October 2015 Industry dustry Ove verview rview Five ve year r - - PowerPoint PPT Presentation

As Prepared and Presented By Paul Fazio CEO Sonny’s The Carwash Factory October 2015

 Industry

dustry Ove verview rview

• Five

ve year r outlook tlook

 Client

nt Types es

• Histo

storic/ ric/ Current urrent / Futur ure

 Industry

dustry Ove verview rview

• Consu

nsumers mers

• Indus

ustry try

Car 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 - 2012

 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

What is driving the growth in the washing market on the consumer side?

 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 Study

Where 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 Study

Which 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 2014

72% of those that wash their car most often at a professional wash, do so every couple

• f months or less!!!!!

Car wash h Usage ge Freque uency ncy 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

Source: ICA 2014 Study

Ye Years old Pro Most st Often en < 1 8% 1 - 3 22% 4 - 5 16% 6 - 9 24% 10+ 29%

 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 Study

By Gender for those that use professional washes only:

 Female – 55%  Male – 45%

Source: ICA 2014 Study

For Pro most often by wash type – What percent is Female?

Femal ale Full Serve ve Ext. In In-Ba Bay Self Serve ve 2014 51% 58% 54% 45% 2008 44.6% 57.5% 56% 48.5%

Source: ICA Consumer study 2008/2014

ICA 2011 Market Study

80,500 Locations 24,000 Conveyors

(26,400 tunnels)

25,500 Self Serve

(89,250 Bays)

29,000 In-Bay

(37,700 Machines)

2,000 Other

(Truck Washes etc.)

Ownership Type 45,000 Owner/Investor 30,000 C-store and gas 5,500 Hypermarket

Source: ICA 2011 Study

Year Total Sales In MM US Sales In MM Outside ide US 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’s

What types of conveyor car washes are being built in the industry now? Internal sales data revealed the following:

2009 09 2010 10 2011 11 2012 12 2013 13 2014 14 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

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 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

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 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

 Flex Service (combination of Express and

• ff-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

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 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

 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

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 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

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 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

Year Total Tunne nnel Sales In MM Total In-ba bay y Sales In MM 2005 $118* $241** 2007 $135** $189*** 2010 $84*** $108*** 2014 $135**** $150****

Source: * Booz Allen 2006, **Datamonitor 2008, ***ICA , **** Sonny’s

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 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

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 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

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 Machines will become more attractive and

inviting

 Cycle times and cost will become even

more important

 New ways to market and add value to

• fferings
• To be successful – New emphasis on Marketing,

Presentation and Training

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 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

• peration

 Equip sales expected to grow

• >10% 2015
• Single digits for 2016 - 19

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 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

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 Opera

rators rs

• 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

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 Cu

Custom tomer ers

• 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 Fr Free e Vac Effect ect

 Has it run its course?

 Why are the Express customers returning to the SS??

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 Manufactur

ufacturers rs

• Equipment revolution continues
• Increased emphasis on profitability for the
• perator
• Customer service from manufacturers needs

improving – as it relates to education

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 Ec

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

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 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??

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 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

• perators as a way to expand their brand

into surrounding smaller markets

 This segment is expected to grow at low

single digits for 2015 - 2019

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 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

Client nt Types es

• Histo

storic ic

• Current

urrent

• Future

ture

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 past

Current

 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 converted

Current

 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
• ther

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 come

Current

 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 gas

Future – 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