Gatorade, the leading name in sports drinks, now sells whey protein powder, protein bars and carbohydrate-loaded energy chews. Netflix expanded from DVD rentals to online video streaming and producing original programming. Nokia, whose smartphone business was acquired by Microsoft, originally produced paper products.
The McDonald’s hamburger chain developed its McCafé product offerings in response to the rise of coffee-shop chains. And the Daily Racing Form, for decades the leading horse-racing publication, now allows customers to wager on races all over the world through its online betting platform.
All of these companies expanded from successful core businesses to other product offerings in an effort to establish new streams of revenue and capitalize on their brand recognition, and successful car wash operators can follow suit.
The idea of business diversification is simple enough. By offering new products or services, a business can manage risk by minimizing the potential harm to the business during economic downturns. The strategy is to expand into a business sector that doesn’t react negatively to the same economic factors that could hinder your current business activity.
But Neil Prasad, a partner with New York-based Marcum LLP, one of the nation’s largest independent public-accounting and advisory-services firms, said it’s only smart for businesses to diversity after they’ve succeeded in their core mission: building customer loyalty through their main business.
A car wash’s solid reputation for service gives it a strong foundation on which to build other business enterprises, but an inability to impress customers through its main business function will make any expansion of the business a tough sell.
“If the customer doesn’t have a good sense of respect and appreciation for the service you provide, they psychologically won’t be willing to spend more dollars in your store,” said Prasad, who worked at a car wash in Los Angeles for six years while attending college and shortly thereafter. “They may still be willing to go to a certain car wash because they have a coupon or because it’s close to their home or office, but they won’t be willing to spend more dollars at your store.”
Dare to go big
Some car wash operators are putting the theory of business diversification into practice, including Dr. Gleem Car Wash in Houston, which features a lube center, repair shop, barbershop and a café serving breakfast and lunch.
Far upstate in Plano, Texas, customers at Trademark Carwash can pay $27 to get their car washed and enjoy free beer, wine, gourmet coffee and specialty sodas while they wait. Company president Tom Miller originally wanted to sell the alcoholic beverages but would not have been allowed to serve them on the premises under regulations established by the Texas Alcoholic Beverage Commission, so he decided to build the cost of providing the beverages into the car wash.
“The idea to serve alcohol began by wanting to have a true wine bar inside the car wash,” Miller told the Dallas Observer. “To keep our dream alive despite the restrictions, we opted to give it away for free.”
Richard Bullivant also has expanded into food and beverages at his Mirror Finish car wash in Tiverton, England, where he recently opened a 1950s-style diner called Richy’s American Diner.
“We opened the diner within the same premises of Mirror Finish so people can have their car washed while they have something to eat,” Bullivant told the local Exeter Express & Echo newspaper. “Since the opening, it has been a slow start, but now business is picking up, and we are getting busier because people know where we are.”
Getting started
Prasad there are many factors to consider before a car wash can diversify its business, including:
• Are your brand reputation and customer base strong enough to warrant offering new products and services?
• Do you have sufficient room at your car wash to offer new products and services, and is there enough parking so customers can relax and enjoy themselves without leading to wait times for newly arriving customers? Does your car wash offer free Wi-Fi to allow busy customers to stay connected and keep their children occupied while waiting?
• Do local board of health regulations make it feasible for your car wash to begin serving food and beverages?
But for those car wash operators who are willing to do their due diligence, there are a multitude of ways to branch out. Here are a few suggestions that Prasad said car wash operators should consider.
• Lube enters, repair shops, auto detailing and window tinting are natural add-ons because they are related to the car wash’s core business: cars. In addition, car washes can sell auto accessories such as ice scrapers in cold climates, air fresheners, seat protectors for riding with pets, and emergency supplies such as gas cans and flashlights.
• Car washes can capitalize on the popularity of local professional and collegiate sports teams by selling team memorabilia such as license-plate frames, decals, bumper stickers and drinking cups.
• For car wash operators in affluent areas or locations with a thriving business community, pickup and drop-off service is another service option, though it comes with additional liability and insurance issues.
• Quick food and beverage items such as coffee, snacks and sandwiches can eliminate another stop for busy customers. Even if it’s not reasonable for a car wash to produce these goods itself, it can seek out relationships with local vendors who supply convenience stores with fresh snacks such as brownies and cookies.
• Even everyday items such as CDs, books, greeting cards, colognes, perfumes and lotions can significantly boost revenue.
“You want to provide a means for impulse buying,” Prasad said. “You have a captive audience for a short period of time, so if you want to get additional dollars out of them, have things that are quick, convenient buys that eliminate another errand or task. Any way you can diversify is a plus so long as it makes economic sense.”
• Since a bored child can be hard to deal with, arcade games give parents a relatively cheap way to keep children occupied while waiting for their cars. Additionally, if your car wash has a mascot, stuffed animals appeal to children and can reinforce brand recognition.
• Personal services such as massages, shoe shines, manicures and pedicures are impulse buys that would appeal to busy customers with disposable income.
“Things like that can be quick and take care of an errand, and psychologically, it goes hand in hand with the car wash – taking care of an errand that gets the car clean and taking care of yourself at the same time,” Prasad said.
