As Prepared and Presented By Paul Fazio CEO Sonny's The Carwash Factory October 2015 - Big Man Washes
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As Prepared and Presented By
Paul Fazio CEO
Sonny’s The Carwash Factory
October 2015
Industry Overview
◦ Five year outlook
Client Types
◦ Historic/ Current / Future
Industry Overview
◦ Consumers
◦ IndustryCar wash and auto detailing industry revenue
growth is forecasted at an average annual rate of
3.3 percent to 2018*
Contributing factors include:
◦ The growth is largely tied to the industry’s
reliance on consumer discretionary spending
which they believe will increase in the next 5
years.
◦ New and used car sales are positive indicators
for the next 5 years
◦ Environmental awareness will drive consumers
to professional car washing
*Source: IBISWorld October - 2012What is driving the growth in the
washing market on the consumer side?
Automated car washing offers the speed and
convenience increasingly demanded by US
consumers*
◦ US consumers consider products and services that save
time to be important
◦ The proportion of US consumers washing their car at
home is in decline
Increases in car wash use** -- over 19.2% more
consumers used a professional car wash in 2014
than in 1996
*Datamonitor **International Carwash Association (ICA) Study of Consumer Car Washing Attitudes and Habits - 2014 ICA research data shows a decline in home washing
as “Most Often” choice in the past 18 years
Trend continues to move from “Do-it-Yourself” to
“Do-it-for-Me”
Home washing as an overall percentage:
◦ 1996: 47.6%
◦ 1999: 44.5%
◦ 2002: 43.0%
◦ 2005: 38.0%
◦ 2008: 34.4%
◦ 2011: 31%
◦ 2014: 28.4%
They are Leaving the Driveway!
Source: ICA StudyWhere do they wash MOST OFTEN?
(2008 vs 2014)
34% / 28% At home
14% / 20% Exterior
20% / 20% Full Serve
18% / 16% In-Bay
14% / 12% Self Serve
/ 5% Hand*
◦ (2014 = 101% - rounding)
Source: ICA 2008 / 2014 Studies The Industry is growing since more Americans
are washing their cars at a professional wash
than ever before
Where are they washing?
◦ Of those that wash at a professional carwash only:
◦ 58% Conveyor Most Often
Source: ICA 2014 StudyWhich ONE of the following do you
use most often? (2014)
Type Pro Only Pro most often
Full Serve 30% 27%
Exterior 28% 27%
In-Bay 22% 22%
Self 13% 17%
Hand 7% 7%
Source: ICA Consumer study 201472% of those that wash their car most often
at a professional wash, do so every couple
of months or less!!!!!
Car wash Usage Frequency Pro most often
Only once a year 5%
Every six months or so 20%
Every couple of months 47%
A few times a month 24%
Once a week or more 4%
Source: ICA Consumer study 2014 28% are Heavy Users – minimum of a few
times a month – 66% of total washes
47% are Medium Users – every couple of
months – 29% of total washes
25% are Light Users – every 6 months or less
– 5% of total washes
Source: ICA 2014 Study To protect their investment they are more
apt to wash their car
Average car age in the US is 11.4 years old
Years old Pro Most Often Why don’t they wash more often (580)?
◦ Too expensive - 36%
◦ It isn’t necessary - 22%
◦ Too time consuming - 20%
◦ I’d rather do it myself - 7%
◦ Weather does the job for free - 6%
◦ I’m too lazy - 2%
◦ I don’t like the service at car washes - 2%
◦ It’s inconvenient - 2%
◦ Location, there aren’t any washes close by - 2%
Source: ICA 2011 Study Why they don’t:
◦ Number one reason for washing at home instead of
at a professional wash – Cost
Why they do:
◦ Number one motivation for using a professional
carwash – it makes the consumer feel good!
The emotional rewards outweigh the attributes in
terms of motivation
Source: ICA 2014 StudyBy Gender for those that use professional
washes only:
Female – 55%
Male – 45%
Source: ICA 2014 StudyFor Pro most often by wash type –
What percent is Female?
Female Full Ext. In-Bay Self
Serve Serve
2014 51% 58% 54% 45%
2008 44.6% 57.5% 56% 48.5%
Source: ICA Consumer study 2008/2014ICA 2011 Market Study
80,500 Locations Ownership Type
24,000 Conveyors 45,000 Owner/Investor
(26,400 tunnels)
30,000 C-store and gas
25,500 Self Serve
(89,250 Bays) 5,500 Hypermarket
29,000 In-Bay
(37,700 Machines)
2,000 Other
(Truck Washes etc.)
Source: ICA 2011 StudyYear Total Sales US Sales Outside US
In MM In MM In MM
2005* $118
2007** $135 $103 $32
2010*** $84 $79 $5
2011*** $92 $66 $26
2012**** $99 $78 $21
2013**** $115 $97 $18
2014**** $137 $124 $13
Source: * Booz Allen 2006, **Datamonitor 2008, ***ICA , **** Sonny’sWhat types of conveyor car washes are
being built in the industry now?
Internal sales data revealed the following:
2009 2010 2011 2012 2013 2014
Express 75% 77% 80% 81% 84% 82%
Flex 20% 17% 15% 10% 11% 12%
Full 5% 6% 5% 9% 5% 6%
Source: Sonny’s Sales Statistics Express Exterior segment is easily outpacing other
conveyor segments:
◦ Express Exterior is creating growth in tunnel systems.
82% of all new tunnels we built in 2014 were Express
Exterior
◦ Investors that have always been drawn to the industry see
they can enter the business without the labor headaches
and management problems of the Full Serve model and
still get a good ROI on this real estate based investment
◦ In-Bay created additional customer base for Express
Exterior washing
In-Bay and Self Serve investors are looking at the Express
market Express Exterior market will continue to
grow and dominate the landscape
Will continue to pull more washers out of
the driveway and make existing car wash
customers wash their vehicles more often
Smaller units will reach into small markets
Express washes (and Express lanes at Full
Serves) will fight for market share with In-
Bay and Self Serves
21 More on-line offerings and auto greeter
advancements will be developed to help
up-sell and produce a higher average
ticket
May migrate to Flex to gain more market
share and for differentiation as markets
saturate
Equipment maintenance will become more
important based on volumes and
replacement cost
Further recognition that Express concept
is not a guarantee of success
22 Flex Service (combination of Express and
off-line aftercare) is replacing Full Service:
◦ Flex accounted for 12% of new locations we built
last year
◦ In areas with good income levels to capture
more market share of the washing public
◦ Less labor / easier to manage than Full Serve
◦ Off-line offerings are typically priced higher
than at Full Serves
◦ Pricing is used to throttle up or down the
percentage of washing customers
Usually looking for 25% – 30% of cars washed Flex Serve will be used in express
saturated areas for differentiation
Percentage of Flex washes being built
will increase with time, taking away
from both Express and Full Serve
More equipment products will be
developed to add to the appearance
and the efficiency of these aftercare
areas
24 Only 6% of new locations we built in 2014 were
Full Service washes
Full Serve locations today struggle with labor
issues, and time of service
Where space allows, full serve operators are
adding exterior lanes in response to express
exteriors
◦ Increase volume/customer base
◦ Reduce labor cost
More equipment is being added to eliminate as
much labor as possible – starting with “ultimate
package” Full Serve locations that remain will do well
◦ Demo shift to: Do it for me
◦ Competition will shrink
Need to be well run with focus on the
customer experience and providing value:
◦ Consistency of product
◦ Time of service (15 minutes or less)
◦ Professional appearance (personnel & facility)
◦ Professional presentation of services
◦ Menu offerings to differentiate them from the
Express providers Secondary/smaller markets will be an area of
growth for conveyor segment
More automation – start with “ultimate
package”
Equipment will be more environmentally
friendly
Regional branded locations will continue to
grow and be the most successful – Leverage
the Brand
27 5 Year Outlook: Positive
◦ Growth on the Retail side
Consumer studies support positive growth
Market place supports those studies
Growth in the Conveyor market
◦ Around 20% for OEM’s in 2015
◦ High single digit through 2019
28Year Total Tunnel Sales Total In-bay Sales
In MM In MM
2005 $118* $241**
2007 $135** $189***
2010 $84*** $108***
2014 $135**** $150****
Source: * Booz Allen 2006, **Datamonitor 2008, ***ICA , **** Sonny’s Was estimated at $241MM to OEM in
2005
Was the largest segment of industry (by
far)
Steady decline through 2009
In-Bay sales to Self-Serve and investor
market slowed
Recognize benefit of “Express in-bay”
and Mini-Tunnels
30 Gas not buying like before – major oil
divested of retail assets
Drop in gas prices in the last year has
made retail locations profitable -
leading to the replacement of old
machines
◦ Tremendous amount of pent up demand
31 Machines will become more attractive and
inviting
Cycle times and cost will become even
more important
New ways to market and add value to
offerings
◦ To be successful – New emphasis on Marketing,
Presentation and Training
32 Bay length will increase to accommodate
“express In-bay” (or short conveyors)
◦ stand-alone blowers, etc., to increase speed
and be able to provide additional services
Extra options will be added in longer
bays
◦ Tire dressing, Lava etc
Still the choice for attendant-free
operation
Equip sales expected to grow
◦ >10% 2015
◦ Single digits for 2016 - 19
33 Was estimated at $78MM to OEM in 2005
Shrank – no growth – until recently
Added In-Bays from 90’s - 2005
Now beginning to add “express In-bay or
mini tunnels
Expansion of Express Exterior market
has affected this market
Demographic shift to a more “Do-it-for-
Me” audience
34 Operators
◦ The good ones are becoming better informed
Looking for help to transition from investor to
professional operator
◦ Willing to upgrade facilities but looking for a
“magic bullet”
◦ Placing more emphasis on appearance and
reliability
◦ Improved segment profitability is fueling the
desire to update
35 Customers
◦ Returning to revamped locations
◦ Showing a desire for new features and more
reliable equipment
◦ Marketing still works!
◦ Shifting from ill maintained and operated
Express models
The Free Vac Effect
Has it run its course?
Why are the Express customers returning
to the SS??
36 Manufacturers
◦ Equipment revolution continues
◦ Increased emphasis on profitability for the
operator
◦ Customer service from manufacturers needs
improving – as it relates to education
37 Economy
◦ Statistics show cost is a big driver to this
market
Drop in Fuel Price - positive effect
◦ Tight credit market has forced poor
preforming sites out of the market
Remaining sites have benefited
Especially those that upgraded
38 There will always be ideal self serve markets
New wash facilities are being built
Is SS the breeding ground for the entire
industry?
◦ Lack of representation at the national level
◦ Challenging negativity from other wash
segments
Will the future car wash facility offer all types of
washing??
3940
Will continue to add Express In-bay or
mini conveyors to compete with the
Express Exterior car washes
These sites will be bought by tunnel
operators as a way to expand their brand
into surrounding smaller markets
This segment is expected to grow at low
single digits for 2015 - 2019
41 All three segments expected to grow
We will continue to pull more washers
from the driveway
Those that adjust will do well
Locations that are run professionally
and offer value will do well
We will see tunnel expansion into
smaller markets
42Client Types ◦ Historic ◦ Current ◦ Future
Historic – 1950’s – 90’s
Family owned and operated
One location
Few had multiples beyond 5 locations
Very fragmented
Full service in the south
Full serve or traditional exterior in the snow belt
Volumes better in the snow belt
Exceptions (CA, HI)Current – last 15 years
Investors / Existing Family owned and operated
Multi site
◦ 3 – 7 locations
Express Exterior
High volumes in all geographic areas
◦ Many more high volume sites than in the pastCurrent
Family owned territory mind set – Car Wash
Professional – (very personal)
◦ Been doing this for 20+ years
◦ Well established brand
◦ Slowly looking at converting or building Express
Car Wash Investor – (strictly business)
◦ Looks for opportunity in any market
◦ Moves fast – especially today with low rates
◦ Willing to build Express next to existing Full Serve that
can’t be convertedCurrent Creates conflict between existing relationships New role of OEM – Referee! ◦ Don’t always know where car washes are being acquired or built ◦ Facilitate dialogue if clients are willing to talk to each other
Current
With both client types today:
◦ Caused all locations to “up their game”
More “retail” than before
Focus on “experience”
◦ Dictate to the OEM
What they want and where they want it
Will listen to suggestions, but they decide
◦ It is only the first time buyer (or first time converter)
where the OEM or distributor has real input
Can help with Saturation
Location, Location, Location vs Build it and they will comeCurrent
Investment firms
◦ Retail side
TDR Capital – Imo - over 830 locations
Leonard Green and Partners – Mister Car Wash – over 150
locations
◦ OEM side
Trivest – Ryko / MacNeil
Prairie Capital – DRB
Vopne Capital - Vacutech
◦ Culture change in the industry
Jeans??Future – Competition could intensify
Gas / convenience entering the tunnel wash
market
◦ Who – Multi site operators
◦ Why – differentiation and margin
Where no room for free vacs – best gas wash in a market
Where have room for free vacs – become your competition
Entering the car wash business
Looking for wash sites that can have gasFuture – Competition could intensify Car Dealerships entering the tunnel wash market ◦ Why – Have to wash cars being serviced Turn cost into profit center Increase CSI (Customer Service Index) Build a retail Express wash to service their dealership 20 group conversation
Future – Competition could intensify ◦ Big Box? ◦ National Franchise? ◦ ??????????
Questions
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