Publication of the Southwest Car Wash Association
Second Quarter 2018
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PRESIDENT’S MESSAGE Welcome to the second quarter edition of ADVANTAGE. What a year so far! It seems my year as the SCWA President is really moving at warp speed. The successful SCWA 2018 Convention kicked off a BIG year and helped us all realize how great it is to be a part of the car wash industry and also a part of the SCWA family. Tyler Furney As the events and activities SCWA President of SCWA continue - I am excited about the positive momentum of SCWA. One of the primary goals of SCWA is the building of a community or family environment. We work to make sure all our programs create a feeling of belonging – where everyone becomes part of a large family. I have realized many associations don’t really have a community. People press the garage door opener, pull in and shut the door. They don’t attend meetings, they don’t use the program or benefits and they don’t even know their neighbors‘ names. Successful associations, like SCWA, are finding ways for members to connect with each other; to help each other be more successful. I have experienced the true foundation of SCWA is the community or family spirit. As our theme states “Experience SCWA” – We are Better Together. SCWA continues to create opportunities for you to participate in the SCWA community. The rapid growth of our Mentor’s Council is an excellent example of the SCWA community or family. This past year we have had more than 300 calls or requests to connect to our Mentor’s Council. The connections and assistance provided through this opportunity are an invaluable benefit. Be sure to mark your calendars for more outstanding SCWA events around the corner. -- August 14, 2018 - SCWA Car Wash Tour in Boise, Idaho. -- October 22, 2018 - SCWA Car Wash Tour in Nashville, Tennessee. -- November 8, 2018 – SCWA Colorado Member Meeting, Denver, Colorado. We also have an outstanding series of webinars scheduled you will not want to miss. -- July 17, 2018 - Developing Leadership for the Car Wash Manager -- August 21, 2018 – Emerging Force – Women in the Car Wash Industry -- October 10, 2018 – Digital Marketing To Amaze Your Customers
-- December 5, 2018 – How Self Serve Car Washers Can Compete Today Whether it may be the insurance program discounts through Midlothian; the Mentors Council; the Water Conservation Alliance; the Charity Car Wash Program; the credit card processing program; the expertise of the SCWA legal counsel; the webinars; the Regional Car Wash Tours; the weekly industry emails; the ADVANTAGE; the website; the Convention & EXPO or just getting to know other successful car wash operators – the community is here and I encourage you to take advantage of the strong SCWA community and network. Thanks to all our members who have helped SCWA become the strong advocate for the car wash owners.
SCWA MEMBER IN THE NEWS Frequently SCWA members are featured in national publications. The following article is from Auto Laundry News, April 2018 and highlights SCWA member and Past President, Dave Swenson, Arbor Car Wash. One of the biggest challenges for busy consumers is finding the time to get their car detailed. Sure, they can make an appointment in advance, but that requires forethought, and a few hours without their car. But what if there was a way to combine the speed and spontaneity of a car wash with the results of a top-tier, full-service detail? David & Sonia Swenson have found a way to do just that. The 30-year car wash veteran and owners of Arbor Car Wash and Lube Center in Austin, TX just unveiled a new concept at the fourth location that has the potential to revolutionize the detail industry. The newest Arbor Car Wash features three exterior hand wash bays where customers can get anything from a monstrous dually pickup truck to a late model Ferrari washed without the fear of damage to their vehicle. After getting their car washed by hand, they can either exit the site or opt to send their vehicle down the full-service detail tunnel and get both the interior and exterior of their automobile detailed at breakneck speed. The detailing tunnel features a slow-moving AVW belt conveyor and a host of detailing technicians trained to not only turn out a high-quality product, but to do it quickly. Once the vehicle is on the conveyor, four detailers assault the interior of the vehicle, each vacuuming, cleaning, and protecting one quadrant of the interior. As the car moves down the conveyor at five feet per minute, it inches toward the final step of the tunnel: an automated polisher that buffs the exterior to a fine finish. The innovative concept has been a hit with customers since the wash opened in February and continues to grow in popularity as word spreads throughout the city. The fast detailing tunnel concept was the brainchild of 3
ADVANTAGE Swenson, who was in search of a way to compete with the growing express exterior concept without turning his back on his full-serve roots. “We see the express exterior popping up on every corner,” Swenson says. “The mom and pop can’t compete with them on price. You have to differentiate. If everyone is washing the outside of the car, who is going to take care of the inside?” Swenson’s invention was not designed to compete with the express exterior, but rather to fill the gap created by it. Loyal express exterior washers are accustomed to a quick,
affordable, and convenient experience, and pride themselves on having a clean and shiny car. But how can they keep their interior clean? They have to either deal with a dirty and dingy interior or do the upkeep themselves. Arbor provides an alternative. A no-appointment needed, full-service detailing experience that caters to the busy, yet discerning car owner. Arbor’s detailing tunnel is a complementary service to the exterior craze. Consumers can stop in at Arbor when they need a thorough cleaning in and out and continue to use exterior only washes for in-between detail upkeep. While the business and customer-facing benefits of the new model are abundant, there is another major advantage: happy workers. Operating in the sun and heat of central Texas can be oppressive in the summer, sapping workers of productivity and putting them at risk of heat-related sickness. “We have been doing detail down here for 20 years,” Swenson says on his wash career in Texas, which follows a decade-long run in Colorado. “Some of my long-term employees, they are getting up there, and so am I. That is part of the reason we did this. We don’t want to beat them up.” The new work environment keeps detailers out of the sun, shielding them from the unbearable heat and allowing them to focus on one thing — detailing cars. In addition, moving the detailers inside to a controlled environment has opened the doors to a lucrative revenue stream that has helped the new venture hit the ground running. Swenson has struck deals with some local car dealerships to do their prep and detail work. This wholesale work is accounting for the majority of Arbor’s car counts in the earlier going and helps keep the detail conveyor rolling all day long. “We are able to operate in inclement weather,” Swenson says. “That is especially important for the wholesale work.”
While the dealership work is accounting for a large portion of Arbor’s revenue in the early going, Swenson hopes to scale back the wholesale projects as the retail business takes off. “The good thing is down one side we stack our dealership cars, and then the two lanes in the middle we handle hand washes and customer details,” he says. “If we get a customer detail they are going to bump ahead of that next wholesale detail.” Start to finish the average detail, including a stop at a hand wash bay takes around an hour. Retail pricing starts at $185 and can go north of $300 for full-size dually pickup trucks. For their wholesale work, Arbor charges the dealerships $120 if they pick up the vehicle, $100 if the dealer drops it off. Currently, the mix of wholesale and retail work is producing an average detail ticket of around $150. As a long-time, full-serve tunnel operator, Swenson is no stranger to high labor costs, but the new automated detail concept takes payroll to a new level. Labor spend eats up about 50 percent of every detail, including management costs. “Labor has been the hardest thing to figure out in the earlier going,” he says. “We have been running overtime like crazy but that will slow down. We are still figuring out the right number of people.” After a little trial and error, Swenson thinks he has solved the labor question. He has nine detailers and seven or eight car washers on site each day. The detail tunnel’s current capacity is around 40 details per day, with an additional 75 hand washes.
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ADVANTAGE “We are actually doing a lot more car washes than we anticipated,” says Swenson. “This location was a car wash before. But it wasn’t a very busy one, probably doing about 2,500 cars a month.” While the new hand wash/automated detail center that now occupies the space will never produce those kind of car counts, that is not the goal. The goal is to provide a competitive detail product at superior speed, and cater to those wash customers that crave a higher level of clean but are unable or unwilling to frequent a traditional full-serve detail center. Swenson and his team are doing just that.
THE 2018 MOST VALUABLE CARWASHER AWARD For 28 years now, Professional Carwashing & Detailing has asked its readers annually to submit nominations for the title of Most Valuable Carwasher (MVC), and every year, we receive a number of highly qualified nominees. Like any most valuable player, the MVC is on the front lines of the carwash and is an integral member of the team in addition to showing leadership and going above and beyond the call of his or her carwashing duties. Congratulations from SCWA. This year’s MVC demonstrates all of these qualities in abundance. The PC&D team is pleased to present the 2018 MVC award to Jason LeBlanc, General Manager of Benny’s Car Wash, based in Baton Rouge, Louisiana.
A PASSION FOR CAR CARE
In the early 2000s, LeBlanc faced shutting down the video store he owned with his wife due to increasing online competition. Looking for a new job, LeBlanc responded to an ad for a windshield repair position for a company contracted with Benny’s. According to Justin Alford, owner of Benny’s Car Wash, the team did not believe LeBlanc was the right fit for that position; however, they sent him to the carwash’s general manager for a second opinion. As a result, LeBlanc was hired in March 2003 as the site manager for one of Benny’s full-serve locations. “This was my first job in the auto care industry,” LeBlanc explains. “I was always very particular and very OCD with my vehicles and was the type of person out there cleaning my cars with a toothbrush, so this felt natural for me. I am a car guy, and I always loved making a vehicle look great.” Like many others, LeBlanc took the offer at the time while waiting to pursue a “real job,” and yet, 13 years later, he remains at the company, now as a general manager. After working at the high-volume, full service location for eight years, he moved on to two other locations successively; he currently manages Benny’s flex-serve location in Gonzales, a suburb of Baton Rouge, Louisiana. What made LeBlanc decide to stay? Ultimately, it came down to how Benny’s made him feel appreciated as an employee. “Over the years, I worked for quite a few other companies… and the bosses or owners always had the temperament
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As such, LeBlanc never felt comfortable making lifelong decisions for his family in these other job sectors, which included networking, commercial telephones and fire alarms and a local cable company. However, after he started working at Benny’s, LeBlanc never felt that his job was insecure, and he felt safe making financial decisions for his family. LeBlanc is not the only one who feels rewarded from his tenure there. According to Alford’s nomination, “In Jason’s 13 years with Benny’s, he has not only developed a passion for the carwash industry but also a passion for fulfilling the Benny’s mission of providing excellent customer service to each guest. We are lucky to have him on our
team and look forward to many more years of watching him grow and develop with the company.”
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As a general manager, LeBlanc is responsible for all day-to-day operations of the Gonzales carwash (which also happens to be the farthest location from headquarters) — from labor control and finances to sales and equipment maintenance. He is also responsible for staff training and ensuring that said staff gives customers not only the services they pay for but the quality as well. In creating the customer experience, LeBlanc refers back to something Walt Disney once said: “Whatever you do, do it well. Do it so well that when people see you do it, they will want to come back and see you do it again, and they will want to bring others and show them how well you do what you do.” According to LeBlanc, when customers love the results and you are consistent with them, they will keep coming back; furthermore, building a relationship with customers is of vital importance. Altogether, he notes, “This will help the customers feel confident in you and your team.” “Jason takes time to really get to know his customers,” Alford notes. “They bring him food, donuts, cards and many kind words and gestures. We can set up a carwash to clean the car, but it is hard to teach passion.” However, LeBlanc’s passion for customer service is not the only way Benny’s has benefited from his work ethic.
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ADVANTAGE In fact, LeBlanc also developed a method of collecting customer claim checks to reduce the number of unpaid washes and theft — a strategy adopted by the entire company. Proposing this idea is actually one of LeBlanc’s favorite memories from his time working at the carwash. LeBlanc recalls, “We were having a meeting with all the site managers and general managers with our owner. For years, our cashiers stapled these little paper, colored tickets with their receipts. We had many thefts with this system — employees giving customers the tickets so the customers did not have to pay for our services. “I came up with the idea to get rid of our tickets and have a claim stub to print with the customers’ receipts, and a manager or supervisor had to come collect the customer’s receipt and tear off the stub at the bottom when the customer came to collect their vehicle. When I mentioned the idea at the meeting, our owner jumped up and went straight to the corporate staff to get that idea into effect.”
In addition to getting to know the customers, LeBlanc is big on getting to know his carwash team and bringing them together. But, the leadership he displays now is the result of many years of learning, mistakes and experiences. LeBlanc attended the Louisiana National Guard Youth Challenge Program at Camp Beauregard in Pineville, Louisiana, for a year, where he progressed to platoon sergeant. “That obviously helped me a lot as far as leadership skills and
just the hard work mentality,” LeBlanc relates. It also made him a front-lines sort of guy when it came to working at the carwash. “That’s one thing that I do is whenever we are busy, I get out there and get dirty with the guys,” he adds. With that militaristic mindset, LeBlanc started his first several years at Benny’s by operating his sites with the “it’s my way or the highway” mentality, which, in retrospect, he says was a mistake. “After several years, I realized that I was always training new people and [they] never progressed. I learned that was not the best way to lead a crew of people that have no military experience. So, I had to change. Now, I have the best crew ever, and [they] have been with me for a long time.” Just as LeBlanc reflects that his own journey contained mistakes that he learned from, he believes this is a crucial part of development for others as well. “I learned that I want [my team] to make mistakes,” LeBlanc asserts. “As long as they learn from their mistakes, we can grow. The people who cannot learn from their mistakes are the type of people you do not want.” With this new approach, LeBlanc set out to create a teamwork environment, and he succeeded beyond Benny’s wildest dreams. “On our employee satisfaction surveys, he took [the Gonzales] location from 70 percent to 95 percent in two years. Turnover went down, and employee satisfaction went up,” Alford describes. “He developed a good staff
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ADVANTAGE and made work ‘fun’ again. Our corporate staff spends the least amount of time supporting this location because of Jason. He knows what to do and just does it.” How exactly did LeBlanc bring together his team? As with any great crew, it all came down to inspiring camaraderie through group events. LeBlanc frequently takes the team out for bowling parties and pizza nights, and he coordinates other events, such as a Christmas party at his home or participating in the company-wide Halloween costume contest at the carwash. In addition, the entire team uses a group instant messenger app called WhatsApp to socialize as well as plan for work events. “Friendship is the strongest bond,” LeBlanc declares. “Friends won’t let their friend fail.” In fact, LeBlanc’s team feels such strong kinship with each other that they proudly identify as “Team Gonzales” and wear matching T-shirts to all company events. LeBlanc’s secrets to success also revolve around his team. Firstly, he says that to succeed, you need to keep an open mind and stay positive. “Stay away from negativity, especially with your team,” he recommends. “The way you are feeling will affect your team drastically.” Secondly, LeBlanc adds, “My team is the secret to my success; [I] couldn’t do it without them [just] as they couldn’t do it without me.” One of the unique ways in which LeBlanc has helped his team succeed is by writing multiple training manuals,
including ones on guiding and driving safety, wash and detail procedures as well as his personal favorite, a maintenance and terminology handbook. “The one I am proudest of is our maintenance and terminology handbook,” LeBlanc states. “This is where I cover most of the carwash equipment in the wash and in the equipment rooms with pictures of each piece of equipment with the names, purpose and how it works. It has proven to help the staff understand how the machines work. The better your staff understands how everything works, the better help they are to you.”
THE MAKINGS OF AN MVC
LeBlanc believes he was nominated for this award because of the skills and experience he’s attained. “Everyone has the potential to gain the knowledge of this business at my level, but it’s through my endurance and bearing the load of customer service, employee communication and mechanical skill that’s granted me the capabilities that I possess today,” he explains. These were all certainly aspects of the nomination that Alford echoed, stating that LeBlanc is “a crucial part of our growth and success.” In addition, Alford is even more impressed with LeBlanc’s work because LeBlanc suffers from diabetes, meaning he has to constantly monitor his sugar intake. Even with this hardship, Alford notices, he still puts forth his best efforts daily.
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ADVANTAGE “I just watched Jason grow over the years in maturity, leadership, work ethic and passion for the business,” Alford elucidates. “He was at three of our locations and always left them better than when he arrived. The current location, Gonzales, is one of our best locations and always leads the way in profitability and employee satisfaction.” Alford concludes, “I would not have seen Jason in this position five years ago. He finds a way to continue to develop and surpass our expectations. As we continue to grow as a company, I know he will be a part of it.”
MANAGEMENT Employee Engagement - 10 High-Impact, Low-Cost Ways to Drive Higher Levels
We all seem to get it by now — more engaged employees perform at a higher level. The organizations that get their strategy right in this area provide a superior customer higher financial performance. Their customers love them more. What are some things you can easily implement that will give you a big lift in your levels of employee engagement with the lowest investment? First, hire right. Making the right hire is well over half of the battle in your employee engagement levels. Hire people who believe what you believe, and have the attitude you want. Get that right, and the following 10 ideas can help them thrive: 1. Embrace and Adopt a Strengths-Focused Culture People excel in their areas of talent and strengths. You can find many assessments to help you in this area. But the key is focusing on people’s strengths first. Identify them, and then figure out how you can stretch them in those areas. Once it takes hold, it impacts decision-making, structuring project teams, and the particular talents that are required for a specific project. It does not mean you ignore their weaknesses, but your people become more engaged when doing what they naturally do best. 2. Volunteerism and Company Support from Top Down It’s important to help the communities in which you serve. You cannot underestimate the impact of allowing your people to volunteer (yes, even on company time). It is beyond giving back, it is team building, networking, and uniting around a common problem to overcome obstacles. With regard to engagement levels, this is one of the highest-rated items on many employee engagement surveys, and it is a multiplier in terms of return on happier and more satisfied employees. 3. Make Friends At Work Some of you may be skeptical, but according to the 2017 Gallup Study of the American Workplace,
having a best friend at work has a high correlation with engagement and higher productivity. But how can your organization help support this? Formally, you can embrace deeper mentoring programs and relationships. This should be aligned in initial onboarding so the mentor can assist and facilitate introductions, networking, and group activities. Informally, in- and out-of-work activities you schedule aid in bonding, networking, and ultimately friendships. 4. Establish “Fun” Committees Whatever you call or brand your internal efforts to schedule fun stuff, give it to the people who are passionate, and let them run. Never underestimate the impact of happy hours, food trucks, bowling, and other fun activities to help your people get to know each other better on a personal level, and perform better in teams. 5. Flexibility Wherever possible, err on the side of providing more flexibility for your people. You hired them so hopefully you trust them, and if you don’t, you probably should not keep paying them. It is about the “job to be done.” Extending flextime goes a long way in helping people better balance their lives. 6. Contact with Senior Management Leadership by simply walking around is a really big deal. Have your senior staff pop in on random
ADVANTAGE employees to just see what they’re most excited about working on. Top organizations in engagement consistently show that access and informality with senior staff drives employees to feel more comfortable, enjoy their work more, and provide more discretionary effort. 7. Really Celebrate Successes and Wins When someone does something awesome, find ways to recognize and reward the behavior you want. It is amazing how many employees still only get feedback primarily when they have done something wrong. So many leaders simply expect great performance, and then think they are providing fantastic coaching and leadership when they rip apart someone’s performance when they screw up. That management style is already going the way of the dinosaur if you are really looking to attract and retain the top employees of tomorrow. 8. Extend Trust to Get Trust Play a game of “What Rule or Outdated Process Can We Kill?” Once a quarter, include in any regular scheduled meetings “Keep it, or Kill it” as an exercise. Employees get to nominate rules or processes they believe do not add value. Leadership still has veto authority, but the goal should be to be able to kill at least one (and you can’t add one to replace it). There are so many areas you can see this have impact. Oftentimes, entire rules and procedures are put in place to avoid a few exceptions. Again, if you trusted them enough to hire them…
9. Extend Trust to Get Trust (Part 2) Your people are on social media. While there are some specific instances of needed prohibition of access to some sites and/or personal devices, the best companies are moving towards the understanding that people are increasingly not separating their work and personal lives. Embrace this. Regarding social media specifically, encourage and help your people to be brand ambassadors on all platforms, not just the ones you think are for business. 10. Let Your People be Authentic, and They Will be Their Best for You We have finally reached a tipping point where the vast majority of organizations understand the value of diversity in their teams. They not only get it, they strive to leverage it for a competitive advantage. Appearance standards have shifted drastically of late, as many companies are now not only allowing, but encouraging,unique looks and individuality in their employees. Some companies are hesitant to permit their staff to work with visible tattoos, facial hair, or body piercings — especially if they are seeking to maintain a carefully curated brand — but where possible allow your people do be themselves. The key is getting and keeping the best talent, not the talent you thinks looks the best (unless that’s your goal). You should seek employees who are passionate, talented, and believe in what you believe. Those are the ones who become truly engaged and deliver the ultimate customer experience and help build the brand you deserve.
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All 10 of these tips can help you immediately in your employee engagement efforts at a relatively low cost. The key differentiator for organizations moving forward will be in how they become an employer of choice for a pool of top talent. It is not just about happy and satisfied employees — it is about those who are able to bring their best effort and energy to work each day. Those are the ones who become truly engaged and deliver the ultimate customer experience and help you build the loyalty you deserve. Curt Redden is a speaker, talent-development expert, and co-author of Going PRIMAL, A Layered Approach to Creating the Life You Desire. Curt has spent more than 25 years working to support and encourage employees as they strive for success.
LABOR DACA Waits & ICE Raids - The Immigration Fights that Every Car Wash Owner Should Monitor
The Trump administration’s first year in office has been highlighted by battles on the immigration front, bringing new challenges to small businesses such as car wash establishments. According to the Association of Car Wash Owners, New York City alone is home to 118 such establishments, some of which are individually owned by
immigrant entrepreneurs and many of which are staffed by newly arrived or even undocumented immigrants. From Supreme Court challenges to ramped-up enforcements, car wash owners should be alert to the issues at the forefront of this important battle. Two issues especially relevant to car wash owners are the administration’s efforts to terminate DACA and the increase in ICE raids in the workplace.
DACA TERMINATION PLANNED, BUT HALTED
To many car wash owners, the pendulum surrounding the Deferred Action for Childhood Arrivals program (DACA) seems to swing in a new direction every month. As it currently stands, DACA allows certain undocumented minor immigrants to receive a renewable two-year period work authorization and protection from deportation. As of 2017, close to a million individuals were enrolled in the DACA program, many of whom work in the service industry for small family businesses. As an employer, you should pay special attention, as it is likely that some of your employees may find themselves to be DACA beneficiaries — perhaps without even knowing about it. DACA has been a crucial immigration initiative since 2012, but the current administration in late 2017 had sought to terminate the program as part of President Trump’s election mandate. This rescission would have rendered as many as 545,600 beneficiaries ineligible for renewal and could have made them subject to deportation after the program’s planned expiration on March 6, 2018.
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ADVANTAGE However, the proposed rescission quickly met fierce resistance from lawmakers and found itself being challenged in courts across the country. The most recent swing comes from a federal judge who issued a preliminary injunction keeping the controversial program in place. As of February 2018, several federal courts have joined in keeping DACA alive. Legal appeals have gone up to the Supreme Court, where the rescission issue may soon be addressed. Until then, the fate of DACA will likely travel through the federal appeals court or even through Congress, where both political parties have expressed a commitment to get a deal done but are currently deadlocked on a legislative solution. As it currently stands, DACA may very well be on its last legs but is still alive and kicking.
WHAT DOES THIS MEAN TO EMPLOYERS?
You may not be surprised to hear that some of your employees could be DACA beneficiaries who are waiting anxiously for news about the program and whether they can continue to work for you. This is because every DACA recipient should have an Employment Authorization Document (EAD), which allows the recipient to legally work up to the document’s expiration date, but not a day more. As a practical consequence of the recent federal preliminary injunctions, the USCIS — the agency in charge of DACA — is still processing renewals for eligible recipients. This means that a DACA beneficiary upon renewal of their status will remain eligible to work for you up until their EAD expires, regardless of the outcome of the court battle. On the other hand, the recent litigation does not render a person eligible for DACA where the person would otherwise not be. In fact, USCIS is currently not accepting and will not process new applications for DACA. Therefore, if a worker suddenly claims to be authorized to work based on recent developments, you should be cautious.
CAN’T I JUST DISCHARGE A DACA RECIPIENT NOW?
Of course, strategic planning is an important part of any business, but you cannot discharge employees based solely on their immigration status. First, the current law regarding DACA is extremely fluid and new directives could be issued any day. It is possible that a legislative solution could soon be reached to stabilize the future of the program. Second, and more importantly, DACA recipients as authorized workers are entitled to the same protections against discrimination in the workplace as other regular workers. At least one court has found that federal law prohibits discrimination and illegal discharges based on an employee’s DACA status. Therefore, you should not terminate any employees out of fear that their permits may expire in the future. To take it one step further, it is also not advised to ask your employees about their DACA status at all or take it into account when making personnel decisions. In most
cases, you will not know for sure if any of your employees are DACA beneficiaries unless they voluntarily disclose this information to you. This is because EADs are issued by immigration officials under a wide variety of immigration categories — many of which have nothing to do with DACA. To the extent possible, avoid making assumptions about your employees’ immigration status based on their accent, appearance, or nationality.
EXPIRED EAD CONSEQUENCES
Retaining good, loyal workers is hard. However, penalties for hiring unauthorized workers are even harsher. If Congress does not act, current law requires you to discharge the worker immediately if his EAD has expired. Of course, you can cushion the blow by offering severance packages or other benefits as appropriate. However, if you continue to knowingly employ undocumented workers, you may be liable for civil penalties ranging from $548 to over $4,000 per infraction. Immigration officials conduct regular audit checks, and criminal penalties are known to accompany civil fines. For example, as recently as 2013, 14 managers from the well-known Danny’s Family Car Wash chain in Phoenix were criminally charged for illegal hiring practices related to unauthorized workers. This is a dice you should not roll.
ICE RAIDS AND HOW TO PREVENT THEM
After years of prosecutorial discretion by the previous administration, the Trump administration is bringing its immigration enforcement to work. Small businesses such as car washes, nail salons, and restaurants have found themselves in the cross-hairs of an aggressive enforcement policy leading to a dramatic rise in workplace raids in the past few months. For example, in early January, the administration conducted a series of coordinated raids on dozens of 7-Eleven convenience stores across the nation and arrested 21 employees who were given no warning that ICE was coming. Just a month later, ICE undertook another sweeping raid of 122 businesses in Southern California in just a five-day span and arrested over 212 undocumented immigrants in the process. Needless to say, an ICE visit can potentially be catastrophic for a small car wash business. Not only can it wreak havoc on your business operation and leave your employees in fear, but it may also leave an indelible stigma on your business reputation. If your goal is to mitigate the consequences of such an event, here are three things you can do: 1. Be on the Lookout for Fraudulent Documents ICE places a high priority on investigating document fraud, which has been blamed for facilitating the rise in unauthorized employment. As a business owner, you are legally required to obtain and maintain a Form I-9 from each of your employees. Upon the employee’s hire, you are required to examine the supporting documentation(s) 21
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ADVANTAGE that your employee provides to complete Section 2 of the form. You have an obligation to accept the document if the document appears genuine and relates to the employee. Otherwise, you must refuse it. The standard the government uses to measure your conduct is â&#x20AC;&#x153;reasonableness.â&#x20AC;? This means you are not required to be a document expert, but if a reasonable person would notice a discrepancy, you are expected to do so as well. Be especially wary of misspellings and signs of obvious fraud. For instance, if your employee presents a document in which his name is spelled differently than the one in Section 1, you have an obligation to inquire about the difference in spelling. If upon examination the document reasonably appears to be genuine and to relate to the individual, you may ask the employee to correct the Form I-9, initial the change, and attach a memo explaining the discrepancy before accepting the document. In the event of an audit, following these steps will likely lead to a faster audit and should drastically reduce the chances of a follow-up raid. 2. Be Proactive in Addressing Form I-9 Issues Before ICE Does Form I-9 discrepancies remain one of the main reasons why ICE may choose to pay you a visit. To mitigate this possibility, a good practice is to implement internal audits to address errors or omissions before ICE gets a chance to. However, a word of caution: You may be put in a precarious position if you appear too aggressive in your audits. Any
audits you conduct should be uniformly applied. The federal Immigration Reform and Control Act makes it illegal for employers with four or more employees to discriminate on the basis of citizenship status or national origin. In addition, some states such as California are fiercely protective of employees who allege workplace discrimination. Just last year, the popular restaurantchain Panda Express was fined over $400,000 by the Justice Department for allegedly discriminating against non-U.S. citizens when re-verifying their permission to work. Therefore, be cognizant of the risks of conducting an aggressive audit only to find ICE show up at your door, albeit for a different reason. Throughout the audit, if you notice any errors or omissions, do not attempt to erase them. Instead, have the employee correct the error by drawing a line through the incorrect information and initial and date by the correct information. If a form is missing, have the employee fill out the current version of the form and staple it with the rest of the records. You should not backdate any information. A properly done audit could go a long way in preventing ICE disruptions. 3. Know What to Do During an ICE Visit If the worst has come to pass and ICE shows up at your door, it is nevertheless highly important to know the limits of their enforcement power. ICE agents may enter public areas such as the lobby or waiting areas of your business without permission but may only enter private areas with
Continued on pg. 27
WADE WELCH MEMORIAL GOLF CLASSIC More than 100 golfers recently gathered for the 2018 edition of the SCWA Wade Welch Memorial Golf Classic at the La Cantera Resort Course in San Antonio. The event is played annually in memory of longtime SCWA member and avid golfer Wade Welch. According to SCWA President Tyler Furney, “Again this year it was a beautiful day and a good time to enjoy golf, food and good friends telling ‘big’ stories about their golf abilities!”
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ADVANTAGE Continued from pg. 23
a judicial warrant. A judicial warrant will be signed by a judge and will come from a federal or district court. It is not the same as an administrative warrant, which comes from the Department of Homeland Security and does not allow for private entry. ICE agents have the authority to detain or arrest any of your workers pursuant to an immigration warrant, but you do not have to sort your employees by their immigration status or even direct ICE to any specific individual. Nevertheless, you should never lie, hand over false documents, or sign any papers without examining them with an attorney. If ICE does not detain any workers but serves you an I-9 audit, you have three working days to produce the I-9 forms. Often, ICE will ask for supporting documentations which may include a copy of your payroll, a list of current employees, and business licenses and may thereafter choose to assess penalties for procedural or substantive noncompliance. If your car wash business has been subject to an ICE raid, you should seek an attorney who may be able to assist you in navigating through the finer points of immigration enforcement law. After all, as a small business owner, we understand how important it is to protect your business and your workers. Jacob M. Monty is the SCWA Attorney and is the managing partner of the Houston-based law firm, Monty & Ramirez LLP. Monty & Ramirez LLP is an employment, labor, and business immigration law firm. Please visit www.montyramirezlaw.com for more information.
MARKETING Internet Marketing - Seven Basics to Consider
Car wash companies have a multitude of marketing options: billboards, direct mail, print advertising, and, more recently, the Internet. But does Internet marketing make sense for a car wash? Is it worth investing in a high-quality website, social media, search engine marketing, e-mail, and paid search advertising? The short answer is yes, but some Internet marketing options make a lot more sense than others for a car wash. Here is an overview of the Internet marketing basics to help you decide where to focus and how much to budget. 1. Local SEO is a Natural for Car Washes Local SEO (search engine optimization) is a long-term marketing campaign to make your business appear prominently in Google’s organic (non-paid) search results when people are searching for a car wash. Google processes billions of searches every hour, and many of those searches are people looking for local businesses. In addition, mobile phone users are very likely to be looking for a car wash while they are on the road. Big opportunity!
A local SEO campaign, depending on the size and competitiveness of your market, could cost several hundred dollars or more per month, and will take several months to ramp up. You’ll want to hire an agency or freelancer with a proven track record in local SEO for consumer businesses. 2. E-mail Marketing is Good for Repeat Business If you can get customers to give you their e-mail addresses and permission to e-mail them, an e-mail campaign is a great way to stay in touch and give customers a reason to come back. E-mail marketing does not require a large investment, and is often done in-house using a dependable e-mail marketing platform. The keys are to provide customers with useful information about auto care and appealing offers (such as discounts or free service) — these are the things that customers want to see. Mailing once a month is a good frequency to start with. In addition to creating content for the e-mail, maintaining the list and getting new people to sign up requires a fair bit of ongoing work. 3. Pay-Per-Click (PPC) Advertising is Ultra-Flexible • PPC advertising usually uses Google AdWords to have ads display your car wash on Google when people are searching for one in your area. PPC has several advantages that make it very attractive to small businesses: • You can start and stop PPC campaigns very quickly. • You can control the budget down to the penny. • Ads display in the best positions on Google’s search results pages, so lots of people see them. There are some potential negatives to PPC. If you are in a very competitive, urban market, ads may be very expensive. If this is the case, you may need a substantial budget — $1,000-plus per month — to get a good return on your investment. And because managing a PPC campaign is quite complicated, you’ll need a pro to manage it, requiring you to pay a management fee in addition to the cost of the ads. Nevertheless, PPC may be worth a three-to-six month test. 4. Social Media Is a (Sometimes) Useful Frill We have not seen social media be particularly effective for most small/local businesses. While it’s nice for your brand to have an active presence on popular social media sites, it’s hard to know how much business it creates. Results for other Internet marketing options, such as local SEO, paid search, and e-mail are easier to measure and provide a more direct route to a sale. That said, if your budget is big enough and you have someone on staff who is social-media savvy, it may be worth focusing on one or two social sites to see if you can build a community of followers. It will take time, and don’t expect earth-shattering results. 5. Here’s What You Need on Your Website Naturally, you want your site to deliver a great experience to anyone who visits it. But it’s possible (probable?) a lot of your customers, even your best ones, have never looked at your website. 27
ADVANTAGE It’s probably not necessarily to invest $20,000-plus in a custom website. On the other hand, if you neglect your site, you may be driving business away. Here are elements your website must have, at a minimum. • Mobile-Friendly Design — More people use mobile devices than desktops to access the Internet. And as mentioned earlier, it’s likely a lot of your website traffic may be coming from these mobile users. It is essential to give them a great experience. • Directions to Your Location — Embed a Google Map marked with your location on your contact page. This is the best way to guide people to your car wash, and it also helps your SEO. • NAP — Every page of your website should display your company name, physical address, and phone number (NAP). This is basic for local SEO, but also makes it easy for website visitors to find and contact you from any page of your site. Make the phone number unmissable! • Offers — Displaying special offers and/or providing downloadable coupons are great ways to turn passive website visitors into customers. Keep them fresh, and take advantage of seasonal opportunities such as discounts on car-mat cleaning during the winter. • Simple navigation — Make it easy for site visitors to find what they need in a hurry. Top navigation should be as simple as possible — for instance: Home, About, Services, Contact. 6. Cultivate Online Customer Reviews Customer reviews have become a big part of Internet marketing on sites such as Yelp, BBB, and many others. People are interested in what customers have to say about your car wash, and these reviews appear very high in the rankings on Google and other search engines. It’s to your advantage to encourage positive reviews, while staying within review site guidelines. The best way to build positive reviews is to provide exceptional service, and take care of complaints and problems quickly and thoroughly. Remember, many online reviews include photos, which can really help or hurt a car wash business. It’s also imperative to monitor customer reviews. If you see a negative review and the review site allows you to respond, you should do your best to tell your side of the story and/or make the problem right. Doing this can turn a negative review into a positive impression. 7. Online Marketing Budgeting Naturally, you don’t want to invest in any type of marketing unless you can expect some type of return. For Internet marketing, you should consider the lifetime value of a customer. Suppose you are considering a PPC ad campaign and the ad costs $10. If 10 people click on the ad, you’ve spent $100. If one of those 10 actually comes in for a car
wash, you will certainly lose money on that transaction. However, if a typical customer comes in 12 times a year for five years, your ad expenditure struck a gold mine. The more you know about your customers’ behavior, the easier it is to assess your return on Internet marketing.
GIVE IT TIME
Also, it’s important to give any Internet marketing campaign enough time to succeed. Local SEO and e-mail marketing can take several months to ramp up. While PPC has a quick ramp-up, continual testing makes most campaigns improve over time. Testing and continuous improvement is actually a big part of any Internet marketing campaign. If at first you don’t succeed, don’t throw in the towel. Many campaigns fail simply because the company gave up too soon. Brad Shorr is director of content strategy at Straight North, an Internet marketing agency headquartered in the Chicago area. You can visit the company on the web at www.straightnorth.com.
PERSPECTIVE Good Design - It Is Good Business
Design is important, not only to those in the design business but also to business owners, customers, stockholders, manufacturers, and the like. Technology and engineering is vitally important, but if Tesla packaged its high-tech electric cars in a Pontiac Aztek body we would not know the name Elon Musk. If Apple decided to sell its phones in a pink Hello Kitty flip case, they would not exist today. Good design matters and great design builds success. Design is not just about making products and buildings more attractive. It is a way of thinking, a creative process spanning entire organizations driven by the desire to better understand and meet customer needs. Great design has moved from the drawing board to the boardroom. Car wash owners do not want good-looking buildings these days, they want great-looking, eye-popping facilities that rival other retailers. This is fantastic for the industry because it is changing the mindset of consumers when they think of a car wash. When we design a building for a client, we are also designing and building a relationship — a relationship not only with the car wash owner, but also with the city or town in which it is located and the customers who use its services. Each design needs to reflect the owner’s identity and the experience they plan for the customer. The history professor Adrian Forty said, “No design works unless it embodies ideas that are held common by the people for whom the object is intended.” If you desire your customers to be of solid character and drive nice, well maintained vehicles, your building should reflect this. 29
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MARKETING FIRST IMPRESSION
THE REAL PROBLEM
The car wash building has evolved over the past 20
Marketing - What Changed years from four walls and a roofhas to a true expression of its function, accented with the owner’s excitement for the in the Last 100 Years?
industry andthe their commitment to customerCommission service. The In 1975, Federal Communications design of your new car wash or the renovation of your (FCC) issued a largely overlooked ruling that allowed existing facility can determine the success of your business. earth-orbiting antennas — satellites — to be used for Like the all-important decision of location, location, location, broadcasting television over large areas. Around that the car wash design influences how inviting it is to same time, a little-known regional broadcasting network customers. Washing one’s car can be a split-second decision. called Home Box Office (HBO) took notice, and decided If the car wash looks ho-hum, the potential customer is to use the FCC’s landmark decision to begin distributing likely to drive on by. If it looks exciting, clean, and sleek, its programming theown customer will wantvia to satellite. drive on site and join the party. HBO’s innovative move would have a ripple effect There is a saying that bad design is like wearing a rumpled that would spill over onto the landscape of marketing. suit. It doesn’t mean you are a bad person, but it may Soon, satellite proliferated, them, give people the networks wrong initial impression.and Thatwith impression marketers’ to target ways that were never pretakes time ability to change and in convince potential customers viously possible. that your car wash is fantastic, and that you will take care that time, of there has beenWith so much technological of Since them, regardless the dressing. the competitiveness innovation that marketers faced with choices beyond and compaction of the carare wash industry, this “time to measure. It can be the blinding change” can break bank. and bewildering for anyone charged withareallocating on behalf Buildings an integralmarketing part of the dollars brand. Branding is of a business. And, this Companies very issue spend is what has caused a billion-dollar business. millions to get the right look andawry. colorsThis to evoke positive response from marketers to go is ana age of unprecedented potential customers. The business logo and brand tell the communications, and yet many still struggle to connect company story. It needs to be simple and clear. If it is too with one another. But this problem is not the real problem.
complicated the message might be marketers conveyed. have The The true problem is that too not many main two differences between the logo and the building failed to recognize that only one thing has changed in is the cost and size. A 100 building cost a lotThat’s more and is marketing in the past years:will technology. it. Yes, more difficult to change. The building is also a very large you now have social media and tweets and followers and element, taking up a lot of space. This is one reason to get apps and branding and re-marketing and analytics and your building designed right. focus groups and ROI and CRM and customer personas COLOR and digital and so on. It’s all certainly true. But, what has Color selection andbit restraint a very important design enabled nearly every of it isistechnology. decision. Businesses commonly overuse bright colors So prolific is the role of technology in marketing thattoit overcome visibility or lack distraction. of good design. has becomepoor for some an alluring PanicThe andoverpeer use of color is common in the car wash industry. Just look pressure set in, and organizations pursue the latest and the at most technology-based menu boards, canopies, andtactics vacuum equipment greatest marketing without taking and you will be flooded with red, blue, yellow, orange, the time to thoughtfully consider a strategic approach. As and green. Primary and secondary colors are fine to use, legendary philosopher and strategist, Sun Tzu once put it, but pick one or two and use them sparingly. Color is like a “Tactics without strategy is the noise before defeat.” good beer, it should be used responsibly and in moderation Marketing must ultimately get the product or service or it results in a blurry drunken mess. intoLook the hands of theofcustomer — amost realpopular person.companies Marketers at the logos some of the need to realize that it is way too easy to distract ourselves and you will find only one or two colors. When using (via technology) away from what is centrally important more than two colors, make sure they work well together in a sale to a real person and, — marketing: and use no generating more than two primaries or secondaries. hopefully, repeating that process again and again to can her Many trendy colors are being used but realize they or his delight. strategy is white, not so and much about eventually fadeMarketing in popularity. Black, grays area plan, but a system. your that marketing (including the always a good basis Build for design allows the use of one additional color to create the pop. Earth tones are popular sale) around a strategically based, customer-centric sysgo-tosthen for building colors but they are good background, tem, technology becomes a true and valuable tool, and not a distraction.
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ADVANTAGE transparent colors that work to blend in, but do not stand out. Good design doesn’t need to scream at you for it to be seen but it cannot be transparent. Cities are getting more involved in color selection of buildings. Many cities in the Dallas-Fort Worth metroplex restrict the use of any primary color. No red, blue or yellow here. One city even restricted the color orange, so Home Depot had to use Gold colored signage. Upscale developments are also restricting or defining the colors of buildings and signage to keep a free-for-all color palooza from happening. Keeping the building simple in color will allow a car wash owner to expand to the more restrictive markets while keeping their design and brand intact.
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Great design does not need to cost a fortune. A simple clean car wash can be made of simple materials and methods and still be a good design. The use of concrete block, brick, stone, metal, and glass can be arranged in many different ways. How they are put together and how much each material is used can affect the final design and cost. Good design is not cheap. If you want a cheap building, expect cheap customers who will not blink an eye to complain about the service they are getting. The site design should provide a great foundation for the building and brand to do their work. Clear drives and easy to follow paths to the pay stations, through the wash tunnel, and to the vacuum areas are paramount. Well designed and placed landscaping can enhance a great building design and hide some not-so-attractive areas on the site. Directional signage should be clearly visible, and its design should reinforce the brand with their colors and shapes. Don’t go for the red-yellow primaries if they don’t reinforce and blend well with the overall design. The well designed car wash must be a good neighbor with the other buildings and businesses in the area. Many times, a nice new car wash in an older part of the city acts as the impetus for other businesses to upgrade their building and site. We are witnessing a time when the car wash is not the ugly duck on the street but a critical player in high-quality development. I have seen nicely designed car washes replace older unattractive buildings and within a few years help attract more new developments and upgrades along the street. I don’t want to discount how important solid and innovative engineering must be for the product to work and sell. Engineering is equally important in building and operating a car wash. If the engineering doesn’t work, the product will not sell. It might not be the aesthetically pleasing part, but it makes the pretty package into a sellable product or service. The two components, package design and product engineering, don’t always live in harmony, but each one has to understand the other’s importance in the complete product or service.
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Taking care of a well-designed car wash building is very important. There are many new car wash buildings that after only a few years look like they are 10 years old. I have seen the reverse as well. A car wash is providing a service to car owners allowing them to take care of their car and keep it in good condition. The car wash building needs the same level of care and attention. Don’t let a nicely designed building fall apart and tarnish. It is difficult for me to go to a car wash that was designed only a few years ago and see it already looking tired and weary. Most of our clients provide routine maintenance weekly or monthly, and their washes look great 10 and 15 years later. The Pontiac Aztek was a good solid car, but its strange exterior design is one of the reasons Pontiac quit building it — and eventually Pontiac died as a brand. Tesla is the hottest auto manufacturer on the planet and cannot build cars fast enough to keep up with demand. It’s all about great design backed with solid engineering. If you are building a new wash or your existing wash lacks either good design or solid engineering, get a plan together and create a team of great architects and engineers and get it fixed. It’s a competitive market out there and only the best will thrive. Trent Clark is the founder and lead architect with A Plus Design Group, a multi-state-registered firm located in Flower Mound, TX. You can visit the firm on the web at www.apdg.us.
FINANCE New Rules-Taxing PassThrough Income
Pass-through business entities, car washes and other businesses operating as partnerships, limited liability companies (LLCs), S corporations, and sole proprietorships, have long been extremely popular. In fact, one form of a pass-through business entity, the S corporation, is currently the most-used business entity. LLCs are the pass-through entities most frequently chosen today. Unfortunately, thanks to the recently enacted “reforms” under December’s Tax Cuts and Jobs Act (TCJA), the owners of many small businesses operating as pass-through entities will face personal tax rates as high as 29.6 percent — far above the new 21-percent corporate tax rate. Little wonder that many have begun considering switching to the basic C corporation for their car wash operations.
PASSING THROUGH BUSINESSES
In addition to benefitting from profits being taxed only once — not at the business level but rather only when passed onto the owner’s tax returns — many car wash owners choose to operate as so-called “pass-through” business entities because of the protection from personal liability it affords.
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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.
ADVANTAGE As mentioned, under the just passed TCJA, the tax rate for incorporated car wash businesses will be reduced from the former 35-percent rate to 21 percent for the 2018 tax year and thereafter. Unlike the TCJA’s temporary provisions for individuals that largely expire in 2026, the business tax cuts are, for the most part, permanent. An incorporated business electing to operate as an S corporation or a car wash operator choosing another form of pass-through entity, has its pass-through income taxed only once, similar to the manner in which a sole proprietor is taxed. By electing to operate as a pass-through entity, an operator can benefit from the legal advantages available to businesses with a corporate structure as well as the tax advantages available to a sole proprietorship. One of the best features of a pass-through entity such as an S corporation was the tax savings for both the car wash business and its shareholders. While “members” of an LLC are subject to employment tax on the entire net income of the business, only the wages of the S corporation shareholder who is an employee are subject to employment tax. The remaining income is paid to the owner as a “distribution,” which is taxed at a lower rate, if at all. An S corporation designation allows a business to have an independent life, separate from its shareholders. If a shareholder leaves the car wash business, or sells his or her shares, the S corporation can continue doing business relatively undisturbed. Similar rules now also apply to partnerships. Maintaining the business as a distinct, separate
entity defines clear lines between the shareholders and the business that improve liability protection for the shareholders. An LLC is, on the other hand, a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. As is the case with car care services business owners in partnerships or sole proprietorships, LLC “members” report business profits or losses on their personal income tax returns; the LLC itself is not a separate taxable entity.
OTHER PARTNERSHIP TAXES
As a general rule, the losses from a pass-through entity cannot be claimed by the shareholder or partner in excess of the amount they have invested — their “basis.” And, not too surprisingly, there are several tax issues pass-through businesses must consider. Partners, for example, are considered to be self-employed, not employees, and required to file a Schedule SE with their Form 1040 and pay self-employment taxes. Because of this self-employed status, each partner is also responsible for paying his or her share of Social Security taxes and Medicare. Partners are responsible for paying double what a normal employee would pay (because employers normally match employees’ contributions). Of course, the partners’ tax burden is reduced by an allowance for one-half of the selfemployment tax that can be deducted from taxable income. While pass-through entities are generally not subject to federal income tax, they may be liable for and required
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ADVANTAGE to make estimated tax payments based on entity-level taxes such as gain built-in from an earlier entity change, so-called “BIG” taxes, a tax on passive income, voluntary and involuntary terminations, as well as a tax on the operation’s earnings accumulated rather than paid out.
Currently, the vast majority of pass-through business owners can no longer deduct state and local income taxes and are permitted to write off only $10,000 of their property taxes. A regular ‘C’ corporation faces no similar deduction restrictions.
TCJA AND PASS-THROUGH BUSINESSES
SWITCHING TO CORPORATE FORM
The TCJA created a 20-percent deduction that applies to the first $315,000 of income (half that for single taxpayers) earned by car washes and other businesses operating as S corporations, partnerships, LLCs, and sole proprietorships. All businesses under the pass-through income thresholds, regardless of whether they’re “service” professionals or not, can take advantage of the 20-percent deduction. However, the TCJA places limits on who can qualify for the pass-through deduction, with strong safeguards to ensure that so-called “wage income” does not receive the lower marginal tax rates for business income. For pass-through income above the threshold, the new law also provides a deduction for up to 20 percent — but only for “business profits.” In other words, that 20-percent deduction from passthrough income applies only to business income that has been reduced by the amount of “reasonable compensation” paid the owner. That so-called “reasonable compensation” has not been defined by our lawmakers as yet. On the downside, those operating as a pass-through business lose things like fringe benefits, are required to pay themselves “reasonable” compensation, and or obliged to deal with the other restrictions. And, then, there is the elimination of a number of itemized, personal deductions.
In the eyes of many experts, there is no longer a reason to operate a car wash or other car care business as an S corporation or other pass-through entity. However, converting from a pass-through entity to a regular C corporation can be a complicated process requiring quite a few adjustments. Going the other way, a sale of assets by an S corporation that was formerly a C corporation during the “recognition period” is subject to the already mentioned BIG or builtin-gains tax. The BIG tax is imposed on the incorporated car wash business at the highest corporate tax rate, based on the appreciation in asset value that existed on the date the corporation became an S corporation. The shareholders may then be subject to a second tax on distribution of the sale proceeds. This “double tax” created by imposition of the built-in gain rules can be eliminated if the corporation holds and sells assets only after the 10-year recognition period has expired. Naturally, the longer the recognition period is, the tougher that is to do. Under the former rules, distributions made by an S corporation converting to a regular C corporation during the post-termination transition period (PTTP), can be tax-
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ADVANTAGE free to the shareholders. Distributed funds from those accumulated adjustment accounts can also reduce the adjusted basis of the stock. Under the new TCJA rules, adjustment of a terminated S corporation (even if only changing accounting methods) is taken into account ratably during a six-year period beginning with the year of change.
The annual tax return provides an opportunity to re-consider the options available to some car care businesses. Entities with more than one shareholder or member can elect corporate status on their annual tax returns. Thus, an entity that is a partnership under state laws may elect to be taxed as a C corporation or S corporation for federal taxes by using Form 8832 (Entity Classification Election). Unfortunately, under those so-called “check-the-box” regulations, entities formed under a state’s corporate laws are automatically classified corporations and may not elect to be treated as any other type of entity.
CHANGING BUSINESS ENTITIES
Changing circumstances, revisions of the tax laws, and even the success of the business might prompt a reassessment of the entity used for a car wash business. And, best of all, the annual tax return is not the only option when selecting the entity that makes the most economic sense. Although many of the tax law’s provisions apply to all business entities, some areas of the law specifically target each entity. Choosing among the various entities can result in significant differences in federal income tax treatment, but there is also more to choosing the right structure for a business than just taxes. Not only will the decision to change the car wash business’ entity have an impact on how much is paid in taxes, it will also affect the amount of paperwork required for the business, the personal liability faced by the principals, and, especially important in today’s economy, the operation’s ability to raise money. To switch or not to switch? If earlier tax law changes are any indication, the IRS should issue guidelines to help switch entities without a penalty. Since every situation is different, the best approach might be to choose the entity for your car care operation based on the current tax law. To help in this decision-making process, professional advice is strongly recommended. Mark E. Battersby is an Ardmore, PA-based freelance writer, specializing in finance and tax issues.
SELF SERVE UPDATE Is it Time for a Change?Expanding, Adjusting Your Service Offering
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 for a change? The car wash business is like any other service business when it comes to evaluating the services you offer. You adjust your services based on a number of market factors such as the economy, customer perception, and competition.
Here are a few steps to help you decide if it is time for a change. Step One Analyze your services. Use SWOT (strengths, weaknesses, opportunities, and threats) analysis charts to help define 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? Step Two Analyze your customers and ask the following questions: • Who are they? • Why do they choose your car wash over the competition? • What services do they like or dislike? Why? • 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 for which you can create a niche service? Example: I recently visited an area where approximately 60 percent of the vehicles on the road were large pick-ups and SUVs with liftkits. The vehicles were too tall to fit in the majority of the automatic car washes in town. This is the perfect self-service car wash customer. Step Four • Analyze your competition: • Who are they? • How many competitors do you have? • What services do they offer that you do not? Why? • What does the competition do better than you? • Are you competitively priced for similar services? After you have completed the analysis of your services, customers, market, and competition, carefully read the details of each analysis and formulate a plan. 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? 41
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ADVANTAGE Your market analysis will help you develop a plan for additional options to offer in the different seasons at your car wash. Each area of the country is unique and has its own set of washing challenges. Find your wash challenges, develop a solution, and profit from it.
DEFINE YOUR BASIC SERVICES
Using the information from your analysis, establish what basic services you are going to offer. Take into consideration your market conditions and if any seasonal adjustments are necessary. Example: Basic services at my self-service car washes are high-pressure soap, high-pressure rinse, high-pressure wax, and foam brush. When deciding your basic services, ask yourself the following questions: What basic services are the successful competitors in your market offering? What additional services can you add to your basic services to make you stand out? What has been successful for you in the past? What do your customers say they like the most about what you offer? Use this information to outline your basic service menu.
LIGHTEN UP THE BAY
A great way to give a facelift to a tired self-service bay is to cover the walls in PVC paneling or paint the walls with a fresh coat of bright epoxy paint. It is amazing how this change will make your bays brighter. In addition, the price of LED lighting has come down significantly. Consider installing new LED light fixtures in your bays. Along with the fresh wall covering, the bright LED lighting will attract new customers.
ADDITIONAL MENU SERVICES
IMPLEMENT YOUR CHANGES
Define and add additional menu services. Additional menu services are individual services that a customer can select or add to any basic wash service. A customer can choose, as an option, to select the additional services before, during, or after the wash process. Examples of additional services are bug remover, tire cleaner, foaming presoak, a pressure boost to the high-pressure rinse option, surface sealant, foaming tire brushes, tire gloss, premium wax, spot-free rinse, and handheld dryers. More than 50 percent of customers who have options in addition to the basic wash services select one or more of them. Adding additional options to your self-service wash menu offering will increase the revenue per car.
Once you have developed your plan, you need to execute it. Change your menus, train your staff, and educate your customers on your new enhanced product offerings. Making changes to your service menu may seem like an overwhelming task. The process is easier if you do your homework, develop a plan, and execute it. I recommend checking your menu offerings at least once a year to see what adjustments are necessary due to cost increases, customer demand, or competitive offerings. 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.
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After analyzing your costs, and analyzing your market conditions, set your start price and your price per minute for wash services. If you are the nicest wash in town, it is okay to price your services higher than the competition. Customers will pay for quality.
Add additional services for different seasons. You can make seasonal adjustments to your wash menu options to help enhance your product offering. These seasonal services can be very profitable and help you stand out from the competition. Example 1 The Rockies region of the Western United States experiences a “mud” season. The mud coats the vehicles and a standard wash pressure does not remove it all. In addition, you may not want all of that mud in your bays. Many operators offer a mud removal bay that has higher pressure and they charge a premium for the service. Example 2 Florida experiences a “love bug” season. The front ends of vehicles become coated with the annoying little critters. Many operators offer a “Love Bug Removal” chemical option that proves to be very profitable for them. Example 3 Self-service operators near large bodies of water can add a seasonal boat-motor flush option to their menu. In addition to flushing their engine, the customers will wash their boat. It takes a lot longer to wash a boat than it does a car!
John Park Sr. Vice President, SBA Lending Comerica Bank San Antonio, Texas (210) 771-8878 Jcpark@comerica.com
WELCOME NEW MEMBERS The SCWA members listed below have joined SCWA since our last issue. We Appreciate your Support! Jon Anderson
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BOARD OF DIRECTORS President: Tyler Furney Harker Heights, TX (254) 258-6786
President-Elect: Andrew Zamora Lubbock, TX (806) 543-2775
Vice President: Jeff Blansit Dallas, TX (214) 912-1729
Treasurer: Don Witt Dallas, TX (214) 358-2575
Past President: DeWayne Hall Oklahoma City, OK (405) 414-1489
Vendor Vice President: Bob Kopko Uniontown, OH (800) 336-6338
DIRECTORS John Agnew Fort Collins, CO (970) 485-0287
Pat Kirwan Wixom, MI (866) 362-6377
David Swenson Austin, TX (512) 346-8050
Ronnie Corbin Plano, TX (479) 651-7239
Evan Lorentzatos Stafford, TX (281) 561-0469
Mel Ulrich Weatherford, TX (940) 456-1082
Ryan Darby Lubbock, TX (806) 535-7275
Bobby Story Durant, OK (580) 775-1855
Clay Wilson Lubbock, TX (806) 687-2024
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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.
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