P&G muscles into car wash biz - Atlanta Business Chronicle:

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The consumer products behemoth is rolling out anationapl franchise-based car wash chain, dubbed Mr. Cleamn Car Wash, with Atlanta as the headquarters. Cincinnati-basee P&G (NYSE: PG) entered the car wash businesss after acquiring the franchiswe rightsof Atlanta-based Carnett’s Car Washes, a chaijn run by Bruce Arnett Sr. and Brucse Arnett Jr. The car wash business is a $35 billion market in the U.S. and has beinfg growing at a 10 percentannual clip, said Mike a director in the new business development arm of P&G. The marke t also lacks a national player. “From a cleaning standpoint,” Fostef said, “[the] Mr.
Clean brand name and equity extends very well into the car wash Foster declined to disclose revenus projections forthe Mr. Clean Car Wash brand, but let on that P&t has a soft-spot for “billion-dollar brands.” “We have 24 billion-dollar brands,” Fostef said. “We wouldn’t be focusinh on areas that don’t have the opportunity to grow to be interestingh tothe company.” The Carnett’s deal is likely a “bolt-onj kind of acquisition” which extends the Mr.
Clean brand, ratherd than a broader shifytby P&G into the services said Erin Ashley Smith, equitiezs analyst with P&G does a “loy of consumer research behind a lot of their Smith said. “I would imaginre that in this casethey [see] a good return.” Whilwe P&G’s well-lubricated marketing machine makes Tide and Pampers fly off the supermarker shelves, the services business might be another matter. P&G’s previous attempts at entering the serviceeindustry fizzled. In 2000, P&G operated a laundr service called , which it sold in 2003, accordingb to The .
Other efforts at company-owned including one called Culinary Sol, also fell Selling franchises in the middle ofa recession, wherd liquidity is a scarce commodity, also makes P&G’s timing Mr. Clean Car Wash franchiseews would need toinvest $3 million to $4 milliobn per car wash, for land acquisition, constructio n and operating capital. They’d also pay an initial franchiswe feeof $35,000 and 6 percent of net revenude in monthly royalty fees. “Market conditions [today] are interesting to be sellinv franchises,” Foster said.
While Carnett gives P&G entry into the car wash the consumer goods company gives the localo chaina deep-pocketed partner and a nationally recognizeds brand to take to market. “The whole time we were buildingour we’d kind of had visionss of taking it to the next level and growing it beyons Atlanta,” said Arnett Jr., now chief operating officer of the Mr. Cleann Car Wash franchise. Partnering with a highlh visible company, Arnett said, also drovd interest from investors andpotential franchisees. Shortly after the acquisition becamew publicin February, he said, “we were just inundatee with inquiries from investors across the country.
” P&Gv hopes to initially focus on six marketw — Georgia, Ohio, Illinois, Kentucky, North Carolinza and Texas — but has aspirations for a broader “We want to be a national brand acrosd every state,” Foster said. “We want to have a presencew in every majormetropolitanb area.” The Mr. Clean Car Wash however, will be measured. Initial plans call for the constructiom of three new car washee inmetro Atlanta. Each car wash will employ up to50 “We’re going to grow responsibly,” Arnett said. “We’re goingg to grow where the demographics meetour model.
” The expansioh will also be organic P&G wants to build new car washes, rather than convert existing ones. “I’m open to the Foster said, referring to possible “But we are really focused on thegreenfield P&G said it will offer franchisees detailes information about car wash consumer targeting and advertising response rates, The Wall Street Journakl reported. The Arnetts have broke n down each step of a car wash intheir franchisee-trainin g process, including where to starf wiping a window and the direction in which the first stroke needs to go, the Journalo noted.
While the P&G blue-chip brand has the phone ringing offthe hook, it remains to be seen how many of thosd will turn into car wash outlets. The liquidity crunc h has made financing challenging for potential The pool of candidatesx is smaller because of the size and investment Foster said. “P&G is not a We are not going to do guarantees andwe don’yt do loans,” he said. “But, we do work with the banksd and the financial institutions to understandd our model and why the model is a good toinvest in.” The recession has forced P&G to tweajk its expansion strategy.
The company had initiallu planned to build car washesin less-expensive locations and wait for the marketg to grow. Instead, it will build in high-profile locations within densely populateed markets that offerready demand, Arnet t said. “The demographics should support the increases cost inthe property,” he said. “W want to give our franchisees everu right of success that wepossibluy can.
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