Industry consolidation

[robert roman]

To get the ball rolling, I wonder what forum members have to say about the latest industry consolidation moves.

For example, IMO Car Wash Group (ICWG) acquired Goo-Goo’s carwash chain. What it didn’t acquire was Goo-Goo’s eight self-service locations.

ICWG also owns several other major U.S. chains including Car Wash USA Express, Zippy's, Car Wash Express, and Supersonic Car Wash. ICWG is now owned by a private equity firm.

In July, Generation Growth Capital-backed Harrell’s Car Wash Systems Inc. acquired New England Car Wash Equipment LLC.

Mister Car Wash recently made acquisitions in Alabama, Georgia, Florida and Michigan bring the company’s total store count to 250 locations.

Sonny’s recently announced that it has acquired Diamond Shine, a leading supplier of car wash chemistry.

 

[mac]

It's the natural business cycle at work. I remember hearing about the old time robber barons. John Rockefeller was one of them. However he did the sale thing, only with petroleum companies, which at the time were small companies scattered across the states. When he got done, gasoline was way cheaper for everyone, and the quality control went up. My crystal ball is currently having sporadic outages, so I can't tell what our business will look like in one, five, or ten years. The consumer though will have better choices at lower rates.

 

[jfmoran]

Private equity requires growth, typically for a defined period of time, like 5 years. During that time lots of opportunities will be created for those who work at those businesses. Once the buying spree is over, and private equity wants its money back, either they sell to a larger private equity firm (see Mister Car Wash) or companies start to look at how to trim the fat. It will be good while it lasts and then it's gonna hurt some.

 

[Sparkleclean]

dubois chemical (blendco) also bought out C.A.R. products in Massachusetts.

 

[robert roman]

“DuBois offers increased resources (particularly in the area of their national and international coverage), extensive R&D capabilities, warehousing and excellent manufacturing skills.”

Key aspect here is “national” coverage as in serving larger scale companies.

 

[Earl Weiss]

Industry history is littered with those who have tried in the past. I think technology has now made it more possible. EE's can be built with standard equipment packages and only slight tweaks needed for different geographical challenges to get a clean car. POS central point monitoring aids in having Franchises as well as company owned stores all capable of accepting universal marketing packages. Larger operations can also leverage economies of scale from vendors. So, the time may finally be ripe for the McD's of the industry to find workable business model.

 

[Greg Pack]

So, the time may finally be ripe for the McD's of the industry to find workable business model.

I agree with Earl, this time the effort to build a national chain could work. I'm also hearing the club programs are really attractive to the firms, ensuring a more consistent income stream regardless of weather.

 

[Waxman]

dubois chemical (blendco) also bought out C.A.R. products in Massachusetts.

I used to go to their retail store in West Springfield MA to buy detail chemicals!

 

[Earl Weiss]

I was approached by a group looking to expand and they were possibly interested in one of my places. They tend to go with pre fab buildings which so far is not possible in Chicago. I had heard their budget was $4 Million per location but they told me $5 Million. They also told me their equipment package runs $1.2 million. Interesting that their base price was $6 but there a re plenty of new EEs in Chicago that are $3. So, in a decent area of Chicago their $4-5 Million budget for Land, Building and equipment would be pushing the envelope of doability and then thy would be priced at double the competition.

 

[Sparkleclean]

I can give you my first hand account of what i have dealt with when c.a.r. Was bought out by dubois. I like c.a.r., im happy with the chemicals, happy with the prices, i am super happy with the salesman we have. When the buyout first happened we were given the usual "nothig will change". Of course things change, thats why they buy each other out. First it was internal things with personel etc. departments were merged for cost savings, like payroll, employees were let go. Benefit plans changed, employees were angry. There was an influx of new money into c.a.r., that allowed them to buy new delivery trucks as there old ones sucked. Most things started to be consolidated out of massachusetts and into ohio where dubois is located. Billing for example became a nightmare. Any invoice discrepencies took/can take forever to deal with. some of this can be attributed to a companies growing pains but a lot is also due to dealing with a much larger company that reacts much slower then the old one.
Then the real consolidation started. They moved all production from massachusetts to ohio, then moved the mass facility to another smaller location that is used for just storage. Because the new location was smaller and because they werent producing chems anymore there, picking up of empty drums became an issue. They are limited to space for storage so when they run out they wont take the empties back. That was never a problem. They also had issues with supply, before, when they ran out of a chemical they just made more, now they have to order more from ohio, and the trucks only hold so much, so they sometimes ran out of certain chemicals, or certain sizes. Then to correct all that they wanted to streamline everything and reduce supply issues so they started to eliminate the amount of sku's they sold. So chemicals you could get in 5,15,30,55 gallon drums before may now only come in 5 and 30. They eliminate 2 "sku's" and have less of a chance of running out of the ones they still have. But if your used to buying 15 gallon drums of something and now you either buy 5 or 30 its annoying!
Old company was faster at responding to things, if they ran out of a 15 of low ph they poured it out of a 30. Problem solved. That cant be done under dubois because the 30 is a sku that needs to be accounted for. Now you wait for the truck from ohio. The old company provided a lot of free ****, foot valves, hose, metering tips, check valves, spray nozzles, etc..... the new company still does, but it has its limits. If you want 3 bixes of 3/8 hose, they will give you 1 or 2 and you pay for the others.
This is not a hit piece on dubois or c.a.r., i actually really like them. So far they have been a stand up company. Any problems have been fixed, albeit slower then before. Although the only thing that got quicker was billing, of course! They switched to invoicing by email the day before the delivery shipped as opposed to after delivery. It was helpfull in a way, it allowed you to verify the order was correct on paper before it was shipped instead of after. You can still see the resentment in delivery drivers who openly mock the new company, that can lead to an F' thjs job attitude.
I was worried that because i was a small account i would be cast to the wolves due to low profit for them, or they would switch delivery to drop ship by carrier instead of their own trucks. Yes there was a recent price increase but that seems to be industry wide. But at least my other fears havent come true yet. Things may still change in the future. Another plus is having access to a larger portfolio, i could order blendco stuff if i wanted, and now they are starting to market a chemical monitoring system developed with the same company that partnered with ZEP on theirs. But overall, if you asked me if i thought consolidation was good for the industry i would probably say no. I like knowing the owner of the company i deal with is in the upstairs office, not the high rise in ohio.

 

[robert roman]

“But overall, if you asked me if i thought consolidation was good for the industry i would probably say no. I like knowing the owner of the company i deal with is in the upstairs office, not the high rise in ohio.”

Insightful, thanks.

Let me ask this. Did you know, personally, the owner of C.A.R. before the acquisition?

For instance, when you began buying from them, did you get a call from the owner thanking you for the opportunity to earn your business?

Or was it enough to know owners were carwash guys and not some stiffs in a suit?

 

[Sparkleclean]

“But overall, if you asked me if i thought consolidation was good for the industry i would probably say no. I like knowing the owner of the company i deal with is in the upstairs office, not the high rise in ohio.”

Insightful, thanks.

Let me ask this. Did you know, personally, the owner of C.A.R. before the acquisition?

For instance, when you began buying from them, did you get a call from the owner thanking you for the opportunity to earn your business?

Or was it enough to know owners were carwash guys and not some stiffs in a suit?

I did not know the owner personally, but i knew who he was. To me it was enough to know that when i had a problem chances are ethe owner knew about it and helped solve it. Now there is a ceo in ohio, he doesnt know who the hell i am! I would compare it to other industries. Restaurants for example, if you ate breakfast out eery morning at mcdonalds would the owner know you? Would he care? If you ate every day at a local mom and pop diner would they? I think they would more then the mcd's owner..... it makes you feel better, at least for me anyway!

And i woukd like to restate that a lot of people lost their jobs during this consolidation, not at dubois but at c.a.r. . Whole departments like Billing, payroll, h.r., production, osha compliance, all were "consolidated" into ohio. In essence the old c.a.r. Doesnt exist anymore, they are now just a warehouse and sales/shipping crew. Everything else is in ohio. Even the decision to move the mass location to the smaller building was a consolidation of sorts, dubois also owns a company called heat bath in mass, the building they were in is owned by the old owner of c.a.r., but dubois owns the one heat bath is in. So they move into that one that is really too small for them because the old building wasnt part of the purchase and they didnt want to keep leasing it. But it caused problems with storage space etc. i have felt they will eventually use the delivery portion of c.a.r. To deliver heat bath products as well. Right now heat bath drop ships ups/fedex.....

There is also the residual fallout, the guy who sold them the drums they used to use for production in mass also picked up the old empties for re use. Now that they arent producing chems there they arent buying drums from him, that happens in ohio. So now that guy could care less about picking up the old empties from them. Leading to empty drum return problems, c.a.r. Used to pick up empties from any manufacturer, simoniz, zep, etc.... now they will only take "their" drums back, not others. Plus thats another local business (drum guy) that loses money.

 

[Sparkleclean]

i wanted to update this a little. since I wrote my synopsis on industry consolidation, another local company has been bought out and merged with a larger one. that is new England car wash equipment in Massachusetts. they were purchased by Harrell's in a similar fashion as c.a.r. products was by dubois chemical co. again nothing I write is to disparage any of these companies, I like them all, but rather its just to show my opinion of consolidation in our industry as it is ongoing.

when harrells bought out NECWE we heard the same thing we did from c.a.r. products during their merger, nothing will change. however since harrells bought NECWE there has been an exodus of employees. today I sent an email to their parts guy and I received an auto email back saying he was no longer with the company. and from now on I should call an 800 number, or send an email to another harrells email address for parts orders. I sent an email order to that new address and a little while later I received a return email just saying thanks for your order. whats the big deal you ask? nothing, the process went just fine, hopefully my order is on its way to me. BUT, I have no idea who took the order. I have been told by another person in the business that parts orders are going directly to harrells now out of state. that used to be a guys job in mass. he was a nice guy that gave me lots of advice when I called to order parts. for example, I tried to order a valve one day that was expensive and he said wait, they make a rebuild kit for it instead. that saved me a ton of money at the time. but now if I am just emailing part numbers directly to someone at harrells headquarters will I ever get that type of personal assistance again? doubtful....
the exodus of help that the company has lost since the NECWE and Harrell's merger surprised me. they are a service company, and losing experienced help in that field can be tragic. so far the service hasn't suffered really, as far as I have seen anyway. but it hasn't been that long since the merger and when employees are unhappy the vultures start circling to pick the good ones away. and again, for a service company, the loss of long term experienced help is tough to deal with. it takes a long time for a non car wash person to be a technician. that on the job training isn't cheap. I have to wonder aloud though if the real value in buying NECWE wasn't the company itself but the contracts between NECWE and PDQ and other manufacturers. that gives them a virtual lock on everything related to those companies.

to add a little to the c.a.r. merger, I have heard several people tell me one of the annoyances that has come up since the merger was they no longer accept cash payments from C.O.D. customers, in ANY amount. and if you order from them and they show up and you have cash to pay them with, not only will they not accept it, they will not leave the product for you. and if you are NOT a c.o.d. customer you only have 30 days to pay your invoice or you get skipped on your next deliveries until you pay the invoice. one of their employees told me they had a bunch of angry cash paying customers when this started.

so my updated opinion of mergers and consolidation is still that it is bad for the industry, it leads to impersonalization in my opinion.

 

[Earl Weiss]

so my updated opinion of mergers and consolidation is still that it is bad for the industry, it leads to impersonalization in my opinion.

Bad, perhaps but it is the way of the world or the most part. (Except N.J.) We used to have Full service Gas Stations. We knew all the customers. Chain Fast food has replaced mom and pop restaurants. Sure there are plenty of examples of exceptions. But due to economic conditions such as minimum wage increases and employment headaches, consolidation can take advantage of economies of scale.

 

[mac]

Well I hope that some of the techs that were let go are reading this, and that they send me a note about opportunity I have for them in Florida. Finding, training, and keeping good techs is literally the hardest part of my business. Can't do squat without them. Usually when good talent leaves a business it won't take long for the customers to notice.