Download the New Car Wash Investor E-book

Transcript

Todd:  Okay, thanks everybody for joining us today, and welcome to Is Car Washing Your Next Big Business Venture? My name is Todd Davy, I'm the SVP of Sales of DRB. I've joined the company about 25 years ago. I have worked in sales for about the last five or six. Really glad to get a chance to talk to you all today. I'm going to introduce my co-host, Taryn. Taryn, go ahead.

Taryn: I am Taryn Chmielowicz. I am the Vice President of Marketing, here at DRB. And I've been with the company for about four years. So I'm looking forward to sharing some info with you guys today.

Todd: Fantastic, well, we're going to talk a lot about, this is a new investor-based presentation. So just going to talk about car washing as a whole, some trends and stats that we've found. Before we get started, I do want to kind of go over some webinar participation rules and how you can communicate with us. If you have a question you can click the Q and A button, which is right at the bottom of your screen, and then type in your question. At the end of the webinar, we'll answer as many as we can. And also if you're having technical difficulties, we'll be kind of keeping an eye on the Q and A button. So just tell us there. If you don't see that button at the bottom of your screen, just go ahead and try clicking view options, and then exit full screen, which puts the webinar in a little smaller window. And now we'll be monitoring those questions throughout the event. And with that, let's get started. We're really glad you joined us today. And just a quick overview of our agenda, we plan on talking a little bit about ourselves, obviously who is DRB and what we do. Then we'll get into some overview of the car wash models, and then we'll spend a lot of time talking about why we think car washing is a smart investment. We'll follow that up talking about potential pitfalls and how we can help you overcome them, and then how to get started in the business in what's a really, really exciting time for the car washing industry.

Taryn: So first a little bit about DRB, for over a third of a century DRB's journey has been about helping entrepreneurs discover the American dream of running and growing a business. The DRB brand is made up of these three segments. First, DRB Tunnel Solutions, where we focus on conveyor-style car wash technology, including point-of-sales systems, tunnel optimization systems, like NoPileups, and reporting and business statistics. Then we have our DRB In-Bay Solutions group, and they're really focused on the unattended segment. So in-bay automatic point-of-sale and reporting systems. Suds is our team that are our data led marketing strategists who can help you grow your business and also happen to have an amazing design team who can help you create a really amazing brand. DRB supported and often drove an unprecedented era of growth in the car wash industry. We've helped operators limit weather impacts with unlimited wash memberships, improved customer experiences with advanced technology and marketing strategies, and really tap hidden growth potential with uptime and monitoring services like NoPileups. With that same pioneering spirit that's driven us from the beginning, DRB is constantly evolving to help operators conquer new challenges and chart new paths to growth. So we will share a little bit more about how we do this towards the end of the presentation, but that's DRB.

Todd: Thanks, Taryn, well, first let's start just by briefly talking about the different car wash models, 'cause the type of model of car wash you decide to build will play into the amount of business that your wash can generate. Just to kind of go through this quickly, express exterior, that's the most popular model today. It's the conveyor moving the car through the tunnel as the equipment washes the car. It's most popular because it has the ability to support a really high volume of cars with low labor and unlimited plans. This is most common at convenience stores or unattended sites. I'm sorry, I skipped ahead there, I talked about in-bay automatics being more convenient at the convenience stores or unattended sites. Express exterior washes are kind of the standalone with free vacuums, things you will see out there. For an in-bay automatic moving forward, that's where the customer drives into the bay and the equipment rolls around the car and moves around the car. Sometimes they'll be called rollover car washes or touchless car washes, a lot of times in our industry. That's again most common at convenience stores or unattended sites that might have self services as well. Much lower volume per hour. If you can get to 10 to 12 cars per hour through an in-bay automatic, you're doing really well. Whereas an express exterior, depending on your number of lanes and your tunnel length can go a 100, 150, 200 cars an hour, especially on times like this, when there's a lot of pollen in the South and lot of salt being washed off of cars here in the morning. A full service car wash, that's where the staff would clean the car inside and out. And your customer waits in the lobby. Many of those interior services are hand applied, still running through a conveyorized car wash to wash the car. And then a flex-serve is kind of a hybrid between express and full-serve, where the customer would drive the car through the tunnel and then pull into an area afterwards to have the interior of the car cleaned. Usually a very fast cleaning, things like that. One segment we don't really talk about on this slide is something called a mini-tunnel. We're seeing a lot of in-bay automatic car washes kind of move from, they want to move into a mini-tunnel, a very short bay with a small conveyor, as short as 35 feet, but it lets them increase their volume as they go far, go on. Often what helps determine what kind of wash you're going to build is the size of your lot, the ingress and egress of your lot. But now that we've added mini-tunnels, it really opens up express exterior options on much smaller lots. So there's a lot of, you've seen some investors going into that today.

Taryn: So why is car washing a smart investment? Next slide. So here is a stat from the International Car Wash Association's Consumer Study that they put out this year. 60% of drivers say they most frequently wash their cars at an automatic car wash. And that's we're talking like conveyor tunnel/in-bay. This is up from previous studies, so consumer demand is at an all-time high for car washes. As we know, convenience is king and increasingly drivers are turning to the convenience of car washes. Also the ridesharing aspect and the popularity has really caught on, and they are required to have clean cars, both inside and out.

Todd: And what we've really learned is 63% of drivers now are saying that washing their vehicle is as an important and necessary part of routine maintenance. So car washes are really becoming a service that is in more demand now than it ever has been. We like to joke about younger folks don't own buckets and hoses and wash the car themselves. They're taking the car through the auto automatic car wash and building on the stat that we talked about with rideshare before. Even DoorDash or delivery services or Amazon private vehicles are really needing to keep a clean exterior of their car, making car washing much more important.

Taryn: This market is booming, which is probably why you're here. You see here from Grand View Research, the expected compounded annual growth rate of the car wash market is 4.8% through 2028. Some of the reasons include the popularity of the unlimited wash plans, which are stabilizing recurring revenue for investors. The ability to scale a car wash business without compromising the financials. A lot of that is due to that express exterior model and their low labor dependence. Lower than other retail-type business. That's why we've seen a ton of private equity investors come into the industry the last few years. And just a fun fact for you, DRB actually was the company that commercialized the unlimited wash plan around the 2006, 2007 timeframe. And since then we've sold over 30 million membership tags. So it's definitely taken off.

Todd: That's awesome. 30 million customers out there.

Taryn: 30 million.

Todd: Yeah, that's just, yeah, it's fantastic. So yeah, really-

Taryn: Yeah, so the good news for you is this industry is still very fragmented. We've seen a lot of consolidation over the last few years, but it's still in its very early stages. So the top 50 conveyor car wash chains make up only 16% of the market. So that means the rest of the market are people just like you. Perhaps you're even getting into the business so you can flip it and get out of it. And I got to tell you, it's not a bad strategy given these numbers and that the consolidation is kind of at the tipping point.

Todd: It's a great segue to talk about next, but we did have a question and answer, someone asked who are some of DRB's key clients? We actually have 38 of those top 50 chains. So if you go out to our website, drb.com/top_50, you'll see the list. And you'll be able to look at some of our large clients, basically the biggest operators, the biggest players in the industry, we support them with various products from DRB. So we're pretty excited about that. So for those of you buying an existing at wash location, you really want to look at areas of optimization. Specifically, look for the lack of in this case. When you're buying an existing wash, advanced data collection and reporting, there's a lot of opportunities for optimization and existing car washes. And if you can get your hands on that data, our partners at Suds can help you uncover many areas of opportunity like pricing optimization and ways to grow that at unlimited membership. When you go out to acquire an existing site, they may have 500 members, but we want to help you get to 1000, 2000, because memberships are going to help you build your next wash, buy your next wash and continue to acquire. Other things that you can do after you acquire a location is upgrade technology. A lot of car washes still don't use pay stations. Adding a pay station can help you both reduce your labor dependencies and increase your security around money coming in and credit card authorization, that kind of thing, letting the customer, the consumer, make their own choices there. You can also add license plate recognition, or RFID tag usage to really help your members, your unlimited customers get through faster. Another product called NoPileups, it actually follows the car as it goes throughout the tunnel and helps prevent collisions. It helps you actually increase capacity. You can get your cars a little bit closer together because we're using cameras to make sure the cars are in the right place as they go through the tunnel. And you can use NoPileups with any POS or controller system. You don't have to use the DRB POS to use that. And finally, we can use a touch queuing technology. When your car pulls up to the beginning of the conveyor, we can quickly identify that car. We look at the picture, we touch the button and off it goes. It kind of eliminates a lot of the guesswork when cars are coming in. A lot of things you can do to optimize the volume and the revenue at the site, just by adding in technology at the location. Other things you can look at are your solid branding and marketing. I think any car wash you look at, especially if you're buying existing wash, that's been around for a while, there's a great opportunity to update the brand and the marketing, and then finally expansion capabilities. Are there opportunities to expand in the region? We're seeing washes pop up on every corner these days, and the demand in the market meets the need. There's a ton of opportunity out there for more car washes. And we just see this continuing to grow over the next few years. So financing is another thing to keep in mind, and you do have many options when financing a car wash. One of the most popular is SBA 7a loan, which gives you a low down payment, a low interest rate, and a longer repayment period. We also actually, if you've acquired the wash, you're looking to do upgrades to the technology, we can finance the system internally. It's one of the advantages of having the top 30, 38 of the top 50 car washes and being the largest player in the industry. We've got the ability to help you out so you can go focus your capital on acquiring new locations and let us help you move your capital as you upgrade your POS or do different things there.

Taryn: So as we've mentioned, it's no secret that building strong unlimited membership is and should be one of your top goals. And this gives you that predictable recurring revenue that is essentially weatherproof. And this stat at the bottom from the Car Wash Association's Study says that people love their unlimited subscription. So, not only are your customers happy, you're happy and your bank is happy essentially. So it's weatherproof, but Todd, if you'll go to the next slide, it's also a bit pandemic-proof. So I love this example from the beginning of the pandemic shut down. So what you see here is two charts. The left compares revenue, the right compares volume. And what you see in the blue is before the pandemic and what you see in the orange is during the pandemic. And then you also see with unlimited plans and without unlimited plans. So on the left is revenue. Those with unlimited plans only experienced a 32% reduction in revenue during the shutdowns compared to a 66% reduction for those without unlimited plans. Similar results on the volume side, that it's double the pain if you didn't have unlimited plans. So I might also add that it's a bit recession-proof as well. We all know gas prices are on the rise. We may be getting into a recession, and what we know from that 2008 recession is that car washes didn't feel as much of the impact of that recession mainly due to the unlimited memberships.

Todd: Sorry about that, Taryn. I had a little mouse malfunction there, and it kind of moved pretty fast.

Taryn: No worries.

Todd: Yeah, that was during the 2008 recession, as part of the industry, and car washing stayed relatively stable. And it was kind of fun to watch and when times were tough, people still took care of their car. They still wanted to look good, and it's even bigger now, even more as we go through. And then resale potential, as we mentioned, investors love predictable recurring unlimited plans. If you plan to flip your wash, you should put as much effort or more into building that strong plan membership as you do into remodeling or upgrading your equipment. Put quite simply, higher recurring equals a much higher multiple, and getting your customers on a good unlimited program is the way to do that. Okay, so we've kind of talked about the industry as a whole. Let's start looking at some potential pitfalls and how to overcome them as you invest in our industry. First thing we'll talk about is weather. Bad weather can impact your revenue, but it's nowhere near as big of a problem today as it would've been five, 10, 15, 20 years ago. Unlimited car wash membership subscription plans, it really leveled off your revenue. And it really helps you overcome if we have a really cold time, where no one is out washing their car. Even the pandemic thing that we talked about before. Another pitfall is the learning curve. When you invest in the car washing industry, you need to be a salesperson, a marketing expert, a technician, chemist, et cetera. What you really want to do is help reduce that learning curve. Car washing is a fantastic industry. Operators are really willing to help each other. Maybe not your competitor right down the street, but you can reach out to other cities in your state or come to trade show associations. A lot of folks have been doing this for a very long time, and they've been selling car washes in their markets for years, and they have a lot of knowledge. It can help. And finally, location. It's the one thing that you can't change once you get started. It's so difficult to change that you really want to make sure that you have it right at first. And our partners at Suds have a service that can help, which I accidentally switched to earlier in the presentation. Our partners at Suds can help you with a new tool called SiteSeer, which is a comprehensive tool to allow you to help assess the growth potential of a prospective car wash location. We use 1,500 different data points to evaluate the growth potential of the sites you're considering. And we leverage information from both the local area and from similar markets across the country to provide a robust snapshot of what we think a site is going to do based on location and different factors like that. It also works with the traffic patterns and customer behaviors within that potential market that other data tools can't really do, and they're not visible by just looking at the map. We really look at the entire picture with sites here to help you say, "Hey, this is a good location, this is a bad location." And even the worst locations we can do some things with, but you're better off trying to pick this one. All in all, SiteSeer helps you to make an informed investment decision, armed with a comprehensive understanding of your location's potential future performance. And if you're just getting into the market, we'd be glad to show you sites here and how we would kind of help you pick the right location as we move forward.

Taryn: Alright, so we're going to move into getting started, where you should start. This industry is great for sharing information as Todd mentioned. In May, coming up is the Car Wash Show in Nashville, and that's a great place to meet people, to network, see what kind of technology is out there. Plus there's a few other regional shows throughout the year. There's several regional and national associations you can become members of. DRB is happy to help you get connected to other operators and partners. Todd's team's been in the business for quite some time, so they can certainly hook you up with different members of different organizations and what have you. And we also have a blog on our website that provides a lot of good sort of information that really runs the gamut. And there's a lot of other resources you can find at drb.com. We also compile this free e-book to help new investors like yourself to get started. And we use knowledge and expertise that we'd, I guess, honed from since 1984. And it provides a lot of critical information on point-of-sale, business optimization, and just lasting success of your car wash. So if you take a picture of that QR code, you should be able to get to the area on our website where you can download the e-book.

Todd: I'll just leave this here for another 10 or 15 seconds or so, and then we'll go on to the next slide here. Just give you a chance to scan that QR code and log into the website if you need. Okay, so let's talk a little bit more about DRB. We mentioned at the beginning, we talked through this, there's another QR code that can kind of take you to our website and get you through. But operators, when you're starting your car wash journey, you start to think about location, tunnel, what kind of equipment I'm going to use and chemicals before you think about the technology that's going to help run and manage your business. I like to tell my customers, my clients, people who I've talked to about our business, we're really the spinal cord of your business, kind of what we do impacts everything on your car wash lot. And how do we get there? Well, we have a nice acronym that we use to kind of explain this. So we'll roll through this as we go. We really start with D for data. We have the largest install base of any point-of-sale provider, which gives us unrivaled access to overall industry data. And then our partners at Suds Creative can apply consumer behavior insights and predictive analysis to that data to help us uncover new paths for growth. Plus we have a lot of great tools for actual insights that we can give to operators to kind of help them grow their business. We'll move on to the R, which is reliable, intuitive software and hardware. Again, we kind of hit this over the head a couple times. We're trusted by more top 50 conveyorized car wash chains than all of our other technology providers in our industry combined. And there's a reason they go with us. It's because we have most uptime, strong software and hardware to really keep your business running. You don't want to be worried about your IT department when you're trying to wash cars. Finally, our best-in-class team. We're located here in Akron, Ohio, but we have offices around the country, and our team has a deep commitment to the carwash industry. And it's evident in every interaction that operators and car wash distributors have with our team, from our long tenured sales experts, through our R&D team, and then our highly vetted technical support team and beyond. And we have a culture of humble, hungry, smart, which really means we work together to go the extra mile. We take responsibility for mistakes that we make while we're always striving for improvement. And we treat our customers and partners how we want to be treated. If you want to learn more about how we can help you get started, again, there's a QR code there. But another thing we'd like to do is we'd love to have you come visit our headquarters here in Akron. It's coming up on the most beautiful time of year here at spring and summer. We have really great weather in the spring and summer, December is a little rough sometimes, but we really like to have you come in and we'll show you around our facility. We've got our office with our best-in-class team that we talked about. We'll go to our warehouse facilities. We love to bring folks in. So if you're interested, let us know, and we'll help you get a visit out here to beautiful Akron, to kind of see our facilities. Going a little deeper, just an overview of where we help, we provide everything from the point-of-sale side from pay stations, e-commerce, mobile apps, et cetera. We have two different point-of-sale software systems on our attended conveyorized side, which is SiteWatch, our longtime point-of-sale software. It's found in most of our top 50 car washes. and then Patheon, which is an enterprise level hybrid-cloud based system that we're rolling out now to across the country. Most new investors that we have coming into the market, we kind of lead with Patheon, because that's the future of DRB. That's what we would do on the conveyor side of the business. On the in-bay automatic, if you're looking to do an in-bay location, we use Sierra, it's our software platform that powers our pay stations. And then we have the famous XPT pay station on the tunnel side, and several options on our conveyorized or on our in-bay automatic side for controlling your business. We also provide vehicle management CarPics, where we take a picture of the car at the pay station so when it gets to the tunnel entrance, we know the cars are in the right order and ready to go. And then NoPileups, which we talked about a little bit earlier, monitoring the car as it travels throughout the tunnel. And then, tunnel control. If you ever think about how, when you're washing your cars, that car is being pulled through, our software and hardware is behind the scenes, turning devices on and off at the right time, making sure we're using the right amount of chemical and the right amount of water to really maximize your business and your investment. And then finally reporting. StatWatch, SiteWatch Web, Patheon Insights, all accessible from your phone or mobile device. So if you're playing 18 holes of golf, and want to see how your car wash is going, all your KPIs are right there, including the ability to call employees directly from the app, send people home when you have too many people or call more people in if you see it's being a really busy day. We're just not a one-stop shop trying to get every part of your business. We really focus on technology and data to help your business grow. We're really good at what we do and we focus on that one thing, being that POS data provider for your location.

Taryn: So I would be remiss if I didn't do a quick plug for our new technology platform, Patheon. Plus, I want to give an example of the types of things that DRB is putting into place for the future. Patheon was designed with the future in mind. And our goal is for it to be beyond a point-of-sale system, more of a modern, integrated, flexible car wash management and optimization platform. The platform that will help you navigate the challenges of increased competition, rapid advances in technology and rising consumer expectations. With agile development, we continue to add features and functionality to Patheon. Combined with our partners at Suds, we intend to provide a platform that will be able to do things like the following example. So let's say we market to you via social media marketing or direct mail or something and you end up coming to our car wash. Then what we will do is we will take or we will collect other data from you, whether it be zip code, license plate, phone number, we will append it with third party data, and then we will cleanse that data and combine it to create a neural network, which just keeps learning different ways to market to you. So basically it will create a profile for you and display a different screen workflow the next time you visit the car wash based on all of this past information. And then it will also allow us to market to you outside of the car wash with personalized offers that are most likely to convert. So this is not in Patheon today, but this is the kind of structure we are building in the architecture that we've put in place to be flexible. And we will continue to add functionality similar to this to bring the most advanced system on the market.

Todd: Yeah, this kind of starts with the genesis of, "Hey, I know this guy. This customer has been here three times. I should be really pushing them a targeted marketing offer to buy an unlimited plan." But it goes deeper than that. We know that after you get the unlimited plan, you need to use the car wash four or five times in your first month. You're way more likely to keep your membership going for eight, nine, 10 months if you use it a lot in the beginning. So we help, we get those offers out to you and kind of just really help you grow that consumer base and grow your unlimited base. So I personally am super excited about what Patheon is going to be able to bring to make car washing a much more mature industry and just kind of really help you market to your consumers and your customers. That is about all we have for today. I don't see any questions. If you've got some questions you can go, put those in now. We've answered some of the questions as we've went long today. We really appreciate everybody's time for putting up with us and listening to us. Go ahead and scan that QR code and we'll get you rolling. We'll get our connections going and kind of keep that moving.

Taryn: That will take you-

Todd: We had a very good, we actually, Taryn, just had a question that came up. First one says, what's the vast ROI for a car wash? That's a great question. It really, really does depend on where you're at and where you go. We'll be glad to research that and we'll get that. We'll get you some more information back out there to you on that. The next customers, the next question actually asked, is there cost to use SiteSeer? There is. Our Suds Creative, we can develop that, they have package pricing based on a number of locations that you're analyzing, and we can have you, well, you'll likely receive a follow-up call from our Suds Creative team, kind of reaching out to talk through this and we'll get you the pricing and cost behind that. Another question that was asked was, do first timers often buy existing or start new? That's a great question. Up until about three years ago, I would say there was a lot of buying existing that's going on, but construction and things that happen, we've seen a boom in new construction. The real answer to that question is if you've got the two or three years of patience that it takes to build from scratch, that's what folks will do. But permitting is tough, zoning is tough, find a good broker that is used to dealing with land in your areas, that's a really good place to start, and then they can give you options on buying new or kind of building from the ground up. Let's see other questions that have come in, more details on pricing structure are fixed or variable based on volume. That's a good question. Our partners at Suds have done all kinds of, if we're talking about pricing your individual washes versus your unlimited plans, or if you're talking about, there's two ways to take that. But what we normally-

Taryn: But Todd, I think he's still talking about our pricing.

Todd: Oh yeah, our pricing is fixed based on the number of lanes that you have and we don't do variable pricing on any of that. We're not a chemical company doing cost per car or anything like that. So that's our pricing structure.

Taryn: There's one on, is there any industry data about industry performance during the 2008, 2009 recession? I don't know. I will look for some for you though. We'll have record of all these questions so I can get back to that specific person if I'm going to find anything.

Todd: So that's reason to get some information back on that. SiteSeer question about conveyor versus in-bay automatic. We really gear the SiteSeer towards the conveyor process. In-bay automatic, it's different. It's not as easy to get data on that because it's so heavily tied in with the convenience store, but a bad location for a conveyor could be a good location for an in-bay automatic, especially very small town or a little like more off, less off the beaten path. And we could partner you up with some equipment manufacturers that can answer those questions as well too, that are dealing with both. But we do a lot of our studies with SiteSeer around what's a great conveyor location because the market is really pushed for express exterior as that has gone. So I think we're, any other questions? Okay, well, hey, listen, we appreciate all of you for taking the time today. Again, scan the QR code, reach out to us. Our team will follow up with each of you. We really appreciate you taking the time and it's all I've got, Taryn, anything you want to add?

Taryn: No, thank you everybody.

Todd: Great, everybody have a great week and a great weekend, thanks.