Franchising Strategies for Car Wash Industry Growth | Business Seminar

[00:00:00]today we're going to talk about on a series for those either have been here before fundamentals of Express carwash success and a lot of things changing rapidly in our industry I'm going to share with you today first of all some copyright information the things I'm going to share with you some of its proprietary patented technology as well as trademark technology we have a process for this product you can talk to us about later if you're interested also this is not an offer for a franchise it's very important disclosure that we're not offering a franchise or anything today that goes through a formal process of disclosure so that have to be followed legally so before we get started again my name is Ryan esenberg president and co-founder of tommy's Express and Tommy carwash systems based out how in Michigan bite before we get started I'd like to get a show of hands who in the room is new to the business and your first time in the industry first time that don't own a car wash but looking to get into the business raise your hand please okay good great and how many of you own car washes now put your hands up hi how many of you already in the business wonderful okay it's about 80% of the room great keep your hands up how many of you own three are more conveyorized tunnel car washes three or more conveyorized tunnel car washes okay how about five conveyorized tunnel car washes keep your hands up high-five conveyorized tunnel okay how about ten conveyorized tunnel car washes how many have ten conveyorized tunnel car washes owner operate okay so about three four five people out of this whole room which is 80 percent car wash operators so what we see here today we're going to talk about is what is really a dysfunction in our industry of being fragmented and we're not like other industries in the mainstream retail businesses so you guys just proofed that majority of the room owns car washes few owned more than ten car washes what if we were all on the same team working together and able to contribute to each other's efforts a little bit of background my family's been in the car wash business tonight since 1969 I want to sure what I'm going to share with you today is absolutely critically important you're at a crossroads of transition and transformation in our industry that is absolutely important that you understand the road ahead and what's coming we don't want to sell you anything today we're gonna leave you with the roadmap ahead of what the future of the carwash industry looks like not asking you to sign up for anything or buy anything so let your guard down but understand a little bit of the transformation happening I want to talk about the type of carwash I'm referring to today what we call a high performance high processing conveyorized tunnel wash system so this is a little bit of a picture of how we wash cars on a fully automated machine there's no person at the loading except for on busy days otherwise its operate self loading cars are washed fully automated with equipment and they're dried fully automated customers can leave the wash and go into a free vacuum center at the end this type of facility operates with very low labor only about three to four team members running the site at any given time so want you to be clear about that first what we're talking about since there's so many different people in the room representing different types of car wash models conveyorized tunnels is typically what I'll be referring to today this type of car wash can process much faster and fully automated with less labor so how is our industry today first of all it's big its 11 billion dollars in conveyorized carwash tunnel revenues we estimate also it's growing rapidly at a pace of 4% per year over the last five years approximately phenomenal growth and it's got scale to it most importantly for an opportunity for everyone in this room is it's fragmented incredibly fragmented so the top ten brands you see there in the car wash industry five logos plus the five after that the top ten chains make up 3.1 percent roughly of the entire car wash industry of conveyorized car washes in comparison on the right side of the screen those logos you recognize the top ten food brands make up 50% of the food industry that is what is going to happen it's not if it's when the left side looks like the right side and the question is who's going to be the top 10 brand on that list this is a graphical representation of the same data you see mr. carwash today with over 300 locations and then quickly tapering off and Bide store ten eleven twelve you're down to less than twenty locations so how should it be how are other industries in other industries peak performance is achieved by an outstanding model replicated with brand saturation the best and brightest in the industry follow business operation processes clearly delineated roles very important so you have the creator of concepts in other industries that create a concept you've got developers that go out and build the assets do the real-estate approvals and get the assets built to building and then you have the operations who's usually a franchisee that operates that facility and then a support system that backs them up with the ability to unify for strength and sustainability that's how other industries work I want to talk about a few highlights in history before we dive in we started in 1969 this year celebrating our 50th year in business in 2001 we revolutionized the car wash equipment with a round arch design to create an aesthetically appealing experience for the customer and also in 2010 we came out of the modular building system we realize that the carwash experience in the building go hand in hand it's a machine as well as the facility interacts with the equipment so we can't got into the modular building space in 2015 another highlight we consolidated our ideas and best practices into a facility that we called the ultimate express carwash it achieved over 224 cars in one hour in over 3,000 cars in a single day and a single hundred and thirty foot tunnel today this facility that we packed all our best ideas into is washing over 500,000 cars a year and still growing most importantly we believe we can replicate these results using our success formula and 2017 in this session I spoke about three major disruptions happening in the industry belts brands and buildings belt conveyors are quickly changing the experience for the user in the car wash and obsoleting older car washes brands I was foreshadowing a little bit of understanding what's coming and these consolidation of brands and well as the building and how that's disrupting things by creating facilities and equipment working is one that's what has been powerful changes disrupting the industry today millennial culture is so important to understand different buying habits today of consumers like myself my wife weird we have different interests today we work through the phones we work through different experiences we don't like people yelling at us and even loading cars sometimes is intimidating it's changing the buying habits of customers in 2018 we talked to last year about blue ocean markets and how there's untapped potentials of course there's bloodbath markets there's also blue ocean markets how to find those underserved markets around the country today we're transforming the industry by leveraging the advantage of professionalism and branding and processes that are extremely common in other industries in fact we're one of the only ones not utilizing these we're gonna talk about why franchises dominate the world of retail business and the powerful advantage they can offer you the quote from ed rensi that you'll hear from in a bit franchising is the most frequently used small business model in the USA the car wash industry is ready for serious innovation and evolution franchising will accelerate the growth and economic power for operators so in 2015 I had this big breakthrough the first thing I realize is that what we just proved is our industry somewhat screwed up every other industries figured out the tactics and we're a little bit inefficient and disorganized it hit me we used to say that the best carwash operators were hands-on operators it's a passion and vested owner that maximizes the performance of the business AHA that's what makes a franchise franchise is an invested owner who's also the operator I'm confident that national chain will not be done by a management company because of the importance of that variable these types of facilities are run by outstanding owners and operators so I'm going to talk about a little bit about what is a franchise and what makes up a franchise franchise typically involves an upfront franchise fee plus an ongoing royalty subscription for proven processes built on existing successful business model in many cases also the assets are leased so not necessarily owned but the building and the land can be leased as well as part of a royalty here are some of the deliverables of what a franchisee offers no one is proven process proven processes the foundation of any franchise based on proprietary technology and know-how there's trust behind that process usually experienced in history in operations manuals part of every franchise it's usually thick and very specific and outlines like a Bible of the guidelines we follow on how we operate the facility sometimes as operators we get into our own way I've seen it many times we listen to one customer's comments and all of a sudden the entire business model just took a shift and because one guy said that he was mad because we didn't vacuum his car now all sudden tomorrow we're out vacuuming cars and and then all sudden somebody complained about a bug on their front bumper and now we're prepping the cars and all of a sudden our plan here just went sideways very common without that operations manual and accountability to assist them it's easy to fall off track a great franchise includes economies of scale large entities enjoy buying power for not only goods and services reduction in cost but also reduction of cost of capital think McDonald's doesn't pay the same price whether straws and napkins said Bob's Burgers pays great franchises have advanced technology with bigger R&D budgets to produce proprietary and patented technology we right now have a project over a million dollars invested in this project absolutely incredible breakthrough of technology exclusive for our franchise partners we don't need to sell the products like we used to we used to have to be careful with our R&D budgets because we had to make sure people are gonna buy this product today we have a chain of stores nationwide we have to innovate and launch the best of the best products and the R&D budgets are much bigger rigorous testing process is important in any franchise you have corporate stores that you do testing at you beat up systems and processes and you execute them out through franchise locations a franchise program includes world-class marketing we like to say market hard and sell soft the goal of the marketing teams make the gate open more often whatever it takes make the gate open more we use modern marketing strategies and tactics that's very important that it's modern not old-school marketing today emotional not features and benefits marketing we look at brand and behavior focused in a complete solution with a local touch local modified marketing is what big brands Dume successful brands are incredibly consist so I was traveling this was a year ago we're going around the world and we had two shows back-to-back so we had to travel around the world we had been about 15 16 days maybe without being in the United States and we all know what that means is probably haven't had really good food or food or used to we got to Bucharest Romania an interviewing a franchisee in Bucharest and when we saw McDonald's it was like heavenly we got in there so fast we were so excited when we could go get ourselves a cheeseburger and fries because we wanted a food something we knew and understood Southwest Airlines everybody knows Southwest incredibly consistent not necessarily the highest end service but unbelievably consistent no one today in the car wash industry has leveraged consistency on a nationwide level or experience Neverending operation support is important for a franchise key word is never ending equipment suppliers distributors can help you for a little while get you started franchising is by your side forever your franchisor and your partners for the future is an equipment supplier we had to make that project happen and move on to pay the bills you got to move on to the next job distributors got to move on in the next job franchising it's a catalyst to be partners for 20 years clear roles so coming back to clear roles and delineated responsibilities of who's doing what developers are a key part of most retail business rollouts developers often find the land they go through the entitlements approval process sometimes finance a project build the facility and the franchisee comes in and operates it at the end of the day and essentially can many cases become a tenant this is how they scale fast I was at a convention last year and a big industry real estate convention and I went in and told somebody about how the carwash industry does this work the owner kind of builds the thing and goes through the process of painful with architects and they laughed at me that what are you guys doing sub surd that's not how retail rollouts work they have developers go and build these things handle hand over the keys and the operators are operators franchisees often a tenant a great franchise requires a great franchisor those of you that workout in the room when you work out you don't need somebody to be a personal trainer and teach you everything you need somebody tell you run and stand behind you and scream run faster that's the role of a franchisor they enforce process and procedures and brand standards not to be the fun police but to maintain a high bar for everyone else who's in that system and the other franchisees they provide leadership leadership like understanding depreciation well the highest most misunderstood things in our business in coaching you through depreciation how it impacts your carwash facilities and when is the right time to reinvest the franchisor has overhead operational support field ops consulting visits they provide multi level training on different levels development process up front with a franchisee getting into the business they provide consumer customer service a lot of times call centers centralized they go through onboarding of franchisees they of course do corporate marketing like attending conventions and expanding the brand which helps everybody they provide a support infrastructure they provide accounting support often do a lot of analytics and work on understanding the financials and helping franchisees grow they often provide an operational management software system that everybody can tap into and unify the team a great franchise involves servant leadership willing to go first and blaze a trail and share in the risks also willing to fail who might fail 30% of the time we're gonna win together 70% of the time always open to collaboration most importantly helping others become successful and get a share for doing it a great franchise of course requires great franchisees what does it take to be a great franchisee number one we suggest at least a minimum of 1 million liquid capital is our requirement to be well funded being a great student of a system energetic and ambitious obviously willing to trust the system most importantly that's been laid out but also willing to contribute to the system and it's going forward plan not a good candidate for a franchisee if this is you not a good candidate preconceived ideas stuck in your ways sometimes past experiences can be your own worst enemy the great franchisee has brand power people love brands when given a choice they will choose brands they recognize and love brand is one of the strongest drivers of consumer Abbot's there is no one in this industry has yet seen the ultimate upside of branding potential we've done it in some small markets in small areas but nobody's seen the ultimate success that national brand can achieve a brand is not a logo it's your customers perception of your product or service being part of a brand empowers you to be greater than your own efforts very important like grandfather says the best of car washing is yet to come he's seen great times in the past we've also seen the explosions in recent days and it's only going to get better one of the core fundamentals I talk about in this session is about critical density critical density is this theory of clustering stores together building closer than most people feel comfortable with to complement each other and not compete with each other this is our hometown of Holland Michigan that circle represents a hundred and twenty four thousand people that's a 10-mile radius circle in 2014 we had three locations in that circle did five hundred and thirty-two thousand cars a year with three locations we went and built a fourth location which most people would say is on top of ourselves is less than a mile down the street and of course all these four locations are within a two mile radius circle the year we open that fourth location we increase to eighty eight hundred and fifty-five thousand cars washed city wide a net of three hundred twenty three thousand cars increased that first year sixty percent increase most importantly 2.8 million in average revenue increase today 2018 those four stores watched 1.1 million cars a 10-mile draw area around their sixteen-year-old driving age I call it is ninety five thousand people that equates till we wash twelve times the driving age population with one store for every twenty three thousand seven hundred and fifty driving aged people and now we're comparing notes last night and right in line with what McDonald's has pretty close for for that density formula they as well there's about four McDonald's locations in that circle that doesn't include our competitors tunnel that doesn't include any NBA automatics and self serves which there's plenty of now it's our duty to serve the world on same level of professional car washing easy accessible by the way we've jake'd for position in this town several times we've relocated three sites over the years since 1969 to get the best corners so let me dig into a little bit of the specifics of what we offer what we do today at Tommy's express everyone of course gets hung up on the royalty well most people realize after they understand the processes and the systems behind this including the financial performance which we can't share upfront till we get closer together but the royalty is one of the easiest decisions you'll make at the end of the day it's simply a return on investment and if we can't deliver you in excess of that royalty we won't be in business and certainly today that's our mission we give as much value to increase the revenue of the stores as possible the real decision that you have to make is can I follow a system a pre-designed system and process a franchise royalty simply a catalyst to cover the cost of centralized support systems and services at a higher level so the first thing that we provide today is field consulting in a franchise we have quarterly site visits and coaching come out to the stores we took one franchise location that wasn't following our script precisely we coach them through it here's the script exactly how you got to say it and their club sales went through the roof instant return on that efforts we provide analytics and financial analysis with weekly analytics numbers benchmarking and quarterly P&L reviews to coach franchisees my father tells the story of why does everyone know they need to clean their car wash and keep it clean we're in the business of cleaning but why do so few people do it so it's an accountability partner we're in business together to help coach each other and say hey we got to make sure we keep this place clean there's a there's a standard here without that things can slip we building contribution into the program so automatically giving back to the to the world and your communities that comes out of our end of the deal we create contribution built in one less thing you have to think about so you can focus on customer service we also centralized club member administration in-house so if a club member moterz has a problem they want to change your license plate number or they have a problem with their credit card they call corporate central so we can keep our site staff out focused on serving the customers and delivering an exceptional experience we've created an app with license plate recognition integrated so the customers can manage their club plan on their phone reducing our administrative costs we have managed websites never have to think about building a website or social media pages all handled by experts we have phenomenal team and one lady who has a master's degree in social media that few have incredible asset to the team where we can manage your social media pages know exactly how to respond professionally at a higher level economies of scale we used we used to own a hotel and the management company that ran the hotel for us could claim that they could basically pay their management fee that we paid them in the savings they were going to contribute to us that's something we look at a lot today our franchisees save money on parts and soaps by being part of the system and there's more of that to come and there's economies of scale we blend our own soaps for some of our core commodity products and we were just able to reduce some prices on those blended products because of that ability to in-house blend and get the economies of scale that we're starting to see so we've built in that immediate savings upfront we require 20 days today of required training we're franchisees also for Tim Hortons so a coffee up in Michigan when we signed up for that we had to send our manager for over a month of training just to make coffee today we we deliver 20 days and probably more of that we'll be continuing to expand to teach self sufficiency is very important in this business this is a fast processing that that wash does over 1,300 cars a day on average this is high processing downtime is the enemy you cannot afford to be shut down ever so self sufficiency in-house you're not waiting on a service company to come help you out this isn't like an in be automatic where it's shut down it's put a cone out there we we manage the wash when your competitors shut down waiting on a service truck to come your fix you're up and running a learning management system lms that's a system that tracks every team members training level so a lot of people think well they guide loading cars that's not that important of a job go out there Joe load cars today no the guy low cars on a busy day is the MVP of the property he defines your profit for the day by how good he loads cars how precise he makes his hand motions in his eye contact so nobody goes out there and loads cars until they've gone through the training accomplished the class and we track every single team member that works at every time he's expressed location we have a marked team of marketing experts of 14 people we've done the ability to pre sell 500 memberships before a store ever opens we've done over 2,000 members in the first month in over 20,000 cars wash in the first month because of this marketing team's capabilities three in-house video producers on staff we've spent big dollars on commercials that we can produce that may be smaller chains and independents couldn't do we can apply it to a national network over 3.5 million Facebook impressions 2.6 million views of our commercials my dad jokes he wouldn't know how to run a car wash today because of all the social media side and the technical technical marketing side of the business we created a proprietary point-of-sale system as a whole we saw they were incredibly expensive in the industry ridiculously expensive we cut all the fat out of it we got rid of a lot of the clunky hardware redesigned it from the ground up cloud-based runs on an iPad just like this completely overhaul the point-of-sale system to save cost who centralized phone services voice over IP so we can transfer club members back and forth easily to the store four-digit extensions and all runs on a voice over IP integrated system like a hotel does VIP communications we communicate directly back and forth with the location if they have a problem even a club member in the lane or a license plate or something they need assistance with they can ping our team and virtually instantly hear back-and-forth conversations even while a customer's waiting at the window direct to centralized support this is a picture of our quality assurance center where they have instant communication back to headquarters direct from their control Council that we have built into the location also have live monitoring these sites where we've been able to notify the manager that there may be a potential problem or potential damage claim risk an extra set of eyes reduces site labor we're on duty when you're not there not always watching March Madness so what's the investment the front franchise fee is essentially irrelevant it's $50,000 that's compensated almost entirely by that point-of-sale system savings of what we've achieved this year in comparison the royalty 4% royalty is just a little bit more half again more on what you pay in a credit card feed of visa mastercard and you get an entire system and team behind you it comes out to fifteen dollars and thirty four cents at today's numbers of what it takes to get an a-list team supporting you with fifty years experience to go forward for twenty years in business there's a small technology fee that covers some of the licenses and subscriptions required to operate the site franchise reduces your risk doesn't increase your risk gives you a sustainable platform to build on a proven foundation there's more added value and upside always coming here's where we land today revenues as of 2018 for matured stores was two point two million dollars and growing rapidly that's matured stores that were open more than one year and that's where we compare into some of the big brands you know you might know some car washes that do 2.2 million in revenue a year that is the average today of Tommy's Express also very important these are single location operations achieving these levels that don't reap the rewards of that critical density I talked about earlier of clustering sites together these stores are all independent single stores that are working on developing their markets in building number two three four five and six also it's a low labor business those are not in the business already it's outstanding to see these numbers combined with low labor typically higher margins and my favorite no food involved there's two paths forward on the left you see the world we live in today as a car wash industry is very fragmented world somewhat of a bloodbath in competing for each other for small locations and stores on the right side you see what everyone else in the world does in major industries have researched been traveling studying attending conferences learning about how everyone else does it and it sure makes a lot more sense compete in a bloodbath versus work with your peers to Co build a brand together independently small chains are slow to connect to new technology and processes also for exit strategy there's less buyers for single one-off locations versus being part of a chain any one of our franchisees right now if they want to exit the business we have leadership to help with that process and there's a lot more people lined up we've got people lined up to get into a franchise they take a store right now versus trying to try and exit a independent business spend time figuring it out on the left like we do today or spend time opening and launching new stores and not worry about the figuring it out brands are and everything we do today from dental taxes to tires I saw this firsthand I was in a city in a really bad part of town on a very busy street and the the street was lined with dilapidated independent mom-and-pop shops the tire store guy with his hand written signs out front and the burger stand over here and it was a wreck and there was two shining lights in the middle of the street and I think at that time I think it was a Burger King and a Taco Bell McDonald's I think was down the street probably in a good sight Burger King and Taco Bell they stood out like a sore thumb in a good way because they were pristine they had us process expectations accountability and they looked like every other Burger King and Taco Bell in the country even though we're I'm in the worst part of town and there ain't nothing around here that looks good that's what franchising does one of the toughest challenges we have today is getting approvals with cities franchising helps immensely with that because cities know what they're getting we've built this program out of 50-year foundation on the left is our equipment supply one of the leading equipment manufacturing companies and modular building companies in the industry built on 50 years of operational experience we have what we call three artists of support industry-leading innovation with an extensive R&D budget proven operations of the 50 years of Tommy University videos and training unmatched marketing with brand development fund that we manage as well as location specific marketing to intangible benefits that are also included in franchises the the gift of Association being part of a team with other people being able to compare notes bounce ideas off each other secondly as a financial model that you can step right into and see proof of concept and it's worked from Europe to Australia from Florida to California been proven and that's the platform you can build your operation on to be king of the marketplace what's fact is the top chains will continue to grow on the left side Tommy's Express now has 18 sites open 12 currently under construction and 70 in pre-construction we have over a hundred and sixty sites under contract for development today greater than a thousand people and companies waiting in line to get into one the difference between the left and the right is our program allows you to be a part of it where these chains don't this is our development plan we've established these high-performance carwashes facilities nationwide these are some of our locations that are built or under development or in development so opportunity is now a couple questions you guys have submitted the first who we allow rebranding the answer to that is no this is an entirely ground-up process so we only do ground-up facilities we won't do any conversions and that's important to us because it's a new modernized system and procedures of this type of facility the way it lays out and everything about the way it operates yeah what's the average store volume great question so the 2.2 million in revenue that equates to average volume right now about 320,000 cars a year for those locations and another question a little bit about crossover washing so we're starting to learn a lot more about that right now we have just opened a new corporate store a lot of our systems and processes are built on a corporate store that we launched three years ago it did three hundred eighty five thousand cars last year we've just built one a mile and a half two miles down the street and we're watching the impact of that and again we're replicating that clustering concept and how we raise the bar between connectivity of those stores and how it improves the brand I would like to say congratulations to my father Tom esenberg is being inducted in the Hall of Fame on Wednesday he selflessly served hundreds of operators and developed and operated car washes for 50 years provided essentially free consulting for many years many things he's learned from many of you as well a lot of veterans in the room today that have contributed to our success but we're thankful to share in this together and he's provided the true foundation of this system we put together today so with that I'm honored to bring to the stage the man you've all been waiting for this guy's all over Fox News he's a restaurant industry mogul he served on the boards of multiple companies please welcome and give a big round of applause for former McDonald's president and CEO ed rensi that's dick McDonald's and that was about 11 o'clock in the morning in November of 1984 and I served him the one billionth McDonald's hamburger and you'll notice it's a cheeseburger and he hated cheese and I told him if he didn't eat it I'd kill him and I was serious he was a difficult guy to get along with my job here today is to do everything I can to get you convinced that franchising is a great business model and there's a lot of pieces and parts to that idea and story none of us are as good as all of us collectively and there's a lot of important attributes to small business in a franchising system small business is the backbone of the United States economy make no mistake about that that small business creates more jobs than any other industry in the United States the Department of Commerce defines a small business as under 500 employees McDonald's and restaurants like that generally have between 35 and 75 employees all at minimum wage and a bud in some places like New York City that's $15 an hour in other places at 7 $8 an hour those are all entry-level jobs the car wash industry fascinates the daylights out of me because there's only four or five employees and that's a lot easier to manage machinery than it is to manage people you haven't lived until you're into a two million customer a day business and four people don't show up for work if you doubt me go over to Dunkin Donuts tomorrow morning when this convention opens up and try to get a cup of coffee in less than 3 - 10 minutes I want to talk about a couple of things about franchising - that's really important in my opinion first of all all of you in this room need to understand that wisdom is wasted on old people and youth is wasted on young people now if I could have Ryan's body in my brains you would have no doubt about what you should do with your future careers you would align with me every time but today you're just gonna have to put up with my wisdom and not my youth in fact I have trouble covering up steps so the next time I only want one step not three let's talk about the attributes of franchising is a small business model all of you know what brand is right they being or not know what brand is brand is what you know about an organization institution or a company the General Motors is a brand they sell cars and trucks and stuff like that right do you know what brand essence is brand is what you know brand essence is what you feel and in a small business world when you get involved in a franchise organization you can create a brand essence and a brand become something of like McDonald's is a family restaurant and brand essence is trusted friend forever young I was on a board of directors of snap-on tools which is a I was on that board for 23 years it's a franchise there's 4,500 franchisees all of them run a $300,000 a year business the brand was we sell tools okay the brand essence was do you remember the first time you needed a professional automotive technician and that's when you think about the first time you were pulling a little sister down a sidewalk and a wheel came off the wagon you think about this for a minute about cars so I mentioned snap-on tools and brand essence your home is probably one of the biggest investments you'll ever make in your life as a normal person walk in the face of the earth the second biggest investment you're going to make is in your family whether it's health care or clothing or housing or whatever college education what happened the third biggest expense you're going to make as an automobile or transportation for your family back when I was on the board of directors snap-on tools the average age of a car at the time of trade-in was four years now it's over people are keeping their vehicles a lot longer because they now cost a car that I bought for three thousand dollars thirty years ago today cost fifty-five or sixty thousand dollars that's a big investment in new folks play a big role in maintaining that vehicle both inside and out and so the Briand essence says you're helping these folks protect a very big important family investment try to live anywhere on this face of the earth other than New York City or maybe LA and not have a vehicle of some sort you can't you can't do it we have suburban sprawl we need to have these vehicles so the brand essence is you are a trusted friend to help preserve that asset when you're in a car wash business what does brand do do you do what do what do brands do for you from an economic standpoint there's enormous power in brands you think of all the largest corporations in the United States today and they've got powerful brands Joe schmo's car wash on the corner of South Street and 1st Street has no brand or brand equity it's just a place you get your car washed you folks are right now in an industry this is word the restaurant industry was in 1950 and 60 you know most restaurants in the United States got started after World War two when people came back were in the military mess sergeants largely there were cooks and served food in the field they didn't have any jobs to go to because the industrial military complex was shut down they opened up small restaurants and small cafes and small diners they had a pack of cigarettes rolled up in one sleeve they had a sloppy wait t-shirt on an apron and they served whatever they could get from the local markets they were truly greasy spoon that's where that came from and the restaurant industry started to evolve Ray Kroc did it started with a McDonald's brothers started in 1948 Kroc bought that company in 55 has started growing the McDonald's system and started to invoke system standards and procedures and cleaned up the industry get real about this McDonald's is a hand make no mistake but they're the best of what they do give me an example something to think about Panera Bread is up it got a big average volume right bigger than McDonald's McDonald's small kids hamburgers got one point eight ounces of meat you know how much meat is in a Panera Bread sandwich one point six ounces they use bore heads lunch meat why do people love Panera Bread so much it's got a brand it's got an image it's got a psychology it's better for you soup and sandwich salads you know that brand and brand essence is hugely important there think about the greasy spoon then think about a Panera Bread or a Chipotle and some of these great companies that are the restaurant business they think about the carwash industry I've got two vehicles I get washed twice a week each I went the last time I went to a carwash God forgive me Tommy forgive me I didn't go to Tommy's car wash which is a little further down the street I went to something called beavertail or something I don't know what the hell it was I was in that place for an hour in 19 minutes and when they got done the car was dirty the back was a mess the wheels weren't clean I said to the guy I said what are you going to do about this it's time for this industry to evoke some standards and start to upgrade the quality of experience why is the carwash dirtier than my car I don't get that you go do you ever go to car washes how do you feel about the bathrooms ladies I used to tell people at McDonald's I did a whole marketing campaign on clean toilets used to laugh at me by the way there's several McDonald's people in here today that are now in the car wash business they better pay attention to me because you know me I used to say if you can smell the bathroom before you can see it you got a problem and put in strawberry spray in the damn thing doesn't fix the dirt if the bathroom can't be clean how the hell can the kitchen be cleaned and in your car wash if your bathrooms not clean and well-appointed how can you clean my car and do it efficiently now you some of you shaking your head yes I understand boy is he full of it you think whatever you want to think I don't care when you're in the business you're in just like McDonald's Burger King Wendy's or the local surgical center or whatever we're in the service business somebody's got a problem they come to us and we have to do something to make them feel better about themselves it's about self esteem when I pull my car on that car wash I want to feel good about my car it's your brand's got power your brand essence has got more power tape out the Ronald McDonald House we used to go nuts with people coming up knock on our door and say we want you to buy an ad in the baseball book we want you to buy this for that and we want you to do this fundraiser and we want you to our franchisees were being driven nuts with everybody in a community wanting money and we said look let's create a charity it started out one way and ended up a different way but it was pretty essentially this if you're in a community you need to have a point of view for the community more so today than ever with social media if you don't care about the community you're going to lose eventually well what's the most important asset any community's God it's people so why not focus on children education Health and Welfare and the arts create your own foundation all of you contribute to it and then when somebody shows up and says hey then you look to the foundation and then you can petition Firehouse Subs does that with first responders they buy equipment for fire departments in a local community great program there's others just like that you can do the same as some other thing that gives you a point of view oh by the way that's brand and brand essence you're making a statement to the community that you care about them that's the emotional aspect of linking you to the community okay I'm starting to rant now I'm Way off script so I'm gonna come back over here and be Ryan's employee the best employee you've got today by the way in case anybody's asking you something else someone to say here what did you tell me you want me to talk about let's see here Oh what do I think about the car wash business actually I wish I was 26 again because I got to work for him full-time I think it's as exciting I went to work for Ray Kroc in 1966 and he was a really strong personality I was sitting in a board meeting one time and he said Renzi now we're talking about big finance JP Morgan's there we're talking about billions of dollars around the world says ran he sent out that in the table I was at the other end cuz I was in charge of the audio visuals I'll never get over that he had Renzi said do you have any idea why people buy cheeseburgers I'm look at him okay this is a trick question what's he talking about yeah cuz they like cheese he said yeah they like cheese and there's something wrong with our cheese I panic the break I called Lionel rout senior VP and say to him did you change the cheese he said well the only thing we did is we went from 160 some slices per loaf to 180 so it's a little bit thinner and we went from Old English cheddar to American cheddar I said change it back crop tasted it commitment to excellence needs to happen in the car wash business there's some of you in here that are really really good washing cars and you see a car coming down that that pathway of yours to get them clean and there's an opportunity to make it better so you do something to make it better the car wash industry in my opinion is right where the restaurant industry was in the 60s and 70s there is a time for consolidation there's a time for rapid growth there's a time for innovation big communities as you know are getting hyper about waste disposal they're getting hyper about water management and conservation energy conservation I don't know for the life of me why you car wash folks don't have massive solar heaters as pre heaters for water on the roofs of your buildings I've got a small pool or a large hot tub however you want to look at it my wife wants it to be 90 degrees I put a heater on it I also put solar heaters on a roof to preheat the water so the damn thing doesn't run all the time I don't know why you are doing that big time why aren't you putting solar panels on the roof to generate electricity to offset the cost that's going to build this industry like you can't believe get on the leading edge of that build your brand's okay I'm done talking cuz we got a time limit one thing we're going to be going into another room we're gonna go up on top of this fancy thing that he paid way too much money for and we're going to talk about the car wash industry will be there to answer your questions the time is now for this industry to consolidate reinvigorate and start getting standards that everybody can aspire to thank you very much goodbye to Mike care at all his question is do you protect territories right yeah great great question very important certainly we have what we call multi-unit development agreement which is very common in the franchise industry basically we carve out a territory that is your your area to go work on developing fine sites after you learn about our sacred selection criteria don't want to come to us with a site because usually it's not going to meet our criteria so you got to learn the criteria first go through our processes we carve out a territory there's an expectation of how many units and what timeline you have to produce those units and you maintain that territory so certainly we have from coast to coast today probably 30 40 of those multi-unit development agreements in place good question one thing that's interesting I add to that about multi-unit developments when we talk about a city in the old days in the car wash you used to think well I'm gonna dominate this town well no one of us can dominate the town thoroughly to the level idea showed by ourselves so and we have one franchisee sign up in a city it's usually a part of a city and in a normal big town then our mission is to go out and find as many franchisees as we can to help support that first franchisee by developing the rest of that town with other people's efforts counterintuitive what to what we do today or we say I'm gonna own this town I'm gonna build us no that's when we go and find other people to come in and support and help we want four or five franchisees in every town so we can make the brand bigger faster and dominate the competition it's interesting in the restaurant industry when we first started we had two three four or five mile radius around every one of our facilities and we found out that that limited us dramatically in our ability to scale rapidly there was a period in 1982 three for McDonald's we built 1,200 restaurants a year for three straight years and we did that because we wanted to double the size of our company to get the scale there stopped Burger King and Wendy's when we got done we built more restaurant those three years and they had together combine the purchasing power that gives you the marketing power that gives you is staggering so while you may want to have a protected territory that may make some sense I'm going to let him worry about that I'm not going to but the fact the matter is the more locations you have and the denser you are the harder it is for competition to penetrate McDonald's highest penetrated market the United States was Cleveland Ohio at one this was 20 years ago was one restaurant for every 26,000 people that's a deep deep penetration so why give up the scale and the power that when McDonald's walked in to the potato farmers of Idaho and said we want to buy five billion pounds of potatoes they paid attention and it's a lot better to make one pound to put a 1 cent a pound on a billion pounds than it is ten cents a pound on a million pounds think about scale in this business and how important that's going to be and having territories gets in the way of that time for one more question great presentation my name is clay Lambert from Minneapolis that 2015 it was a converted look like a service station with dispensers yep yeah good question this is yeah this is one of our corporate owned stores under our legacy brands for 1969 my grandfather founded quality carwash this is a lot of the foundation of our processes when you come up and do a discovery day in Michigan you'll get to go through this location this is a model we call a gas wash C store it is a ground up model it's where a lot of our systems and processes are developed today so on a corporate store side we run both dual brands in West Michigan so we have seven corporate owned locations today that's one of them and then we have the same model of tommy's Express brand as well in Grand Rapids so that is a model that you could do today it's a gas wash T store we also have a flex serve model that has an interior cleaning Center on it in this case you would the franchisee would be the carwash which you can't really see there but it's behind the store entrance here it's exposed on the far side there the car wash would be the franchise you would go out and get a gasoline brand for your gas station separately but it is a very good model it's part of what achieve the success is multi profit Center today we believe even better is go build our Express model next to a busy gas station the gas station in there is not the profit Center it's it's the is there to be there but it's all about the carwash and all to feed the carwash but that's an example of something that's really important in franchising the franchisor gets to make all the mistakes and learn from those mistakes and pays for them the franchisee gets the benefit without the cost of those mistakes it's a huge opportunity here where they've got a live act of model where they can experiment with and not on the back of the franchisee one more quick question one more question anybody raise your hand thank you why did you say that you know specific area that's been carved out for you as a territory that you allow multiple operators or multiple franchisors now with ease right now within your territory but within a city typically there's gonna be multiple carved out territories so at that density we talk about once we're in Michigan one store for every 23,000 people let's just say it's one for every 30,000 or 40,000 a typical town is going to be significant number you know and we want fast pace on this so it takes multiple people to build out any city that's got two million people kind of I'm talking bigger towns you know it's gonna take multiple people to build out those markets fast well that's the idea you're not competing against them because they're not direct competitors they're building the brand with you together yeah so I mean that's that's examples from McDonald's of what how a city is broken up and there are some corporate stores or some this franchisee some of that franchisee everybody's found a book and doing the process together and stronger together I used to tell the franchisees that Famous Dave's now fat burger which I'm the chairman of the board of and McDonald's and snap-on tools if you don't want anybody else in your general area you make sure you run the best business you can run and you buy that territory and build those other stores it's an incentive to excel and create your own strength and power within that if you run crappy car washes you're not going to get another one you gotta you got to achieve excellence in these things to keep the brand elevated at a very high level car washes may be an ordinary service but you want to be the best damn car wash in the world so you capture the largest market share in the most the additional value that today is the club memberships all crossover so my dad jumped in his car from Michigan drove to our Tommy's Express in Sarasota Florida pulled in the lane the gate opens he washed his car so it doesn't matter who the franchisee is you go to a Tommy's Express location you're a member of all location