Publication of the Southwest Car Wash Association
Third Quarter 2017
On The Road Again- Salt Lake City
SCWA Car Wash Tour Next Stop Baton Rouge, Louisiana â€” October 24, 2017 Register at www.swcarwash.org
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PRESIDENT’S MESSAGE When I became the SCWA President in February, I said “SCWA is the place and organization where we work to bring the car wash innovators and the innovations together.” Our recent car wash tour in Salt Lake City was a true example of this dynamic. As you will read in this edition of the ADVANTAGE the car washes we DeWayne Hall visited were outstanding examples SCWA President of the innovations of the industry. The Salt Lake City Car Wash Tour reminded me again of how important our choices are in making our businesses more successful. First, it is critical that we always try to stay on the leading edge of the industry in terms of our operations and standards and customer service. We saw in Salt Lake the truly successful car wash locations who chose everyday to operate at the highest level in equipment, innovations and customer service. These are the same choices we must make to stay competitive. Just as important is our choice to network and experience the car wash innovators and innovations in person. SCWA provides these car wash tours as well as our Convention & EXPO to give the car wash industry the opportunity to meet face to face. Face to face events and meetings drive innovation, stimulate economic development and bring a much better level of industry understanding and awareness. The meetings and events like the Salt Lake Tour serve as education platforms and allow us to come together to find innovation and better solutions. Tours and conventions are key components for developing advanced skills; manager training; and inspire positive business climates. The ability to sit down one on one with colleagues and leaders across the industry provide for instant collaboration and real time productivity. My experience is when car washers meet face to face, relationships are developed in a way that technology cannot recreate or match. The ability to look others in the eye, exchange ideas and learn new directions simply cannot be replicated. For our vendor community, I think the live events are also critical. As I heard during the SCWA Car Wash Academy this past February, “stop tapping the smartphones and look into each other’s eyes. Real long term business is earned in person. It happens face to face. Friends do business with friends.” I have enjoyed all the above benefits in my membership with SCWA and participating in all the “live SCWA events”. The Salt Lake City Tour was just the latest SCWA experience. I would encourage all to make the choice to participate and take advantage of the many opportunities SCWA offers.
You can go online now and register for the SCWA Car Wash Tour in Baton Rouge, October 24, 2017. And, of course, remember the SCWA 2018 Convention & Car Wash EXPO, February 25–27, 2018 at the Arlington Convention Center. Thanks for your support.
SCWA MEMBERS IN THE NEWS Legends Car Wash
Ronnie Corbin is no stranger to developing car washes. His involvement dates back to the pioneering express-exterior days in the mid ‘00s as a franchisee of Rapido Rabbit, the franchise system that evolved into Boomerang Car Wash, which, in turn, was acquired by Zips Car Wash in 2016. All told, he’s had a hand in the development of 37 car washes. He’s latest project to reach completion is a Legends Car Wash in Arlington, TX — the sixth location of his Texas/ Oklahoma chain. What sets this Legends wash apart is how it was constructed. Employing a modular building system enabled site work and production of the building components to take place simultaneously, translating into valuable time saving. Moreover, the modular units arrived preplumbed and prewired on site and, with the exception of the conveyor tunnel, with all equipment already installed. It took 14 weeks to fabricate, but once delivered to the site the building was completed in 11 days. The wash consists of a conveyor tunnel, equipment room, rest rooms, customer service area, full office, safe room, a break room and self-serve vacuum stalls. Stacy Thornberg of Stacy Thornberg Services has done the equipment installation at all of the Legends locations. This was his first exposure to a modular building system; he found it a positive experience. Aside from saving time, Thornberg found the process eliminated many of the difficulties one would encounter with general contractors and their subs that might have limited car wash experience. 3
Todd Klismet Independent Carwash Owner Waupaca, WI
I have a spotless reputation. Running a car wash isn’t easy. I’ve got picky customers, competitors trying to undercut me–and don’t get me started on the weather. So yeah, sometimes I can get a little stressed. It comes with the territory. But one thing I know for sure: my customers keep coming back to my PDQ-equipped car wash because it’s the best in town. All they care about is getting the cleanest car possible, and my wash delivers, week after week. And that puts a smile on their faces and mine.
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ADVANTAGE The newest Legends wash is located on South Cooper in Arlington, just south of Interstate 20. The 1.25-acre site with street frontage suffers no shortage of exposure — the street has an average daily traffic count of 60,000 cars. A major mall is located within one mile of the wash, and both Walmart and Home Depot have stores approximately half a mile away
MANAGEMENT The following article is based on a presentation at the 2017 SCWA Convention & EXPO
Future Wash - What Will It Look Like?
The car wash of tomorrow is really about technology. It’s amazing how technology has become so ingrained in our culture in such a short period of time and how fast it has advanced. In 1965, Gordon Moore, the co-founder of Intel, wrote an article for Electronics Magazine about advancements in technology and computing power. He did it with such accuracy that his theories are now called “Moore’s Law.” Basically, it says that computing power will double every two years; that’s amazing when you consider where we are today. If you do a simple Google search on technology, you will find some interesting dates: • 1973: the term “Internet” was born when a college in London connected to the Royal Radar Establishment in Norway • 1976: Queen Elizabeth II hit send on her first “e-mail” • 1991: The Internet opened to the public • 1998: Google was started • 2003: Blackberry smartphones were introduced • 2007: The iPhone was introduced • 2010: Facebook had 400 million active users; today it has 1.86 billion • 2012: A Japanese inventor filed a patent for the ‘selfie’ stick • 2013: ‘Selfie’ was the Oxford Dictionary word of the year
Previous generations saw amazing technological progress: our great grandparents and grandparents saw the automobile, our parents saw space travel, and I’ve often wondered what we will see. Here we are today with a world of information via the Internet at our fingertips and able to communicate on cell phones, keep our calendars, take pictures, and socialize with the world on the same device. The 2014 ICA Consumer Study reported that 97 percent of consumers had not received digital communication from a car wash. Consumers are using technology everyday to find other businesses, look up information and decide on purchases, yet we are not doing the same thing and meeting our customers where it’s convenient for them.
In 2000, a Pew Research study reported that only 50 percent of Americans were on the Internet. Today that number is over 80 percent. Currently, 64 percent of adults use a smartphone. However, this number is held low by older generations since younger adults have almost a 100 percent usage rate. It’s amazing how far and how fast we have come. So what does this mean for the car wash industry? When we talk about the car wash of tomorrow, what we are really asking is, “what does the future look like?” Back in grade school, I was asked to draw what I thought the year 2000 would look like. Can you guess what I drew in the early 1980’s? The Jetson’s! I had flying cars, robots, a belt conveyor to shuttle me around the house, and I think I even had a dog named Astro drawn in. Now here we are in 2017 and I still drive on a road in a pickup that takes normal gas. Movies, cartoons, and TV shows like Star Wars, Star Trek, the Jetson’s, and Back to the Future shaped my vision of the future. But in reality, that was someone else’s dream or vision and nearly none of it is true today. However, we still need to think ahead, so the question remains: what will your car wash look like five, 10, 15 years from now?
THE FUTURE IS NOW
If you have been in the car wash business longer than five years, you have already caught a glimpse of the future.
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ADVANTAGE Some developments have slightly changed how we process cars. As technologies evolve, the way we do business will incrementally change. Consider the advent of automatic wipers that turn on when they sense rain — or an approaching spritz in the car wash. This is an issue to which your staff had to pay attention. Perhaps they needed to learn how to shut them off, and maybe you needed to reassess your damage-claim policies. Another small change involves the vehicle’s transmission. How many of us have had to help a customer get a Prius in neutral? These types of changes in technology only altered the way we do business, and did not fundamentally change the industry. Consider the effect the following might have: • Car mapping technology: sensors or cameras map the car and connect to the wash, adjusting chemicals and water pressure on the fly. • Active communication between the car, customer, and wash: something akin to Amazon’s cashier-less stores. Customers might select a wash package on their phone; payment is automatically made; cars/customers load themselves; the car wash system recognizes the car, provides the paid-for wash package, and off they go. • Biometric entry to and starting of the car: This operates much like the iPhone fingerprint security. Full-service sites might have to contend with daunting challenges. • Millennials respond to and primarily utilize smartphones to find things, comparison shop, and make
purchases. This demographic will form a growing proportion of our customer base for the foreseeable future. We need to cater to them. • Back-up camera obstruction: the camera recognizes that its lens is covered in dirt and that the driver is not getting an image on the dashboard screen. It alerts the car through the GPS that the car needs to be washed; your car wash location appears on the screen providing directions.
Some technological advances will be big. An example of this is the already troublesome automated collision avoidance systems. This issue, and the complications it is causing in the wash tunnel, was one of many advanced driver assistance systems discussed at the recent The Car Wash Show in Las Vegas. These developments are considered so important that the International Carwash Association has partnered with Schwartz Advisors, an automotive consulting firm, to liaise with the auto industry to research and craft solutions. Technology drives innovations that do not alter the way we currently run operations, but can fundamentally change the industry: • Lyft and Uber: At some point in the future our “normal” customers no longer drive, and “neighborhood” car washes no longer exist. But these companies are rated on how clean and presentable their vehicles are. There will be a growing need for strategically placed locations
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• The future will cost money, so start preparing today • The retail world is changing, we are headed to a subscription-based economy: Apple music, Amazon Prime, Netflix, etc. are changing the way future generations will understand how to pay. Consider these current retail findings: • The largest personal transportation company doesn’t own a car — Uber • The largest “hotel” company does not own a single room — AirBnB Start preparing today for how you will change your business for the future.
dedicated to washing these cars, perhaps incorporating parking facilities? Driverless cars: Technology like this could completely change the industry, but in what way? Imagine segments of the population that currently can’t drive or own cars. Serving this population would expand the car market dramatically and increase miles driven. Imagine a lot where 5,000 driverless cars show up every night and it’s your job to wash them: One wash, controllable costs Controlled damage claims, no angry customers Simple building and costs Guaranteed rain or shine
Aaron Green is with Focused Carwash Solutions, and presented durng the SCWA 2017 EXPO Quick Talks.
All of these things are fun to talk about, but how do we currently deal with changes and how will we deal with it in the future? This is about the only thing I can predict for the future: it will cost. Whether it’s retrofitting your current operation with a belt conveyor, building a new facility on the outskirts of town to handle 5,000 cars a night, or new marketing on the Internet, your company will need cash or the ability to get it. You need to be prepared to invest in technology for the future. The day could come when you cannot operate with your current system. So what do we take away: • Our vision of the future is usually far different from what it turns out to be • Some tech advances will be small and only alter the way we do business; some will be big and alter the industry
FINANCIAL Funding An Express Conversion Existing Equity as Down Payment
A lot of car wash owners I talk to want to convert their wash to an express model. The desire to do so is based on a couple of factors: to reduce employee headaches, promote monthly memberships, update tired equipment, refresh/modernize the appearance of their car wash, and, of course, to make more money with less work. The unlimited wash/monthly membership strategy is appealing to both the owner and banks as it helps
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ADVANTAGE reduce the inherent cash flow lumpiness of the car wash business. I have express owners joke around with me how they love to look at their bank accounts on the first of the month when all their members/customers get auto billed. Sounds pretty good to me. But how do you finance these renovations? How can you do so without tying up a ton of cash in your wash? And how do you do it if you currently have an existing mortgage? These and other related questions are what I’ll attempt to answer below. These are real-world solutions that I personally have used on closed car wash loans throughout the country.
First of all I’m seeing new equipment costs in the $300,000 to $600,000 range on a typical existing 120’ tunnel. Renovation is also typically the same at around $300,000 to $600,000 — an average conversion cost amounting to $800,000 total. We’re talking about a lot of money, which most operators cannot self-finance. So they need a loan, which also means the deal will have to appraise.
The best solution is to use the existing equity in your wash as your “down payment” to finance the costs discussed above. A key point here is that you do not need to have enough equity to cover all the costs; you just need enough to cover the typical “injection,” which is normally 15 percent
of the total project cost. Said in another way: your max loan to value (LTV) on a renovation project will likely be 85 percent of the total project costs. Here is an example: $1,000,000 current as-is value $600,000 existing loan balance $800,000 new construction and new equipment There is $400,000 of equity above which can be used to finance the $800,000 of improvements without you coming in with any more cash. The as-completed value, per an appraiser, would be $1,800,000 ($1,000,000 as-is value plus the $800,000 of improvements) and your total loan balance, after refinancing the existing loan, would be $1,400,000 ($800,000 new construction and equipment plus existing balance of $600,000). The LTV here would be 77 percent. Again, in this example you would not need to bring any cash to the closing table since your LTV is less than 85 percent. What if you don’t have that much existing equity? Say your existing LTV is 80 percent not the 60 percent used in the above example. Here you can still use your existing equity, but you will likely need to add some cash to make it work, probably around 4 percent of the total project costs. Here’s another example: $1,000,000 current as-is value $800,000 existing loan balance $800,000 new construction and new equipment
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ADVANTAGE There’s $200,000 of equity. As-completed value is $1,800,000. Max loan amount would likely be 85 percent of the as-completed value, approximately $1,530,000. So you would have to bring to close approximately $70,000 to complete the project or 4 percent of the total project costs.
ESTABLISHING EXISTING AS-IS VALUE
More details. Unfortunately, there is a lot that goes into valuing a car wash and establishing the current as-is value. It seems like each appraiser tweaks their method a bit so it can be tricky to predict how a value will come out. One way to cross-reference and get a feel for what your wash might appraise for is the capitalization rate approach (cap rate). This is one of the methods used in the income approach. Here in the Detroit area we continue to see cap rates at around 12 percent for stabilized car washes. So look at your tax returns to see what you reported as your EBITDA. Take your EBITDA and divide that number by 12 percent to get a feel for what your wash should appraise at. For example, if your EBITDA was $120,000 then your wash will likely appraise for approximately $1,000,000. Again, valuations are not quite this simple but this should give you an idea.
PROJECTED AS-COMPLETED VALUE
Surprisingly, predicting the as-completed value is easier then establishing the as-is value. Here it is primarily a
function of adding up all of the construction and equipment costs. Most appraisers then back up these costs with a projected income approach. Most appraisers will also do a proforma of the future income, then apply a cap rate to the projected EBITDA to back up the cost approach. They create their projections off of a couple of factors: traffic count, days open per year, capture rate, average ticket, then average margin off of gross sales. Here’s another example: 30,000 cars per day 260 open days per year 1 percent capture rate $8 average ticket per wash 38 percent cash flow margin of grosssales
So 30,000 cars drive by the wash per day. It’s open 260 days per year. When it’s open for business, 1 percent of the cars that drive by will get a wash, which means the owner should wash 78,000 cars per year. At an average ticket of $8 that means the gross sales should be $624,000. With a 38 percent margin the wash should produce about $237,000 of cash flow. With the 12 percent cap rate mentioned above the projected value should be $1,976,000 (again from an income approach).
Bottom line: If you own an existing wash, you can likely use your existing equity in it to either get 100 percent
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ADVANTAGE financing to complete your express conversion or at least reduce your cash injection. You do not need enough equity to cover all the costs, just a fraction of it. Having the right traffic count to justify the projected sales and projected cash flow is critical. Competition continues to increase and the express model with unlimited wash/monthly memberships is a great way to take out the cash flow ups and downs inherent in the business and build some customer loyalty. The financing examples above are real-world solutions that have worked for a lot of owners throughout the country. Best of luck. I hope you got something out of this. Jeff Rauth has over 15 years experience in the commercial real estate business and focuses on car wash financing. The opinions expressed in this article are entirely his own and do not reflect those of his employers.
PERSPECTIVE Competitive Analysis - How Do You Compare to Others?
When is it time to change the services you offer to your customers? What services do you add or do away with? How do your services compare to those of your competitors? Is it time to renovate your existing location? Is it time to expand and build a new location? Is it time to go fishing, or is it time for a change? So many questions.
The car wash business is like any other service business when it comes to evaluating the services you offer and where you stand in the marketplace. You adjust your services and fine-tune your business based on a number of market factors such as the economy, customer perception, and competition. An in-depth look at your operations and a comprehensive market analysis of your competition is key to helping you make decisions to keep your business viable. A competitive analysis allows you to assess your and your competitor’s strengths and weaknesses in your trade area. It also helps you implement effective strategies to improve your competitive advantage. Here are a few steps to help you conduct a competitive analysis and decide if it is time for a change.
STEP ONE: ANALYZE YOUR OPERATION
Analyze your services, facilities, and operations. Use SWOT (strengths, weaknesses, opportunities, and threats) analysis charts to help answer the following: • Why do customers use your car wash? • What services do they use the most? • What services or features do you offer that your competition does not? • What makes your service offering unique? • What is the least purchased service that you offer? Why? • Are all of your features and services profitable? • Is your business growing or stagnating?
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ADVANTAGE • How is your employee morale? • Are your facilities and equipment modern? Or are they growing old? • How is your social media presence? • Is your website modern and up to date? • Is your marketing plan effective?
STEP TWO: ANALYZE YOUR CUSTOMERS • • • • •
Ask the following questions about your customers: Who are they? Why do they choose your car wash over the competition? What services do they like or dislike? Why? Are they demographically diverse? What are their buying trends? People’s lives are constantly changing. You need to be aware of any change in the buying patterns of your customers and plan new product offerings or services accordingly. Ask for ideas of services they would purchase if you offered them. .
STEP THREE: ANALYZE YOUR MARKET
• How many people live in your trade area? • How is the local economy? • What type of vehicles do your customers drive? Old? New? High end? • Are there any unique vehicles in your market that you can create a niche service for? • Are there any seasonal occurrences, which you can create new services for? Example: I recently visited an area where approximately 60 percent of the vehicles on the road were large pick-ups and SUVs with lift kits. The vehicles were too tall to fit in the majority of the car washes in town.
improve and provide added value to your customers. Added value allows you to promote features and unique aspects to your customers and price your services more profitably.
PLAN TO CHANGE
After you have completed the analysis of your services, customers, market, and competition, carefully read the details of each analysis and formulate a plan to implement changes. When formulating the plan, consider the following: • What areas stand out in the analysis? • What changes are necessary to better serve your customers? • How do you differentiate yourself from the competition?
OTHER FACTORS TO CONSIDER
Shakeups or Buyouts As you analyze your competitive information look for management changes or changes in ownership. This is an indication that new policies and marketing strategies are on the horizon and changes are on the way. New Operators Your competitive analysis should include any new car washes that are being built in your trade area. They haven’t captured any market share, but new companies always bring new ideas and innovations to the marketplace and can quickly become major players. Never underestimate anyone. Future Competition In your competitive analysis you need to make a few predictions about what your competition is going to
STEP FOUR: ANALYZE YOUR COMPETITION • • • • • • • • • • • • •
How many competitors do you have? Who are they? What services do they offer that you do not? Why? What does the competition do better than you? How is your competition pricing their wash services? How do you compare on price? Who are your top three competitors? Are your competitors profitable? How long have they been in business? Are they expanding? Scaling down? How is their employee morale? How active are they on social media? Is their website managed by a professional or are they maintaining it themselves? In order to develop effective competitive strategies, you need to make a realistic assessment of your competitors’ strengths and weaknesses as viewed by the market. Complete a SWOT (strength, weakness, opportunities, threats) analysis of each of your competitors. What do you do better than them? Focus on areas where you can 17
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ADVANTAGE look like in the future. Who are they and where are they coming from? If you are introducing new services that your competitors currently don’t offer, how long will it be before the competition catches on? Forecasting future competition will help you better prepare for the long-term health of your business.
PUT IT TOGETHER
Once you have finished gathering and analyzing all of the information it should be fairly clear if you are the market leader, or one of several followers. At this point you also should be able to do the following: • Identify and discuss key areas of competitive advantage and disadvantage. • Summarize the major problems and opportunities facing your car wash, which may require action. • Integrate your analysis of the competition with demographic analysis of your market to develop and implement a marketing strategy that will strengthen your market position. • Develop strategies for building on your strengths and minimizing your vulnerability where you have weakness. • Develop strategies to minimize the value of your competitors’ strengths and capitalize on their weaknesses. • Communicate the competitor information to each of your employees who need to know. • Establish procedures to help keep your competitor profiles current. • Carefully craft a plan and execute it.
I suggest scheduling a competitive analysis at least once a year. I recommend completing it around the time you prepare your budget and your marketing plans. This allows you to plan, pay for, and implement any changes necessary. Consider hiring a high school or college student for the summer to complete the task. Remember, your competitive research and analysis is never finished. This should be an ongoing, rather than a one-time process. Your competition can change quickly. Many other factors, such as the economy or new operators, can change the competitive landscape as well. It’s only when you’re clearly understanding your competition that you can evaluate your standing in the market.
IMPLEMENT YOUR CHANGES
Once you have developed your plan, you need to execute it. Make the necessary changes. Train your staff. Educate your customers on your new enhanced product offerings. Making changes to your car wash may seem like an overwhelming task. The process is easier if you do your homework, complete a competitive analysis, develop a plan, and execute it. I recommend completing a competitive analysis at least once a year to see what adjustments are necessary due to change in the marketplace, customer demand, or competitive offerings. Good luck, and wash on! Bobby Willis has been in the car wash business for over 20 years. He owns and operates Cool Wave Car Washes in Virginia.
MARKETING Discount Day - Will It Achieve Your Goals?
We are going to take this topic and spin it and twist it in all sorts of different directions. And when it’s done, I hope it helps grow your business. You’ve seen the sign: “Half Price Tacos on Tuesdays 4 to 9 p.m.” Is this a good way to promote a discount? Will this bring in new business? It might, but not if this sign was put out on Monday.
DELAY FOR THE DEAL
Here is an example of why: If I wanted to stop in for a couple tacos on Monday and, when I pulled in at the restaurant, saw this sign that offered half-price tacos if I came back the next day after 4:00 p.m., I would drive away with thoughts of returning tomorrow and having my fill at half price.
Take this topic and spin it and twist it in all sorts of different directions. And when it’s done, I hope it helps grow your business. Did this promotion make the business more money? No, in this case they lost a Monday customer because he is going to return on Tuesday and now only pay half price for the same tacos he was going to buy on Monday at full price. Why do you think this business owner is offering tacos at half price on Tuesdays after 4:00 p.m.? It is probably the slowest point of the entire week. He has looked at his numbers and saw that every Tuesday between 4:00 p.m. and 9:00 p.m. it’s dead. So with good intentions he decided to offer tacos at half price during that time slot. He would rather sell some tacos at half price than have his business devoid of customers every Tuesday afternoon. But in some cases he may have just convinced some of his customers to not have tacos on Monday but wait until Tuesday when they could get a better deal.
How does this apply to your car wash? Consider this example: At a car wash I operated years ago, we decided to have a senior citizen discount day. Every Wednesday we would offer senior citizens $2 off any wash. Did we start seeing more senior citizens come in on Wednesdays? Sure we did, but we also starting seeing fewer senior citizens come in on the other days of the week. So did it increase our car count overall? I don’t think so — certainly not much, if anything. The point is this: When you advertise a discount and make it for a particular time of day or day of the week, you need to remember that many of your customers will now wait to wash their car until the day and time of that
discount. All of your “coupon clipper” people looking for the best price will use your car wash only during the time of the special deal you are offering. Here’s another example: The car wash I operate now, opened brand new six years ago. Early mornings the road on which it was located carried high traffic, but everyone was driving by to get to work; no one was stopping for a car wash. The hours from 7:00 a.m. to 9:00 a.m. were the slowest hours all day, yet the period during which passing traffic was the busiest. So we initiated an Early Bird Special. Monday through Friday between 7:00 a.m. and 9:00 a.m. we put out a sign, only during those hours that we offered this great deal: “Car Wash Only $5” — that’s half price.
STRICTLY TARGET PROMOTION
In a few months we were washing more cars an hour between 7:00 a.m. and 9:00 a.m. than we were washing any other hour through the entire day, even lunch hour. Did this special increase our car count? Yes it did, because we were only showing the special to those people who were driving by during the time of the special. We did not advertise it before or after; we did not promote it on our website; we did not post it on our Facebook page. Anyone who drove in after 9:00 a.m. had no idea we offered an early bird special, and they paid full price.
When you advertise a discount and make it for a particular time of day or day of the week, you need to remember that many of your customers will now wait to wash their car until the day and time of that discount. Another car wash in this area started a Whacky Wednesday promotion, offering all washes at half price on Wednesdays. So obviously Wednesdays have become his busiest day of the week. But has it really brought in new business or only pulled some business from other days of the week? And how many people who pulled into his wash on a Wednesday would have paid full price because they were there for a car wash and were not aware of the Whacky Wednesday deal until they pulled into the lot? Quite a few, I would imagine. So in this case, he may be washing more cars, but at a lower ticket average per car — but that’s a whole other topic. The moral of the story is this: If you are trying to pull business from one day of the week to another, promoting a discount day is a good idea, but with a few caveats. Let’s say your Friday afternoons are out of control, so busy you can’t keep up, but your Wednesday afternoons are very slow, too slow actually. So if you created a special offering your best wash at half price on Wednesday afternoons from 3:00 p.m. to 6:00 p.m., I bet some of your Friday afternoon customers will start washing on Wednesday 21
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ADVANTAGE afternoons. This may lighten the load on Friday afternoons, increase the numbers on Wednesday afternoons, and maybe get a few customers to now try your top wash package because its at half price. But, you may not see a huge increase in your car counts overall.
BUSINESS HOURS ADJUSTMENT
I once consulted for a car wash that was open 7:00 a.m. to 7:00 p.m. seven days a week. I asked the owner how many cars he washed between 7:00 a.m. and 9:00 a.m. on Sundays. Not many he said. I recommended that he open at 9:00 a.m. on Sundays and save two hours of labor while not hurting the car count. Most people are off work on Sundays and holidays and will adjust their schedules and wait to wash their cars until the wash is open, rather than drive to another car wash across town. That advice worked for him. He then started closing an hour earlier on Sundays as well and found that the hour between 5:00 p.m. and 6:00 p.m. got busier because customers became used to the car wash closing an hour earlier on Sundays. He was able to save three hours labor without hurting his car count. Think long and hard before deciding to offer a discount day such as an Early Bird Special or a Whacky Wednesday because, once you start that fire, it is very difficult to ever put it out. At our wash we still offer the Early Bird Special,
but now through word of mouth only, everyone knows about it and if we were to ever stop doing it, our customers would hold a protest for sure. So our Early Bird hours from 7:00 a.m. to 9:00 a.m. are always our busiest hours â€” itâ€™s a distinct group of customers that we will never see any other time during the day. Chuck Lundberg, a 25-year car wash industry professional, is presently general manager of Clean & Green Car Wash of Marlborough, MA and owner of Independent Car Wash Consultants of NH.
OPERATIONS Competition - The Value Proposition Differentiates
I recently received a call from Bill Roberts, owner of Miriam South Car Wash in Lakeland, FL. Bill wanted to let me know he had just sold his business, how happy he was with the price, and that he was now retired. Some years ago, Bill hired me to work with him to determine how to reposition his wash in the face of a new conveyor car wash that was to be built very close to his wash. To make a long story short, Bill made a modest capital investment to implement some facility upgrades, a marketing Continued on pg. 37
SCWA CAR WASH TOUR Baton Rouge, LA • October 23–24, 2017
REGISTER TODAY! www.swcarwash.org Marriott Hotel – Baton Rouge 5500 Hilton Ave. 800-228-9290 For more information on the SCWA Car Wash Tour or to register please visit www.swcarwash.org or call the SCWA Headquarters at 800-440-0644. 24 ON THE ROAD AGAIN
On The Road Again
ore than 115 car wash owners and vendors recently gathered in Salt Lake City for the August edition of SCWA On the Road Again. Special thanks to Mister Car Wash; Wiggy Wash; Super Sonic; and Sparkle Express for hosting the tour at their locations. Details and pictures of each site follow on the next few pages of this issue of ADVANTAGE.
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SCWA Salt Lake City
“One of the Best SCWA Tours Ever.” “The caliber of all the washes was fantastic.” “Great camaraderie, enjoyed every minute.” ”Thanks SCWA. The Salt Lake City Tour left our team here at Mister Car Wash energized. It will be something that we remember for a long time. Thanks for coming and allowing us to be involved.”
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MISTER CAR WASH & LUBE S O U T H J O R DAN PARKWAY Mister Car Wash in South Jordan is a 150 foot double tunnel express. The second story equipment room includes the latest in water treatment, allowing the site to be self-sufficient for 6â€“8 hours without an outside water source. Solar panels help support the 120v power. There are 3 express retail lanes, 2 members lanes, and 36 Free Vacuum stalls. This was the 7th site for Mister Car Wash in Utah, acquired in October 2013.
C E NT E R ST R E E T - O RE M Wiggy Wash in Orem is a double tunnel exterior and the largest conveyor in North America. When we first conceptualized Wiggy Wash, we know it would be of utmost importance for us to build a car wash system that would not only offer a superior vehicle cleaning combined with a fun environment for people of all ages, but we also wanted to create a system that efficiently used the resources available. We are happy to report we have succeeded in all areas. Our eco-friendly wash tunnels utilize a state of the art water reclamation process by which we are able to recycle 90% of all the water used to give our cars our famous quality clean shine. In a desert climate like ours, this is very important to us. We did not stop with water efficiency. We went even further by installing an intelligent electrical wash system which controls and reduces electrical usage including power locks on our blowers in our wash tunnels. Since our system uses water to wash cars, we also decided that using electrical and air-powered machinery would be safer for the environment that the alternative of using hydraulic power. This eliminates all risk of hydraulic oil leaking from the machinery and mixing with the water. Plus, we only use environmentally friendly bio degradable soaps and environmentally friendly chemicals at all Wiggy Wash locations. 29
STAT E ST R E E T, O RE M
Clean, Dry, Shiny, and Fast and with a customer service experience second to none. Supersonic Car Wash is committed to consistently delivering a superior customer service and quality wash and detail services. When Supersonic Car Wash opened for business in Ogden, UT in 1959, founders Wayne and Marion Goddard took great pride in providing customers with Utahâ€™s only full-service car wash at the time. Over the last 55 years, Supersonic has expanded across the Wasatch Front and Grand Junction, Colorado. Led by a management team with decades of experience in the car wash industry and passion for customer service Supersonic has driven world-renowned volumes. As part of putting our customer first we are dedicated to giving back to our community through charitable efforts and minimizing our impact on the environment. Supersonic locations are certified as "Green Locations" and have received the Arthur V. Watkins Environmental Quality Award for our water conservation and reclamation efforts. As part of the International Car Wash Group family of wash brands, Supersonic is looking forward to the next 50 years of phenomenal customer service, a quality team experience, innovation, investment and growth. Welcome to the Southwest Car Wash Association members. 31
The Tunnel Experts
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SPARKLE EXPRESS CAR WASH SO U T H MA R K E T C E NT E R D RIVE
Sparkle Express Car Wash & Detail is a "flex wash" operation with two locations in the southern suburbs of Salt Lake City, Utah. Our industry is progressive and becoming more sophisticated everyday and we are working hard to keep up with these changes. In 2014 we installed the first automated wax/polish conveyor in America. The technology and support of key vendors such as Motor City Works, DRB, and Sky Blue Industries has made a very positive impact on our company. We are proud of our association with the Southwest Car Wash Association and are excited to be a part of the SCWA Salt Lake City Car Wash Tour
MISTER CAR WASH SOUTH S O U T H 3 0 0 WE ST Mister Car Wash South Salt Lake is a 190 ft express tunnel with 28 Free Vacuum stalls. Location is the sites most notable future, yielding consistent traffic counts close to downtown. This site utilizes 3 retail xpt lanes, 2 Members lanes, and DRB carpix to assist with queuing. The property also houses the regional support center for the Salt Lake market. This was the 5th location acquired by Mister Car Wash in Utah, July 2012.
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For nearly two decades, Kevin Hodes’ company Swypit has taken pride in bringing honesty and integrity to the world of credit card processing. Swypit aims to be more than just another service. Their goal is to become a trusted partner, helping to positively impact the merchant’s bottom line. In an industry rife with providers more focused on selling or leasing equipment than building relationships, Swypit is different. They ensure customers always know that they are more than just a number. Swypit provides world-class service as well as some of the most competitive rates in the industry. How much do their terminals cost? Nothing! The company provides merchants with credit card terminals, discounted point-of-sale and even cash advances to customers they choose to partner with… no catch. Owner Kevin Hodes is a two time best-selling author and the Executive Producer of, “Maximum Achievement, The Brian Tracy Story.” His expertise in the credit card processing industry is frequently sought out from all over the country and has been on NBC, ABC, CBS & FOX. Staying active in the community and giving back is important to Mr. Hodes - he is an avid supporter of helping families of fallen soldiers with The American Fallen Soldier Project.
Continued from pg. 23
strategy, and tactics, and he flourished despite the presence of the new entrant. Unlike the brand-new $3 express with fully automated equipment and free-use vacuums down the street, Miriam South is a traditional full-service conveyor. In contrast with the chain that looks for opportunity in any market, moves fast, and is willing to build next to existing sites, Bill has been at the same site location for nearly 40 years. Unlike Miriam South, which has created sustainable competitive advantage by means of differentiation and niche strategy, the $3 wash competes on the basis of cost.
Arguably, the shoe is now on the other foot. Some evidence of this is pushback from operators looking to meter free vacuums, but mostly itâ€™s from express operators who mention competition is nipping at their heels. Of course, this is to be expected because over time trade areas eventually fill up with retail outlets until another new one cannot be absorbed. Once this occurs, the supra-efficient express has several options to expand â€” build more or buy existing washes, differentiate, or a niche strategy. Some express operators try to be different by offering more products and services. This may include a self-prep area, free-use towels and window cleaning solution, and coin-operated vending and mat-cleaning machines.
Some express operators have conveyor attendants perform extra-pay prep services at the tunnel entrance, whereas others have people stationed at the exit end to towel dry vehicles. Of course, these extras must be paid for as well as maintained and, in some cases, involves added labor Another consideration is time. For example, experience shows an express wash has an average total guest visit time of eight minutes, which includes four minutes for the wash and four minutes in vacuum area. So, operators would be concerned that the added time customers spend prepping, wiping down, window cleaning, and detailing vehicles could over-burden the vacuum area leading to congestion and waits. Of course, this is not consistent with the notion of simpler, faster, and more efficient. Alternatively, a niche strategy express operators can pursue is vehicle polishing.
Automated polishing involves applying a specially formulated polish with a spray gun followed by a fiveminute ride through a tunnel that is equipped with brushes made with special material. A rollover service takes 10 minutes. An express wash in Tennessee offers a tunnel polish service in its $23 top package wash that also includes Rain-X and poly-wax. A chain in Georgia offers buff-andshine for $20.
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ADVANTAGE Whole-car polishers are designed to enhance shine and help keep the shine in between washes and waxes and can only be done on vehicles with non-oxidized paint. Of course, the rub here is capital investment and additional labor. Another is marketing and promotion. For example, contemporary merchandising often features the top package. Normally, this includes lava bath, hot wax product, tire shine, dry/buff unit, and, recently, a multi-step sealant. However, offering whole-car polishing at most express washes would be like selling electricity to alternative fueled vehicles at gasoline sites. The same applies to full-service and flex-serve sites in terms of express wax. Finally, there is magic pass. For example, at the wash in Tennessee, $49 per month will buy unlimited Rain-X, poly-wax, and whole-car polishing. Perhaps this is one reason why whole-car polishing hasn’t gotten out of the barn in the car wash industry like it has in the new-car dealership segment. Dealerships use whole-car polishing to sell paint sealant warranties for hundreds of dollars, and customers come back semi-annually for re-application whereas most washes sell it like an online extra service with a low price. By comparison, a wash may get between $35 and $50 for express hand wax that takes two people about 20 minutes to complete. Most express wax applications will hold
for up for 60 days or longer, whereas hot wax and Rain-X are 30-day products.
MEET THE COMPETITION
So what to do when the competition is nipping at your heels? Like Bill Roberts did, the first thing is to assess the situation well in advance. This starts by determining how saturated the market is. For example, aggressive entrants that come in and compete with a $3 price are usually in mature markets. This means the new guy is going to slice the whole pie into smaller pieces to some degree. So, repositioning a wash means reaching out to expand the market range and generate new customers. Of course, this would come at the expense of the competing stores. Expanding market range means doing things to increase the customer attraction rate. Ideally, the strategy and tactics to achieve this would result in more volume, higher average sales, and greater profits. An objective strategy of growth would require re-tooling the business model or profit engine. For example, a wash that offers assisted-services, car polisher, etc. has a different value proposition than the typical express wash because it addresses more of the customer’s problems. This difference must be effectively communicated to consumers to unlock the market potential of the innovations. Arguably, whole-car polishing should not be merchandised
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ADVANTAGE like a commodity. Likewise, there is a lot to gain by monetizing smile attendants. During the course of working with Bill, he was presented with a pallet of tactics to choose from. Some of these Bill dismissed as impractical or unworkable while others were adopted. In the final analysis, Bill grew his business significantly in the face of new competition and without the drama associated with a large crew, changing his business model, or making a significant capital investment. Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com).
PERSONAL PERSPECTIVE What You Don't Know About IRAs Could Hurt You
Do you know all you need to know about your IRA? You probably don't. That's because getting the most out of these tremendously popular retirement accounts—and avoiding traps that can cost you money—doesn't just depend on which investments you choose and how much you contribute. It also requires that you follow some little-known rules that affect whether you can withdraw assets without penalty… how protected your money
will be from creditors… and how much in taxes you eventually will pay. Bottom Line asked retirement-investing expert Bob Carlson to describe the most surprising things most people don;t know about IRAs and how you can use that information to your advantage…
AVOIDING WITHDRAWAL PENALTIES
You may know that most advisers recommend not tapping money in a traditional IRA before age 59½, in part because you might incur a 10% penalty on the withdrawn amount. But it is possible to avoid the penalty in certain circumstances. Examples… • You agree to withdraw all the funds in your IRA in “substantially equal periodic payments,” know as SEPP payments. You must spread out the withdrawals over at least five years or until you turn 59½, whichever time period is longer. For more information, search for “SEPP” at IRS.gov. • You use withdrawn IRA assets to pay unreimbursed medical expenses for yourself and/or your family that are in excess of 10% of your adjusted gross income (AGI). In that case, there is no penalty. • You become permanently disabled, meaning that you are unable to perform an substantially gainful employment. In that case, you can use the withdrawals for any purpose without penalty, but your withdrawals will be taxed as income.
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Washworld’s Profile, is a soft touch system with standard features such as Washview® HMI On-Site , VS2® Vehicle Sizing System and Flex Pass® Dual Application System The wall mounted system eliminates the gantry for an open bay while Washworld’s exclusive Digital Surface Profile (DSP) utilizes 3D imaging to insure optimal cleaning. Washworld’s best selling Razor® has earned the reputation of a proven system for its quality, dependability and longevity. Stainless steel throughout, Razor is built to last. Razor combines all of the great features for which Washworld is known. Profile and Razor were both designed with emphasis on durability, simplicity of use and reduced maintenance.
ADVANTAGE their MAGI is more than $98,000 or less than $118,00 and no deduction if their MAGI is $118,000 or more. For 2017 the ability to take a deduction is phased out between $99,000 and $119,000. If only one spouse has a retirement plan at work, the ability to claim a deduction is phased out between $184,000 and $194,000 for 2016 and between $186,000 and $196,000 for 2017.
You generally can split up a traditional IRA into separate IRAs without tax consequences. This goes against conventional wisdom, which says that if you have several IRAs of the same type (such as IRAs rolled over from 401(k)s or inherited IRAs), you should combine them into a single IRA to make it easier to manage investments and to calculate required minimum distributions (RMDs) starting when you turn 70½. But in some cases, having more IRAs is preferable. Examples: • If you have several beneficiaries, you may want to split a large IRA into separate ones for each beneficiary. This would make it easier to choose and pass on particular investments for each beneficiary based on such factors as the beneficiary's age, income and financial needs. For instance, you might want to leave one child a rental property and another one dividend-paying stocks. • To use some of your IRA assets for an investment that requires a specialized IRA custodian, it may make sense to create a separate IRA for that investment. Example: Legal tender gold coins, mortgages or a small business may require a specialized custodian.
There may be limits on how much you can protect your IRA assets from creditors if you declare bankruptcy or get sued. This is different from the rules for some other retirement accounts, such as most 401(k)s, which may receive near-ironclad protection form creditors under federal law if you face bankruptcy or personal-injury or other lawsuit. (You are not protected from federal tax liens or spousal/child support payments among other exceptions.) Examples: Inherited IRAs receive no federal bankruptcy protection unless you inherited the account from your spouse. For traditional and Roth IRAs, the amount shielded from bankruptcy creditors is capped at a total of $1,283,025 this year for all of your IRAs combined. Rollover IRAs from employer 401(k) plans, Simplified Employee Pension (SEP) plans and SIMPLE IRAs do get federal protection from creditors in a bankruptcy, but like all IRAs, state laws define the protection from you get from other creditors such as an individual who wins a civil lawsuit against you. Say you injure someone in a car accident, the injured person's claims exceed your insurance coverage and he/
CONTRIBUTING FOR A NONWORKING SPOUSE
You can contribute to an IRA for your spouse—even if he/she has no income. You are allowed to put up to $5,500 into your own IRA as long as you had at least that much earned income for the year ($6,500 if you are age 50 or over) and you also can contribute to an account in your spouse's name regardless of whether the spouse's income was enough to normally qualify. What matters is that your combined earned income must be at least as much as your combined contributions to the two accounts and that neither contribution can be more than the individual limits stated above. (Roth IRA contributions are allowed only if your income is below a certain level.)
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401(K) CONTRIBUTIONS VS. IRA CONTRIBUTIONS
You are allowed to contribute to both your 401(k) plan at work and an IRA in the same year. If your employer matches part of your 401(k) contributions, it typically makes sense to first contribute enough to get your full employer match. Contributions to a traditional 401(k) are not taxed until you withdraw money from the 401(k). Caution: When you are covered by an employer plan such as a 401(k), the tax deduction you can take on your contributions to a traditional IRA depend on your modified adjusted gross income (MAGI). Example: For married couples filing jointly, if they both have retirement plans at work they can take a full deduction on IRA contributions up to the allowable amounts if their MAGI in 2016 is $98,000 or less - a partial deduction if
John Park Sr. Vice President, SBA Lending Comerica Bank San Antonio, Texas (210) 771-8878 Jcpark@comerica.com
ADVANTAGE she sues you. Most states provide some protection for your IRA assets, but how much varies drastically. Examples: In California, you can exempt only as much as a judge deems “reasonably necessary” to support your dependents. In Ohio, traditional and Roth IRAs are protected, but SEP plans and SIMPLE IRAs are not. For rules in your state consult an estate planning attorney. Self-defense: If you have a very large amount of assets in your IRAs, you may want to consider a personal umbrella liability policy and/or malpractice insurance if, say, you are a surgeon or in some other occupation at high risk from creditors. Of if you plan to leave your IRA to a child who has financial problems and could wind up seeking bankruptcy protection, you may want to name a trust as a beneficiary of the IRA instead and let the trust distribute the money to the child.
FUNDING AN HSA
You can fund a Health Saving Account (HSA) with your IRA without facing a penalty or paying taxes. Transfer money directly from your IRA to your HSA using a Qualified HSA Funding Distribution (QHFD). You may take only one QHFD in your lifetime, and the transferred money can be used only for qualified medical expenses. For more information, including limits on the amount transferred, see From 8889, Health Savings Accounts (HSAs), at IRS. gov. This transaction is not taxable or subject to the 10% penalty.
MAKING REQUIRED MINIMUM DISTRIBUTIONS (RMDS)
• You don't have to liquidate an investment in your IRA in order to take an RMD. You can do this by making an “in-kind” distribution rather than a cash withdrawal. Have your IRA custodian transfer IRA investments with a value at least equal to the RMD amount into a taxable account. Example: You can transfer shares of a mutual fund or stock or, if you own real estate, you can transfer all or part of the property. Advantages: You get to keep investments what you want to hold long-term or that you might have trouble selling in a timely and profitable fashion, such as real estate. • You may be able to avoid RMDs by using a “reverse rollover” to a 401(k) at your current employer. You might know that you can roll an employer retirement account such as a 401(k) into a traditional IRA. But some employers allow you to do the opposite —roll assets from an IRA into a 401(k). This strategy is attractive for individuals who have reached age 70½ but still are working and don't need additional income. The IRS does not require you to begin taking RMDs from your 401(k) accounts until April 1 of the year following the end of your employment. Bottom Line interviewed Bob Carlson, editor of the monthly newsletter Retirement Watch. He is a managing member of Carlson Wealth Advisors, LLC. Centreville, Virginia, and chariman of the board of trustees of the Fairfax County (Virginia) Employees' Retirement System.
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EXPERT IN SBA LENDING LOAN PREQUALIFICATION FREE Founding Director Pavillion Bank 1982 - Dallas, TX Lending in Texas and Nationwide
Hershel Pierce 214-726-9000 www.SBA-Capital.com firstname.lastname@example.org
More Car Wash Loans Available For • Refinance-Lower Rates & Longer Terms • 1031 Tax Free Exchange • Expansion and Renovating • Existing Washes • Construction Loans
WELCOME NEW MEMBERS The SCWA members listed below have joined SCWA since our last issue. We Appreciate your Support! Sam Beaini
Nuform Building Technologies, Inc. San Jose CA
Kumar Austin Ent. Austin TX
Clean & Green Car Wash Fort Worth TX
KOS Group, Inc. Houston TX
with luxurious microfibercloths from Texas Microfiber
The Wave Car Wash Fayetteville GA
Texas Star Express Car Wash Fort Worth TX
Country Breeze Carwash, LLC McCloud OK
Car Brite Lexington KY
Oakcrest Management, Inc. Browsville TX
ASHWA Enterprises San Antonio TX
Royce Industries West Jordan UT
Finish Line Car Wash Murray KY
H&Y Carwash Midlothian TX
C&B Chemical, Inc. Conroe TX
Just Wash It Car Wash North Salt Lake UT
Sparkle Express Car Wash Riverton UT
Steeplechase Car Wash Dripping Springs TX
Basys Processing Lenexas KS
BOARD OF DIRECTORS President: DeWayne Hall Oklahoma City, OK (405) 414-1489
President-Elect: Tyler Furney Harker Heights, TX (254) 258-6786
Vice President: Andrew Zamora Lubbock, TX (806) 543-2775
Treasurer: Don Witt Dallas, TX (214) 358-2575
Past President: David Swenson Austin, TX (512) 346-8050
Vendor Vice President: Bob Kopko Uniontown, OH (800) 336-6338
DIRECTORS John Agnew Fort Collins, CO (970) 485-0287 Jeff Blansit Dallas, TX (214) 912-1729 Ronnie Corbin Plano, TX (479) 651-7239
Ryan Darby Lubbock, TX (806) 535-7275 Robert Duncan Artesia, NM (575) 308-9248 Ian Heritch San Antonio, TX (210) 421-1295
Pat Kirwan Wixom, MI (866) 362-6377 Evan Lorentzatos Stafford, TX (281) 561-0469
ORDER ONLINE TODAY !
Clay Wilson Lubbock, TX (806) 687-2024
Executive Director: Chuck Space • 4600 Spicewood Springs Rd., Ste. 103 • Austin, Texas, 78759 • (512) 343-9023
www.swcarwash.org THE ADVANTAGE is the official publication of the Southwest Car Wash Association. It is published four times each calendar year by SCWA, 4600 Spicewood Springs Rd., #103, Austin, Texas 78759. The officers, directors and members of the Southwest Car Wash Association, as well as The Advantage editors, in accepting advertising for this publication, make no independent investigation concerning the services or products advertised and neither endorse nor recommend or make any claims as to the accuracy and therefore assume no liability thereof. The opinions expressed in the articles are not necessarily the opinions of SCWA and its publisher and therefore makes no warranties and assumes no responsibility for accuracy or completeness of the information herein. (512) 343-9023.
214-810-9563 800-742-2913 49
■ Fragramatics 1600 hr Turbo Motor ■ Poly or aluminum dome ■ Computer controlled timer ■ UV protected graphics ■ Filters – Four-bag system uses high performance,
synthetic filtration media with 15 sq. ft. filtration area. Two easy-access service doors on rear ■ 2” dia. vac hose – high-flex, vinyl, crushable, 15 ft. long. Includes cuff and polyethylene hand tool ■ ¼” x 25’ Wire braid or coil hose with inline gauge
■ 1.25 HP ‘Big Dog’ high output compressor ■ Brushed Stainless Steel Tank and Main Cabinet ■ Coin acceptor – mechanical ■ Electrical - 120 V ac, 25 amps ■ Mounting - One internal and two external lugs with security collars. Uses 3/8” bolts for secure installation.
■ Tank Dimensions - 18.5”dia. x 42”h ■ Unit Weight - Net 145 lbs. Ship weight 185 lbs. ■ Ships in carton/pallet: 67”h x 32”w x 31”d Options
■ Multi-coin acceptor ■ Lighted dome ■ Debris catcher ■ Dome colors: red, orange, yellow, green, blue, white ■ Hose colors: red, orange, yellow, green, blue, white, gray, black
3021 Midland Drive • Pine Bluff AR 71603 800-643-1574 • email@example.com
SOUTHWEST CAR WASH ASSOCIATION 4600 Spicewood Springs Road Suite 103 Austin, Texas 78759
PRESORTED STANDARD U.S. POSTAGE
AUSTIN, TX PERMIT NO. 1142