Fred O’NeillDavid Miller

The panel for this year’s look ahead at the following 12 months is composed of two executives with extensive involvement in the areas of operations, associations, equipment, and chemicals. The participants are:

Fred O’Neill, president of the International Carwash Association and owner/operator of four Fred’s Car Wash locations in Connecticut.

David Miller, senior vice president, marketing and product development for National Carwash Solutions, home of the Ryko, MacNeil, Clean Touch, and Clean Wash brands.

We asked the panelists to consider four issues of general interest to car care business operators:

• The Economy — The outlook for next year and its impact on the car care industry

• What equipment and wash format trends should we look for in 2017?

• How can associations enhance their value to the individual operator?

• Concerns — What other issues will the industry face next year?

THE ECONOMY

O’Neill

I see the economy next year being much the same as this year. Slow, sluggish overall growth with low interest rates and relatively low gasoline prices continuing to bolster consumer spending. That being said, I think consumers are cautious and waiting for a downturn. I believe the election, finally being over, will have an effect but, at this point, I think just having it over will bring some renewed consumer confidence. As we all know, getting your car washed is a discretionary income purchase that is going to come after life’s essential expenses. I do firmly believe that the economy will continue to provide consumers the income they need to think of car washing as well within the budget. I believe most of the major economists are looking for an “adjustment/slowdown” in the next year or so, but few are indicating a looming major recession such as we saw in 2008.

Miller

The car wash industry is enjoying very favorably economic conditions. We see this trend continuing into 2017. Low fuel prices, low interest rates, and stable job growth all point to consumers having the discretionary income to wash their cars. This is good news for both consumers and car wash owner/operators. Next year will continue to see growth in new capital equipment purchases, chemical wash solutions, and maintenance services.

EQUIPMENT AND FORMAT TRENDS

O’Neill

Equipment and wash formats continue to support greater automation and adoption of newer and easier payment options offered by technology developers. In base equipment offerings, developments move slowly with growing interest in belt-style conveyors due to new car-safety features making it more challenging than ever to roll vehicles through a tunnel. Automated pay gates are now a standard in the industry. However, new wrinkles such as Apple Pay, and other specific apps for an individual operator are making strong headway.

On the self-serve side of the industry some operators are offering cashless bays, where customers can access an app to pay and turn on equipment — totally revolutionary for the self-serve side of the business that may begin to re-energize that segment. In the petroleum-based in-bay automatic wash segment there appears to be stable growth. Gasoline margins are depressed from last year overall but still healthy, possibly encouraging further investment in renovating or adding washes to existing gasoline sites.

As far as tunnel formats go, the express exterior wash still garners the most interest from new investors and industry veterans. The increases in the minimum wage are challenging as is finding qualified personnel. The express model remains the simplest to operate and control. This does not mean the traditional full service is going the way ofthe dinosaur. There are plenty of do-it-for-me car owners, and this is possibly a great opportunity for those operators who can access the employees and are able to handle the complexities of a full-service operation. The full-service model actually offers some protection from competition, depending on how well it is run.

Payment-method technology improvements have made the development of unlimited monthly car wash subscriptions the hottest trend in the industry. These programs are fantastic for cash flow, customer loyalty, frequency of customer visits, and offer more extra-service sale opportunities. Additionally, the enterprise value of car washes with strong monthly subscription programs appears to be greater than those with none. Renewable reoccurring revenue may be the new mantra of new and veteran operators alike. I see continued robust growth in these programs with many different methods of incentivizingcustomers to purchase a monthly program.

Miller

The tunnel conveyor segment continues to be hot. We are projecting growth for mini-express tunnels and full service tunnels over 75 feet. Consumers see the value-added benefits of a tunnel car wash and they like the value-added experience. NCS is positioned for growth in this segment, offering everything from long-lasting conveyors to durable brush configurations.

As the C-store-industry players expand into markets across multiple states, connectivity continues to be an opportunity with these car wash operators. They want the ability to remotely monitor all their car wash equipment, tellers, bay doors, chemicals, bay temperature, etc. in a holistic solution. New and improved solutions can monitor the bay without the need for an expensive site server and work with any brand of payment tellers. Error codes can be pro-actively monitored and reported instantly. Accurate end-of-the-month wash count data can be provided.

ASSOCIATIONS

O’Neill

Associations at all levels — local, regional, and national — are valuable assets to both new and veteran operators. There is no more effective resource than a local or regional association for problems or opportunities in a geographic area. Associations working with operators in an area understand and operate in a space the national association cannot be effective in. Car washing has its own nuances depending on the geographic area it operates in. Certainly, washing cars in Maine in February is far different than washing cars in Florida in February. Local and regional associations working with their members understand the issues impacting the car was industry in that locality or region and can be very effective interacting with local politicians and policy makers. Local events and networking have always been great tools for operators and regional equipment suppliers to gather and learn from each other.

On a national level, the association continues to provide the largest and most diverse events for networking and showcasing products to the industry. The national association is the overall educational and knowledge center for the industry at large and will continue to support local and regional associations where needed. These areas include consumer research, interaction with auto manufacturers, networking with equipment manufacturers and suppliers on a national level, representing the industry to the larger national audience, raising awareness of the consumer as to the benefits of car washing, as well as growing the community of car washers, both operator and supplier, nationally and internationally. The ICA is uniquely positioned to foster the growth and interchange of ideas/thinking with a much broader scope than regional or local associations. The general idea is that we can all grow and learn from car washers all over the world as well as here in the United States.

Miller

Individual vendors can provide value to individual car wash operators through partnerships in class training, education, and “after the sale” support. NCS is rolling out its new NCS College of Clean training program in 2017. This training program combines classroom instruction with real-world hands-on equipment training, all set in one location. New-investor workshops, chemical-management, and maintenance-service classes will be offered starting in spring 2017.

Associations can also refer individual operators to maintenance service providers for expert service repair, parts, etc. on any brand of equipment. These two support functions can greatly help individual car wash operators profitably manage and grow their business.

OTHER CONCERNS

O’Neill

The concerns I have could be viewed as opportunities for some. While new vehicle-safety features, such as self-braking, can be frustrating to some, innovative operators and manufacturers will offer solutions that differentiate them from their competition. As self-driving vehicles begin to enter the market, how will we as an industry become a resource for those vehicle owners? Will there be apps available in the vehicle to bring it to a car wash to be cleaned? How will we load, wash, and provide additional services to these unmanned vehicles? Can we get car manufacturers to interact with us to make maintaining the cars they sell more car wash friendly?

As the national drive to increase the minimum wage inexorably pushes the cost of labor up, how will that impact car wash volume and revenues as we adjust price or revenue models to meet the increasing cost? The increasing shortage of qualified competent labor in all areas of the country is becoming a problem.

I worry about over saturation of car wash facilities in certain markets. Unlike McDonald’s and Burger King, too many facilities in a market is not always healthy. At some point, the era of low interest rates will end, and the cost of financing renovation or expansion will increase. In some geographic areas, drought is still a problem, and managing our water resources will not only be crucial to the individual car wash operator but will also affect how customers perceive the industry’s response to this vital necessity in everyone’s life.

Miller

Conservation issues will be at the forefront in areas experiencing water shortages. Water reclamation and reverse osmosis will be important eco-systems for car wash operators. Reclaim and RO systems can greatly reduce water consumption and improve water quality for a better car wash product for consumers who want a “clean, shiny, dry” car without spots or streaks.

Communities and individuals are concerned about the environment. Car wash operators must be certain the chemical wash solutions they use are safe for the environment and won’t harm their equipment’s longevity. In today’s market, car wash chemicals are available that are non-toxic, certified biodegradable, and safe for the environment while tough on dirtand grime.