An article published in Wall Street Journal reported that Procter &
Gamble wants to start a new business model of franchising car washes. The giant
manufacturer of household staples makes products such as Pampers diapers, Crest
toothpaste and Gillette razors.
P&G is under mounting pressure to find new sources of revenue growth,
particularly as more cash-strapped shoppers think twice about buying its
premium-priced products. Wall Street is increasingly skeptical that the mammoth
company can garner meaningful gains in its slow-growing product categories and
a tough economy.
To jump-start plans for a nationwide chain of Mr. Clean Car Wash franchises,
P&G in December acquired the franchise assets of Atlanta-based Carnett's
Car Wash, which has 14 locations. "We need to look for new opportunities
to allow us to grow," says Bruce Brown, P&G's chief technology
officer. "That isn't limited to things within our current business
model."
Known for exhaustively testing new ideas, Procter & Gamble has been quietly experimenting with service businesses in
recent years. Since 2007, it has operated two Mr. Clean Car Washes near its
Cincinnati headquarters. Last year, it unveiled three Tide dry-cleaning shops
in Kansas City, Kan., area. In 2007, P&G said it bought a minority stake in
membership-based medical services firm MDVIP, based in Boca Raton, Fla.
Professional car washing, which rings up about $35 billion in sales a year
in the U.S., according to P&G estimates, won out as the company's first
major franchise push. "We want to blow this out to a national network of
car washes," Mr. Brown says.
The car-washing business has a handful of competitive advantages, says
Nathan Estruth, vice president of P&G's FutureWorks, which develops new
business ventures. It lacks a dominant national chain, aging baby boomers are
reluctant to wash cars themselves and more water-strapped communities are
pushing professional car cleaning as a conservation measure. Forming a
franchise system, rather than owning locations, means "we don't have to
enter a capital-intensive business," he says.
P&G, which scrutinizes shoppers down to the seconds it takes to notice a
bottle on a store shelf, says it will offer franchisees detailed information
about car-wash locations, consumer targeting and advertising response rates —
techniques developed during the Cincinnati-area tests that P&G will combine
with the Arnetts' experience.
P&G knows people may cut down on car washing in the recession. But
franchise guru James Amos notes that the franchise industry typically grows
during economic slowdowns. With more people out of work, "there's a larger
pool of franchise candidates," says Mr. Amos, chairman of P&G's
franchising-subsidiary board.
Source: Byron, Ellen, “Mr. Clean Takes Car-Wash
Gig,” Wall Street Journal, February3,
2009.