Understanding Car Wash Market Saturation

June 12, 2023

In this encore of our Car Wash Show education session, we will share these trends, predict when we expect to experience industry saturation and highlight some exciting advancements in enterprise business intelligence.


Todd Davy, Senior Vice President of Sales: Okay, let's get started. I'd like to welcome everybody to our replay of the presentation we put on at this year's Car Wash Show. It was a really crowded room and lots of good feedback, so we're excited to present this again. For those of you who sat through that presentation, this one's going to be eerily similar, a few changes here and there, but we're going to kind of present most of the same material. There will be a recording of this available after we're done that you'll be able to get. So thanks for joining and let's get into some logistics before we go into introductions here. Bear with me for a second. There we go.

Housekeeping, before we get started, just how to communicate with us during the meeting. At the bottom of your Zoom window, there's a Q&A button. So if you have a question that comes up over the course of the time while Dan and I are presenting, type in that question. And then at the end of the webinar, we'll answer as many questions as we can. We will have time for Q&A. We're going to kind of keep this to probably about a 30-minute presentation, and about 10 to 15 minutes for Q&A. So we will do that at the end. We will document all of our questions and answers and send that out as well in case we don't get to them.

Also, if you're having any technical difficulties, we'll be watching that Q&A button, so just to let everyone know there. And if you don't see the Q&A button in Zoom, try clicking view options and then exit full screen. That puts the webinar into a smaller window, and it should pop up at the bottom. So that's it from a housekeeping standpoint. Let's get started.

My name's Todd Davy. I'm the senior VP of sales here at DRB®. Started with the company in November of 1996. So quite a lot of experience, both as an installer, field trainer, doing support, working on our engineering team. And moved to sales about 10 years ago, and have been in our sales team since then. Lead that team globally and probably been in several thousand car washes over the course of my life. The running joke here at the office is nobody has a cleaner car than me, which is fun. So happy to be with you all. And I'm going to introduce you to Dan Flatley, our VP of product management. Dan, go ahead.

Dan Flatley, Vice President of Product Management: Hey everyone, Dan Flatley, as Todd said, VP of product management. I've only been in this role about six months, and prior to that I was with SUDS Creative, which is the marketing and analytics arm of DRB. I have not been here nearly as long as Todd, and not been to nearly as many car washes, but I'm starting to pick up pace. So happy to be here and excited to engage and answer questions.

Todd:  All right, well let's talk about first what our goals are for this session. We're really going to try today to help you build an understanding around what we feel the impact of saturation is in our industry, and how industry volumes are trending. We'll look at single-site saturation, how it affects the market, whether or not your membership volume is saturated, and what you can do about that. And then we'll spend some time at the end covering some recent volume trends with a little bit of an update since our last presentation.

So let's get started by talking about whether or not my site is saturated, and how I figure that out. So what you're seeing on the screen here are two membership and churn examples that can indicate whether or not you have a saturated location. The blue on the bar graph shows active memberships, and the orange shows churn. So the question is, do either of these scenarios look familiar to you?

In example A, when we look at our active memberships in that orange going across the top, and then we've got blue showing lost memberships underneath. Do we need to fill our retail bucket? Are we not doing enough with our membership side of things to keep that going and keep increasing that? That's the question we look at when we see things happen like this. This is an over time, 4,000 members I've gone up, but then I start to slow down, and I see some losses coming up on the top. So what do we need to do in the retail bucket? Is my membership churn trend keeping pace? Am I seeing my retail traffic grow?

You start to see that drop off, and lost memberships are going up, that could tell you your site is saturated with members. Another example is something we like to call the treadmill of doom with membership. Once you get to about 70% membership rates, so I have 70% memberships and 30% retail customers, any new memberships that you're selling are likely replacing ones that are churning out. Whether they canceled their plan, they've had a card expire and they haven't updated it, or they just decided, they move, different things like that. It's a lot harder when you get to a peak membership level to keep that going.

So how do we keep you off the treadmill of doom? And how do we figure out how to keep those customers in longer? That's what we'll spend some time talking about here. So I'm going to hand it over to Dan to talk about how to respond to saturation with capture rate.

Dan: Yeah, so I think this slide represents kind of a thought experiment that follows, Todd. So let's make the assumption that our retail traffic is fixed for this case. And I'll kind of talk through what this slide means. But essentially the hypothesis here is if the retail traffic is fixed, I turn them into members, I'm going to churn them out. I'm going to turn them back into members, I'm going to churn them out. So that's kind of the mindset I want you to approach this slide.

So what you see depicted here are several situations where you've captured a larger and larger portion of the retail traffic base, and you've turned them into members. And so in the top left-hand corner, let's talk a little bit about the assumption. So this site, this is an example site that we're using, it has about 20,000 unique visitors to a site in any given year. And on average those people come in about two and a half times per year. You have 2,000 members to start, and they come in an average of three times a month. And your base initial traffic is somewhere around 120,000 cars in general.

And the reason I bring this up is because oftentimes what we see from operators is to respond to a situation where their site is reaching saturation with capture rate. So I'm just going to engage more members. And so what you see as a 2,000-member, so roughly 10% of your unique visitors, you're able to maintain that membership base. You're able to maintain that with about a 5% capture rate. And for any good operator, you know, 5% capture rate is pretty solid.

But as we continue to get a little bit closer to that treadmill of doom, let's say that we've now got 3,000 members of 20,000 unique visitors. Now, it requires a 7.5% capture rate in order to maintain that membership base. And then finally, when we get to 4,000 members, or actually 20% of our unique visitors are already our members, you've now radically jumped up to a 14% capture rate that's required to maintain your membership base.

And so what we're seeing here is a divergence where some folks will go, "I need a double down in capture rate. I need to incent my sales staff to do that. I need to discount my passes." When actually you need to do the exact opposite and control the churn both involuntary and voluntary. And we're going to talk a lot about that at the end right after the market saturation part. But I wanted to kind of set the tone here with there are things we can do, and there are things we can do that are absolutely the opposite of what we want to do if our individual site is reaching a saturation point relative to our membership base. And I think, Todd, you're going to take us to the market.

Todd: Yeah, we're going to actually pivot now and talk a little bit about the market, and look at the overall market. So Dan, I'm going to have you explain the frequency versus density and how we look at an overall market saturation before we get back to the site saturation side.

Dan: Sure. So this is a lot. So bear with me here, 'cause it's kind of a complicated graph. So I'll explain what's going on here. So in the y axis and the vertical axis, you have the annual frequency visits per car. So this is the number of times a car visits a car wash, a professional car wash. And on the x-axis you have the number of vehicles that exist per car wash location. So the way you can think about this is the far right-hand corner of the graph, where it says 35,000, the assumption there is that you have a town with one carwash in it. That's kind of the base case.

Then on the far left-hand side of the graph, so 5,000 or below 5,000, you have several car washes in a town. The case that I like to think about is if you go to Phoenix and you look down the street and you see three or four car washes literally within a half mile, like that's a high frequency of car washes, therefore there are fewer vehicles per car wash. However, we see that there's this slope that goes up into the left. And so what that means on a very, very basic scale is that the more car washes we have, the more often people will wash their car.

Okay, great, thanks Dan. Glad I came to a webinar. Like that doesn't tell me a lot. It actually does. It tells you two things that are really important. The first one is something we call the elasticity of demand. That means we see more people washing their car, the more car washes that are available. We are training our customer base to see an express car wash, in this case, as a valuable investment for their hard-earned dollars, and they want to keep washing the car. That's a really good thing. That is something that will mitigate saturation as we continue to add more car washes to our marketplace. The second part, and maybe equally as important, is the power of a network effect. And what I mean by a network effect is, the example I like to use is social media.

If you went on a social media site, and the only people that were on that site were Todd and I, you probably wouldn't spend much time on that social media site. But if all your friends, all your relatives, and all the businesses you care about, were on that social media site, that's a significantly more valuable proposition to you as a customer. The same thing occurs with car washes. If I'm able to look around and on my daily drive and go by two, or three, or four of my favorite car washes, I am much more likely to one, wash, and two, stay an unlimited customer. And we can prove that. We see that data that someone that visits multiple sites in a particular brand is a much more valuable customer.

So if we think about kind of that upward slope, the two things, one is the elasticity demand, the other is kind of that network effect. Those are two things that are working against market saturation, which are good things. Okay, I think we got the next one, and we're going to talk a little bit. I think we're going to market entry. Okay, so let me, let me set the tone here. We're going to start discussing for the next several slides what happens when a new car wash enters a marketplace.

We'll start with uncrowded, we'll go to crowded. We'll start to see what the impact of adding a new car wash is. Now, I want to be clear as we talk about this. This is intended to be an industry, or network-wide view of this. Individual mileage may vary. And I'm not trying to posit what your investment philosophy is, or your return on investment. This is simply kind of an industry approach to how we look at saturation here at DRB.

And so what you see depicted is the average volume for a particular car wash. and then on the x-axis going across are the number of weeks that occur. And if you look on the left-hand side of the graph, you'll see that there's just a yellow bar, there's a yellow graph line that's going. That's because there's one car wash in this particular marketplace. And then you start to see this yellow diverge with a blue there right about midway through. I see Todd's got the laser pointer, which is awesome. We did not have that in Vegas. This is a good update. We see that start to deviate. That's because there's been an entrant into the market, which is represented by that orange graph on the bottom.

And you see that that orange graph kind of putters along there a little bit for a while. They're kind of struggling to figure out how they wash cars, and then it jumps up. The important thing here is that yellow graph that goes up when that new one starts. So we are seeing that entire marketplace add to the volume inside the marketplace. So the aggregate volume by adding a second site is actually 63%. So we have increased the overall car washing in that marketplace by 63%.

Now there's a chain that, once again, that doesn't account for the blue line, the individual site. We're not talking about investment philosophy. We're just talking about the marketplace. And I think the next slide we're going to talk about a more crowded market, so you can kind of see how this changes. Okay, so what we see here is two graphs. One on the left-hand side is the weekly wash volume. This is the exact same graph you saw in the the previous slide, except there are significantly more players in this marketplace. And then on the right-hand side you can see the total and average weekly wash volume.

And I'll explain why that's really important here in a second. And on the left hand side, if we go back to the weekly wash volume, about 2/3 of the way through that you see this yellow-ish orange line start to pop up. That's the entrant, that's a new entrant into that marketplace that's already pretty crowded, as you can see. I mean there's several locations that are kind of within a two to three, to five-minute drive of one another. And what you see is that yellow one kind of struggles a little bit to get off the ground.

Now, I wouldn't say that in 20 weeks the site has reached maturation. I'm not suggesting that, but that is something we're looking at as a potential leading indicator to saturation. Like are new entrants really struggling to find purchase with their volume? That could be a leading indicator. However, if you look on the right-hand side, I've gone ahead and put a trend line there for the average volume overall for the market.

You can see it continues to trend up. So even though that individual site may not be doing as well as the incumbents, the overall market, the overall crowded market is still continuing to add car washes and add car washers, which is really, really important. Okay, I think we can go on. So what I'd like to do now is, we've talked about a single site in terms of your retail traffic.

We've talked about an uncrowded market, we've talked about a crowded market. Now I want to kind of extrapolate that out into the state level. Before I do that, the state level kind of requires me to talk a little bit about the methodology here. So I'll start with kind of what the graph is depicting. I'll explain to you how we did it, and then I'll explain why you should care. So on the y-axis here, you just have a number of states. And so we've blacked out several of them just to make sure that we protect the innocent. But we've got, you know, the names of Texas, Nevada, Oklahoma and South Dakota there. And then the graph indicates relative to what we believe to be an average when that state will reach saturation.

Now it's important for me to talk about what I mean by saturation. What I mean by saturation is I add another site, and I no longer increase the overall volume of that particular market or state. So I put in a 1.5 million site, and I siphon 1.5 million from the rest of the market around it to make that site 1.5 million. That's the way we talk about saturation. There's plenty of way other ways you could do it, but that's one that we kind of use. And what you see depicted here are again, if a state is to the right of that red line then we believe it is further away from saturation than the national average of roughly 12 years, or 11 1/2 years.

And I'll pick out two examples of why that's important to you, and then we can talk a little bit about it. So one, Texas at the top. Texas I think is important one, because you got to kind of give us a little bit of a grain of salt here. Like obviously Texas is a lot of markets. Beaumont is different than DFW, is different than Houston, is different than El Paso. But we wanted to kind of get this up to a level that made a lot of sense at an industry. And so what we did with Texas is if you think about, I think DFW is a great example.

There are a lot of car washes in the DFW area. And yet we're seeing Texas as the kind of the leader in terms of the remaining saturation. The reason for that is one, what we did is we took the population that's in that area, we took the car washes that are in that area, we backtracked and saw how fast those car washes were growing.

We predicted how fast they would continue to grow, and then we predicted how fast the population would grow. And so for Texas in particular, what we're seeing is that as people flood into Texas, it allows that market to absorb more car washes, which drives out the saturation point. Now let's take the very bottom example of South Dakota, that's kind of your opposite. Very few metro areas, and what we suspect is that we're probably quickly going to hit the absolute capacity of a car wash in South Dakota, simply because there's just not that many people, and there's not a rapid growth.

So the big takeaway for this is, on average we see about 10 to 11, you know, 12 years, which is in line with a lot of the publicly available information from some of our, you know, our biggest players in the industry. That's how far we feel away we are from saturation. But certainly individual mileage may vary in an individual state. So hopefully that makes sense.

So now, what I'd like to do is talk, is step back to the single site. So we've talked about, you know, the market, we've talked about the state, and now the single site. This is really a slide that should help you understand competitive entry. One of the big pieces of feedback we got from ICA was, "Yeah, it's great if my market doesn't get saturated, but like my individual site is being affected." Well, let me talk a little bit about that. So what you see depicted here is a single site. And you're starting to see entrants that pop up within three-mile radius of that individual site.

So those are the numbers that are depicted across the bottom there that Todd's highlighting. So this is a $2 million site, and a site enters within three miles. It actually has a positive effect on the incumbent site. Now you may look at me and be like, "That's insane. How could that possibly be the case?" Well it's really two things. One is you've now introduced more people in that local market to car washing. And two, just because somebody is within three miles of your site does not mean that you are seeing the same people every day.

Car washes can be a mile or a mile and a half apart and barely see the same people come across them, because of the direction of travel, where they're going. Are they close to high-frequency retailer? Are they close to the highway? It depends. So what we actually see is the first couple sites make that site better. We've actually improved the marketplace, believe it or not, but that doesn't hold true forever. As we continue to add sites after that we start to see that performance degrade.

And that starts to take us into the conversation we're going to have here at the end is, well what do I do about this? Well one, is you have a really strong brand. Two, is you wash a really good car. Three, is you have competitive pricing. There's a lot of things that we can do, and Todd will get into them. But the important thing is we don't need, as a naval term, we don't need to go to general quarters just because there's a car wash within three miles, it doesn't necessarily mean that we are automatically going to be saturated.

Todd: Absolutely.

Dan: I think you're up, Todd.

Todd: I am, yeah. So thanks, Dan. Let me kind of switch back and look at what are some other signs that we can identify from saturation? So we'll talk about pricing pressure, you know, if we're seeing pricing pressure, if everybody starts dropping back down to the days of the $3, and the $5, and the $7 car wash, then I'd start to feel like we've got some saturation impact. We're going to talk about this more in a little bit. Then we'll also talk about fixed versus variable costs and to see if there's any concerns there. And then we'll finally we'll talk about speed to ramp and how long that, and what that tells you about market saturation.

So we'll get started here with the pricing pressure slide. And this comes from "Auto Laundry News" as our source for this. We've seen price steadily rise from 2014 through 2022, and we don't see that slowing down. Prices have gone up on everything. I mean, I paid $3.69 cents for a gallon of gas earlier today. The McDonald's, which I tend to eat way too much McDonald's. my prices have gone up on the Big Mac and whatever comes in there. We're seeing similar things in the carwash industry, but we're not seeing reduction.

We saw a little bit of a slowdown 2016 through 2019 where everything kind of stayed flat. But really memberships have allowed us to really raise the gross revenue per car. Which is what when the concept of the monthly membership came out, everyone thought my dollar per ticket was dropping. My dollar per ticket was dropping. But we've actually seen that go the other way. Retail customers are paying more.

People have taken their membership prices and made that the deal, and made the single wash price a little higher. So we're not seeing pricing pressure like we all thought we would back when this kicked off. So that's been good. Again, that's vetted across multiple, not just DRB customers. We're looking at surveys and feedback from all car washers. And then we talk about fixed pricing, and I'll hand it back over to you, Dan.

Dan: Yeah, so I want to talk, I want to deep dive the pricing conversation. Because if there were, if there were impending saturation, as Todd mentioned, we would 100% see it in pricing, and here is why. The beauty of express car wash is also the potential weakness. Where there is a high variable, excuse me, a high fixed cost, low variable cost per car. And what I mean by that is for you to open your store and staff it for 400 cars in any given Saturday, if you have 450 cars that day, it doesn't change your cost structure significantly. That is an amazing thing and makes it very powerful to own an express car wash that drives a lot of productivity. However, it looks a lot like another industry where they see lots of destructive pricing, and that is the airlines.

And if you think about that, like, for me to fly from Atlanta to Vegas, I do not change Delta's price, or Delta's cost structure particularly much. Like I'm just there, I got my bag. I maybe have a Coke, that's it. That's their entire cost structure relative to launching a plane in the sky. And so what they've done, essentially the airlines, is they've engaged in destructive pricing. They've lowered prices, they've lowered service to try and entice me to get on that plane, because if it takes off without me on it, that's revenue they can never get. And so our industry looks a lot like that from a structural standpoint, and that concerns me.

However, what does not concern me, and which should not concern you, is there's no indication that this is occurring. We really do, at DRB, look to this as one of the primary leading indicators that we're seeing saturation. And as of yet we haven't seen significant pressure on that.

Now that is different than a retail ticket softening, because of macroeconomic conditions, or something else that's going on in the marketplace. But when it comes to just pure saturation, or pure destructive competition, we haven't necessarily seen it pricing, and that is a very good thing.

Todd: Yeah, I think we often hear, "I'm afraid to raise the price of my wash, 'cause I'm just going to lose to my competitor down the street." I don't think the average consumer, I ask a lot of average consumers, I don't have a lot of close friends that are in the car wash industry, so to speak. The average consumer has no idea what the car wash price is. So there's ability to tweak that base price of the wash and drive to more membership. And no one in our industry has really capitalized on that yet.

So I think there's potential to raise that price even higher. And we'll talk more about that over the course of the rest of the webinar, and conversations after this. So let's go to our next slide and again, we'll talk about ramping memberships. So not just saturation, brand members. I'm going to hand it back over to you again, Dan.

Dan: Yeah, so if you go back to my first slide where I started running my mouth about a retail market being saturated, and kind of that treadmill of doom. The other place where we would see this is a new entrant struggling to add memberships. So if you go back to that point, like if you entered a new site, or excuse me, you built a new site where the retail market was already saturated, you would really struggle to produce members if you opened your site. And that's kind of what you see kind of illustrated here on the left-hand side is that hey, we've got a plan to be at 2,500 members in 90 days.And it turns out we're about 1,500 or 1,000. Like is it us that did it, or is it saturation that caused it? And the reason that we should not be as concerned as an industry is that what we've found is that a lot of things matter way more than competition, or another car wash near where you're opening.

The most important indicators as to whether you're going to do well in your first 90 days is if you've done it before, that's number one. That's not a death sentence for new operators. That's not the case. There are certainly tools that we have available that can help and there's tools that are out there in general that can help, but that's number one. Number two is the power of your brand, which is kind of related to if you've done it before.

But if you have a strong brand with a cohesive message, and by that I mean the message I'm telling with my pricing is the same message I'm telling with my signage, is the same message I'm telling with the quality of my car wash. You're much more likely to do well in terms of capturing members in that first 90 days. Will we continue to monitor this? Absolutely. But as of yet, we've seen that those other factors are significantly more determinative on how a site is going to do as they open, than the proximity to other car washes, or what we believe to be saturation.

Todd: And we've seen things as simple as we think 16% of retail traffic can be directly attributed to the brand itself in crowded markets. A stronger brand brings you more traffic. And top tier brand strength can generate as many as 1,500 additional members in your system per month. So think about that when you're developing your brand, when you're looking to expand, when you're taking over your local market. Strengthen that brand, that really will help drive your performance.

So let's pivot a little bit away from saturation and just give kind of an update on volume throughout the industry. We've updated these slides a little bit since we were in Vegas. We've got a few more weeks of numbers to look at. And what we're looking at here is just average weekly traffic across the United States. I will give a caveat here, these are DRB locations only. All I can look at is anonymized volume. I'm not looking at membership dollars, I'm not looking at retail dollars. I'm just looking at the car count and the traffic. And we've seen that quarter one volumes were below 2022 because of weather and soft retail traffic.

But we've seen an uptick late in April and the beginning of May that's actually really exciting, and makes us feel better about where everything is going. Specific regions obviously hit harder than others. The south, for example, underperformed pretty significantly in the Fall and Winter of '22. But we've seen some normalization in the first quarter of 2023, and now we're seeing an uptick again.

It's been a great pollen season. I mean I've spent some time in Atlanta, and Charlotte, and a few other areas in the South, and the Southeast US that I've not, in my 26 years I've seen more pollen than I've seen a lot of times there. It's also been very dry here in the Midwest, which led to a lot. My white car is dusty and I've been watching it quite a bit more than the once a day that I usually do. I am by the way, your worst member. I'm the membership's worst nightmare. I'm there all the time.

If we look at the West, the West is a different story. I read an article recently and I'm sure we've all seen this, a three-year shortfall in participation, precipitation, easy for me to say, has been erased by this year's rain and snow in California. Now, think about that for a second. They went through a very dark period over the end of '22, beginning of '23. But again, starting to pull out of it. Starting to get back to more normal levels, not quite there yet, but getting there. Think about what those folks in the West would be doing right now without memberships. So we've done our sun dance. It's worked really well here in Ohio where it hasn't rained since May 20th. And we're hoping it works a little bit better out West to keep you guys going and get volume moving once again.

Here again, in the Midwest, just another add to it. Really, really strong, really, really heavy April and May. We've seen dry weather. The Midwest didn't have as much snow, at least in this part of the country, so we didn't see as much salt. But again, memberships kept things rolling, and we keep it going through. Now we've added the Southwest in as well. Again, the trends are trending up. We're getting back to the levels that we saw this time last year. We're doing well, we're getting better on the trend line. So volumes are picking up. I hope this kind of translates again, we're getting even deeper. I've added two more slides that I forgot about to cover. Mid-Atlantic again, trending up.

And then finally New England. Really again, having a pretty good weather. We're all dealing with some smoke and haze right now, which has shut down some airports. I almost didn't get home from Baltimore yesterday, but we're seeing again, good trends, and good solid things that we've seen with you guys. That kind of takes us to what do we do next? That was our quick volume update.

And this is the point where we're going to open it up to questions and answers here in just a little bit. We don't have a lot of questions. So if we've sparked some questions, or you have anything you'd like to ask, please get them to us. But if you're unsure if your market is saturated, you think that it is, the good news is, is we've got tools to help you do that. Use analytics to understand your opportunity. Look at what is happening. Get data from your local government. Go out and find sources to find out where folks are traveling and use that to help build your next site. There are tools out there that'll help you pick the area to build that next location based on traffic count and driving patterns. Focus on your customer experience and brand.

As Dan talked about, the brand matters. We just talked about 16% retail traffic, and 1,500 more members because of a strong brand. Focus on that customer experience and get things moving. Get creative with your loyalty and driving retail traffic. We've spent so much time over the past five years talking about membership, we forgot, we forgot about the retail member. Do creative things like adding a pay as you go membership. You can do that with our SiteWatch and Patheon products where you can sell a wash, and automatically recharge for the next wash. The next time they come in they get another credit. The next time they come in they get another credit.

Rather than locking someone into a monthly plan, do a pay as you go kind of thing that bills it to their card on file and makes them feel like a member. And then finally influence the behavior at your marketing touchpoints. Get creative here. Drive your retail traffic, use your digital signage, use other signage. If you have a car wash at a convenience store find ways to be advertising that car wash in your store. I was at a retailer a few weeks ago that had a really, really cool made to order food section and they had the ability to buy a wash from the place with the kiosk where they were placing their order inside the store.

But there was no car wash promotion, or no car wash signage anywhere to be found. That's another instant way, if someone stopped in, they're getting lunch. "Yeah, my car's dirty, I can buy it right here while I'm picking out my sub that I'm creating." It's a fantastic way to kind of drive that, and another marketing touchpoint that we may not think about.

So I'm going to do a shameless plug here before we get to the Q&A. We've been really driving this, helping you get through speed to market, grow your revenue growth and experience customer loyalty. We have tools that can help you pick your next location based on where customers are driving. We have the ability to help you with your pricing. Ways that we can kind of play with your price points on your retail washes. Maybe you have a bottom price and a top price anchor that you keep, and we have a lot of play with those middle wash packages.

The two or three wash packages you have in the middle that can drive more ticket and drive more volume. And then again, building that customer loyalty. Customers can copy what you're doing, they can try to copy your brand, but they can't change your experience. You can change the customer experience you're offering.

We want to help your customers have the best possible experience. So how can we help you make the transactions faster, a better experience at the pay station with the tablet? We're here to help with that, and that's what our team can do. So that's the plug. Let's get to the important stuff, the questions and answers. We've had a few roll in.

So I'm going to start here, and Dan, a lot of these are going to be right up to you. So the first question is what do we think the minimum household's per tunnel site is for a market? Is it a three to five-mile radius or a 10-minute drive time? And I'll let you kind of take that and play around with it here.

Dan: Yeah, so the answer is, great question, because it was one of the things I was going to maybe mention during the what can I do part, but you're going to hate this answer, but it depends. I get very nervous when people use those black and white metrics. Now granted, we need to guide ourselves somehow, right? I can't just say, "Oh, depends." But just three to five miles or 10-minute drive. I would tend to more towards the 10-minute drive than I would the strict mileage, and here's why.

What makes a site really powerful is oftentimes what's the visibility? What's the miles per hour on the site? What's the stacking capability? Are you on the way to work or are you on the way back from work? What's your proximity to high-frequency retail? Is it better to be near a Kroger or a Walmart? Like those are the things that are really powerful in what makes a site really good. What's the distance to a sister site? Can I wash it multiple places?

That trends more towards the 10-minute drive than it does the the three to five miles. But ultimately, I go back to individual, you know, individual mileage may vary. I would say if you were going to guide yourself, probably trend towards the 10 minutes versus the strict mileage, because that can be a little bit deceiving. And generally I've found that taking a black and white radius is not always a... You're kind of measuring with a micrometer, and then cutting with a battle ax quite frankly.

Todd: Yeah we used to see a lot of folks spending time on just throwing out a car counter in front of a location and counting the number of cars go by, and that's not it. It's what kind of traffic is it? Is it on the drive to work or home from work? What other retail is around there? And there is no clear-cut answer for this, but there are a lot of different variables, hundreds of variables that we use to help you gauge a site, and determine if that's a site that can be profitable and do membership side of things.

So happy to take some addresses and plug those into the system. We can't do that live on this call today, but we're happy to talk about that going forward. Kind of ties into the next question. Someone asked a very similar question. Small market, single point 20,000 population in a county Southeast. What's expected to be the weekly car count? Your mileage may vary on that as well, because it depends on how spread out is that 20,000? What's the traffic look like in the location that you're getting?

I will see, we've seen some trends where folks are going into the county seats. They're going into the, maybe there's a 20,000 county seat that is a center of location for a rural county. A tunnel can do really well there. Where in the past we might have said build a few in bay automatics and just kind of deal with it. Membership, especially if you're catching people that are coming into that town, and it's a regular five day a week thing can drive that. But it really depends on the retail, the traffic that's going by the location. That's where we really want to spend some time figuring that out.

Dan: Yeah. I would just say that, I would obviously have to see that individual site, but that could be a very powerful place to go. The trick there will be convincing that town that has never seen a tunnel why you're worth it. Because they're going to see a 10 or a 12 or $15 pricing, and be like, what is this? So there'll be more of the marketing touchpoint part than it is necessarily the site selection, as an average. Obviously, I don't know the site.

Todd: So I grew up in a small town, right? And I live kind of in a small town now. Think about the ability, if you're the only game in town, to really network within the town, It sounds a little trite, but the fundraising opportunities with the little leagues, and the high school and the people that are really connected to that town. If you're going to build in that kind of a location, build your brand and network the heck out of it with the local opportunities.

You know, if you have an IGA, Sparkle Market, whatever's in town, that's it. Get on the receipts. It's basic, back to basics, blocking and tackling there that can help you really build out that site. And you're not going to get heavy competition. Well, I've seen some instances where people try to build two or three tunnels in a town of 20,000, that's not going to work. But in the right location with the right traffic, and proximity of the freeway, there's a lot we can do there. We have some questions here around brand. Are there benefits to having a strong national brand, or are the benefits only at a local regional level? That's an interesting question, an interesting take.

Dan: Yeah, it's a great question. I think that there is absolutely the potential for very powerful national brands. I'm not sure how much we've necessarily seen that. I mean if you think about the biggest players in our industry relative to the biggest players in like quick service restaurant. Like just an incredible dwarf by that. There's nothing that leads me to believe that that wouldn't be powerful, just maybe we haven't necessarily seen it. What I will say though is that when I talked about that network effect, I think where we see really, really strong performance is the combination of density and strong brand. And that's where we see just folks killing it.

Where there's, you know, five, 10, 15, 20, 25 sites that are all within, you know, a certain region, all with a really strong brand. I'll go back to that, like you have to be consistent and cohesive with your brand message. You can't come to me and say, "I want to be the Ferrari of car washes, but I'm in a Walmart parking lot." And there is nothing wrong with either one of those things, but you have to be consistent. And that's where I see folks kind of trip up is that "I want to be the Ferrari of car washes. I've got a $4 basic wash." It's like that doesn't make sense. There are ways you have to play that. So I would say that's the part of the branding. And then that densification I think is a very real thing.

Todd: Awesome. Dan, I'm getting a lot of questions here around going back to the number of households in that radius. What percentage should be capturing, and how many households do we need? Can you kind of expand on, it's not just households. I mean I think three, four years ago we were all spending a lot of time with the EAS side demographic reports, and looking at median income and households, and just saying, "Just go build here." Lean into that a little bit more for us and explain, you know, are there percentages? Or is there a general rule we can follow there?

Dan: Yeah, and it's a great question, 'cause I don't think we have a great idea of the percentage that you need to capture. The way I look at it in terms of the households is really around those unique visitors. I don't have a good like, hey, it's 25% versus 35%. That's a great conversation that we could have kind of offline. I will go back to though what I see is, your rural county seat was great, Todd. Because there could be 15,000 people in that town, but there's 45,000 people that come into that town, because that's the only Kroger in 50 miles.

That makes me way more interested, the relative traffic patterns, than it does the actual households. The one caveat to that, there are certain places where we do see like the strict number of households matter. The example to that would be like those hyperdense Florida environments where it's just like track, track, track, track, track. Like then it does maybe matter, but if we're talking about other places in the country, we just haven't seen that clearly linear relationship. But happy to talk about that more offline.

Todd: Okay, another great question. So if you were reopening a tunnel that had been closed down for a while, what would your first priority be on it reestablishing the business there? Is it memberships, is it retail? What would we do there?

Dan: I would treat it like a grand opening, personally. Depending on how far gone it was, and how much memberships you retained. And my little pitch for the grand opening is you need to create a digital and physical funnel that culminates at your site when it opens. So backing that up to how am I speaking to my customers on social media? How am I speaking to them via pay Google ads, via re dynamic retargeting ads, like programmatic advertisements? How am I drawing them in with the physical signs? How am I drawing in with my people onsite? Like everything matches at that exact time when your site is open.

But frankly, if it's been down, let's say you did a full tunnel refit and it's 30 days, 60 days, I'd treat it like a grand opening. I would spend some marketing dollars and try and drive people to that site to experience the brand new tunnel and the new car wash. Todd, I don't know, you've probably seen way more of these than I have.

Todd: Yeah, no, I think you've hit it. A lot of times when you buy a tunnel, especially one that's been closed down, you've got to do, you've got to repair the image, right? So you've got to spruce things up, you've got to make it clean. You got to make it a destination. And depending on the market, you probably need to get out there and meet the local businesses, and start doing a lot of things there. Some of that's hyper-local stuff, especially in a closed down location, becomes unbelievably important.

We went through a nice phase where there weren't a lot of closed down tunnels. Well, we may go back in that, we may see some of that with two shifting economies and things like that. So again, it's getting your brand established, getting the team, and just going over the top on customer service, especially in those first three months that you've reopened the business, so that the word gets around is really important there.

Dan: Yeah, the comment I'd make is you clearly are spending the money to fundamentally change that experience. You should treat it like it's a brand new experience across your different functions, marketing, sales. Drive people to that site.

Todd: Well that kind of wraps up most of the questions that we've had. One last question that was asked is where may we get a copy of today's presentation? And our marketing team will be packaging this up, and getting out a link to everyone within the next probably five business days. I'd say by early next week you'll have a copy of everything you need here. I'm going to try to under promise and we'll over deliver on that and get it out faster.

But again, really thank everybody for taking time to listen in with us today. Our phone number is there on the screen, but I wanted to say if you got any specific questions, you can send it to info@drb.com, that'll get over to us. And we're happy to keep the conversation going. So thanks again for joining us, and everyone have a great day.

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