technology. These drives allow us to adjust the rotational speed of the motor driving the gear box which directly adjusts the speed of the brush, conveyor, or dryer without changing gears or belts in a way that’s reminiscent of equipment in the Henry Ford museum.  When combined with rising utility costs, VFDs, once too expensive for the carwash industry, are becoming increasingly popular. There are also a growing number of motor gear box combinations that are IP 66 rated. These sealed components feature windings that are coated in an epoxy, urethane or double varnish that makes them much less susceptible to shorting out the motor.  Based on some research with these manufacturers and a number of customers using electric drive components, the greatest risk remaining and most prevalent source of failure is at the point of connection. No amount of technology can eliminate the fact that water and electricity don’t mix well. Despite tremendous advancements, the harsh environment of a tunnel car wash seems determined to help water wear down a path to sensitive electrical components. Constant motion, varied detergents, and drastic temperature fluctuations continue to frustrate many attempts to prevent water intrusion, so the number of short circuits and problems remain significant.

Electric Drive to the Rescue

There’s no question that those of us with long memories and livelihoods in this industry have a natural tendency to shy away from placing electric motors in our tunnels. That said, there’s more benefit to using today’s VFD controlled electric drive components than a slightly reduced monthly electric bill. The other side of electric drive energy efficiency is an overall reduction in electrical requirements of the entire site. There are many reasons to add wash equipment to a tunnel after its original construction. Whether you’re looking to eliminate labor or improve wash performance and consistency, often the first barrier to adding equipment is that many locations are already at capacity for the electric service in the building. Rather than upgrade the service, it is sometimes more economical to convert some items to electric drive to free up service for the additional components.

Additionally, this is also a popular path for the increasingly common conversions of in-bay automatics to mini-exterior tunnels. It’s often possible to drive all the new tunnel equipment electrically with the existing electrical service.  This allows the operator to modify their business model with minimum cost and plan the next expansion when it is affordable.

In-Summary

Although a true admirer of the engineering advancements and potential of using electric drive components in a conveyorized wash, I’ll never be able to escape the belief that what can go wrong, will go wrong. To me, the risk of using electricity at a car wash goes up as you get closer to the ground. I believe it’s nearly inevitable that one day the conveyor pit will not drain correctly and there is no reasonably priced electric motor that I know of which will survive complete submersion. For operators looking to add equipment without increasing their electrical service, VFDs offer a great opportunity; just make sure you plan for additional training. Being able to keep your car wash open for business demands having the ability to perform routine maintenance and make emergency repairs. Working with three phase electric power in a wet environment presents real risks and liabilities. It should be done by a licensed electrician or certified personnel. At 17, I was very well trained, but I’m not sure that I would let my own son do what I used to do without an actual license. I would however keep the back room stocked with spare motors.

Weather Trumps All - Northeast Rollercoaster Breaks Records

Interview with Fred Frattaroli, Owner Triangle Car Wash

By Anthony Analetto

Just when you thought it was safe to assume the worst, it seems car wash traffic and profits are spiking in several regions of the country, most notably the Northeastern United States. For over six years, operators in these states have been in dire straits. First, horrible weather patterns were made worse by four dollar a gallon gas. Then, gas prices start to drop, but only because the entire world entered an economic recession. Now, defying the downturn, many operators in the Northeast are seeing their best numbers in years and there’s no shortage of washes reporting record sales. There’s cautious optimism and even a little bit of enthusiasm coming from one of the most difficult places to wash cars for some time now.

So what’s going on? For this, I called an old time friend, amateur meteorologist, and veteran car wash operator with 16 locations throughout Pennsylvania. When you ask Fred Frattaroli, owner of Triangle Car Wash, how he runs his business with locations separated by up to 150 miles, he’ll famously answer “poorly”; something that anyone who knows him realizes is very far from the truth. Fred is one of those people who make things happen. While many plan to do things, Fred’s the guy who just does it.

For the 45 years Fred has been a professional car washer, he has tracked the weather. I’m not talking about checking the weather report to plan staffing, he’s kept detailed records. He has calendars for the last 30 years where he can pinpoint precipitation, wash volume, and even the water per car used at each of his locations. On top of that, Fred is a savvy businessman with a keen knowledge of real-estate – who better to analyze the situation?

I want to thank Fred for taking some time to share his ideas on weather, the economy, and consumer trends in car washing. I’ve included several excerpts from our conversation below.

Analetto: Are you experiencing the spike in volume being reported by many operators in the Northeast?

FRATTAROLI: It’s been absolutely wonderful. All 16 of our locations are up. At some sites we’ve washed more cars in January of 2009 than we washed in the first quarter of 2008. What more is there to say?

Analetto: For starters, how about why you think traffic is up?

FRATTAROLI: No doubt about it - there is a lot going on these days. That said, I’ve been doing this for 45 years and there’s one thing that always holds true. People don’t wash their cars when it rains. Our last really good year before now was in 2002. That year we had 108 days of measurable precipitation with 49 of those days on weekends. It’s been mostly downhill from there with a couple of decent periods. Last year, our worst, presented 177 days of precipitation with 78 of those falling on weekends. With only 52 weekends per year, 78 rainy weekend days doesn’t leave a lot of room to wash cars.  Our washes are all in smaller markets. Unless we have snow on the ground, it’s hard to make up for a lost weekend. We were repeatedly seeing five, six, and even seven days in a row with partial rain. Try making payroll without any income for a week. It’s not pretty. So far in 2009 we’re getting precipitation but it’s not continuous and the weekends have been decent. In January we had 12 days and in February 9 days of precipitation. March has been good too. Last weekend for example, Friday and Saturday were what I call 60% days, meaning 60% of the day was clear and sunny. Sunday was a 10% day, but after a strong Friday and Saturday it’s easy to take.

Analetto: Have you really tracked and documented your daily weather for 30 years?

FRATTAROLI: I don’t think you can be in this business and not track the weather at least mentally, if not in writing. To show you how much I like to aggravate myself, I’ve been tracking weather for at least 45 years, but I only have calendars and records for the last 30. Our washes are up to 150 miles apart so the weather isn’t always the same at all of our locations, but more often than not, the weather is similar. Whenever I’m in my office the weather channel is on. There have been occasions I’ve gotten really frustrated and have been tempted to throw my stapler at the TV, but so far I haven’t actually done it.

Analetto: You mentioned that all of your washes are in rural areas; what types of washes do you operate?

FRATTAROLI:  Full, flex, automatics, self-serve, really a little of everything. In my eyes, in all this time, I think the utopia in the car wash business is now an express tunnel with a flex-serve option, along with an automatic and  a couple of self-serve bays so that you’re utilizing the facility 24 hours per day. I believe you must have a conveyor to handle peaks. In my mind, it’s really the only way to go. We have one location that has two automatics and 4 self-serve bays, but we’re about three weeks away from tearing out one of the automatics and putting in a 70 foot conveyor. It’s a beautiful building so we’re leaving it in place and just using one of the bays. It’ll end up with a touch-free automatic and self-serve open 24 hours with the conveyor doing exterior services only. Action creates action so if you have the room; I always recommend installing a couple of in-bay automatics.

Analetto: What are your guiding principles for maintaining revenue during a prolonged period of bad weather?

FRATTAROLI:  You have to be in control of your expenses, especially labor, and you have to do what you can to drive traffic on cloudy days. You also can’t miss a single opportunity to make up revenue. Don’t get lulled into believing that your volumes will be off forever because they can change just like that. You have to know your equipment, how it works, how to maintain it, and how to fix it in an emergency. The other day I went to visit a new operator to find out he closed his wash and went home on a 400 car day because a limit switch broke and he didn’t know you could activate a roller up with your foot. I told him you can’t do that. Get in the car and drive it through yourself if you have to, but you can’t close if you have a line of customers willing to pay you to wash their car. You just can’t do it. The other thing I see are operators scared to put cars bumper to bumper on busy days and really make the most of volume spikes. Equipment today is unbelievable if you know how to use it. I’ll tell you, you got to be optimistic and look for the good things. People today keep talking about unemployment passing 8%. To me that means 92% of the population is employed and able to buy a car wash from me.

Analetto:  What activities do you do to drive traffic on cloudy days?

FRATTAROLI:  We do a lot of marketing, but one easy thing I recommend is putting out a sign at different times promoting some sort of special that you keep changing. I’m not a big fan of discounting and I’ll explain that in a minute, but putting out a sign with a special teaches people to look at your wash when they’re driving by to see what you’re offering.  We’ll do breakfast specials from 8am to 11am or evening specials - we have a sign company so it’s easy for us to change. The point is that customers are thinking about getting a car wash which means they’re one step closer to getting a car wash from you.

Be careful with discounting because it can cost you big time. Although you have to drive volume on cloudy days, you can’t increase volume where there is no volume. Right now I’m discounting for about 32 hours per week but have to be careful that I don’t just reduce my revenue from regular customers who would have paid full price. Don’t forget the purpose of discounting is to carefully build volume, not blindly reduce revenue.

Analetto:  Do you have any theories other than the weather that you think are contributing to your increased traffic?

FRATTAROLI:  Plain and simple, with gas at less than two dollars per gallon, people like their cars again. At four dollars per gallon, even if you could afford to pay, your car became your enemy. Now, for the 92% of the population that’s still employed, getting a car wash is an inexpensive pleasure.  

Getting Back to Basics - Automation, Innovation, & the ICA Car Care World Expo

By Anthony Analetto

President – SONNY’S Car Wash Equipment Division

Getting back to basics seems to be the battle cry of many businesses trying to navigate our current economy. The mood of our country seems to have changed overnight. Reckless speculation has been replaced by cautious deliberation … and, it’s show time!

Only a few weeks remain until professional car washing’s biggest event kicks off – the ICA Car Care World Expo in Las Vegas, Nevada opening April 1^st. It’s professional car washing’s annual opportunity to re-evaluate, recharge, and learn from other operators what is and isn’t working to grow our businesses.

Wall Street, Main Street, and Recession Preparedness.

Conversation with a Bank VP

By Anthony Analetto

President – SONNY’S Car Wash Equipment Division

I’m no economist. I’m no banker. But I doubt I’m the only car wash operator walking around with this tingling sense that I’m either about to be sideswiped by economic forces outside my control or miss out on one of those opportunities of a lifetime.

With two washes in a hurricane prone region, I’m no stranger to hurricane preparedness plans – but what do you do to prepare for a prolonged recession? None of us needed the official announcement that we were in a recession to tell us that business was down. Unfortunately, none of the experts seem able to predict if the storm is about to respond to the bail out programs and dissipate, or is about to hit the proverbial fan.

Volume=Demand/Competition - Navigating Site Selection in an Uncertain World.

A fool thinks he needs no advice, but a wise man listens to others. When I first met John Dix on a trip to evaluate potential car wash sites for QuikTrip’s first venture into the express tunnel industry, I spent a lot more time listening than talking. Operating in nine states, Tulsa-based QuikTrip Corp. recently celebrated both its 50^th year in business and the opening of its 500^th location. The company sells approximately 1.7 percent of all the gasoline in the U.S., employs 10,500 people, and sales last year totaled $8.3 billion dollars. They are masterful marketers with a famous reputation for picking winning sites to grow their business. Before his retirement earlier this year after 36 years with the company, John Dix was the man in charge of all site selection for all eight markets in which the company operated.

John is a true competitor. He is one of those people who can see through problems and create success with decisive action. While talking to him recently regarding site selection, he agreed to do an interview on the topic for this article. Even if you’re not looking to build a new location, I urge you to read John’s insights on competition. He outlines the qualities of an incumbent business that would lead him to avoid competing with them and look elsewhere. These are exactly the qualities each of us must refine in our service offering as car wash operators to ensure the success of our businesses. I want to thank John for sharing his knowledge; excerpts from our conversation are below.

A Carwash Legend in the Making - 0 to 24 locations in two years

By Anthony Analetto
Originally Published in AutoLaundry Magazine

Interview with Ronnie Corbin,

There are talented people who can create new ways to do things better. There are also good leaders able to execute a plan with extraordinary efficiency. Ronnie Corbin, Founder and President of SourceOne Car Wash Company, is one of those rare individuals who can do both.

Formed in 2006, SourceOne has made it easy for a growing number of private investors looking to profit from the car wash industry to enter the business without the daily challenges of building and managing a location. Under the Legends Car Wash brand, Ronnie and SourceOne have already opened three express-exterior tunnels. As of today, SourceOne has another seven Legends Car Wash locations at various stages in the construction process, two of which are scheduled to open in the next couple of months. Within the next two years, SourceOne projects to have 24 Legends Car Wash locations running in four geographic markets, making it one of the industry’s largest chains.