For Kevin Kan, president and CEO of American Auto Wash Inc., energizing the once-sluggish company has meant enforcing the fundamentals and revamping its business model to keep up with a changing marketplace.
In the process, Kan has found new ways to expand his chain of car wash and gasoline station combinations. His company, with 20 locations in the Philadelphia area, posted $60 million in sales in 2005, up from $40 million when he joined it in 1999.
But Kan’s progress has come with no small measure of pain and effort, and his growth plans would be of little value if he hadn’t taken steps to bolster his management and retool the way the company does business. Since taking over the family-owned business and assuming half-interest in the company once held entirely by his father-in-law, Reinhards “Ron” Bets, Kan has struggled to impose some fundamental business discipline on the company.
Before he arrived, there was little demand for accountability from supervisors and managers. Indeed, employees were rarely dismissed for any reason except dishonesty, and that meant deadwood in the company’s operations. And meeting the standards of a performance-oriented organization meant some long-time employees had to go.
Since taking over, Kan has professionalized his management team, making it accountable for operations and offering incentives for outstanding performance. He’s introduced financial and operational discipline and is developing a training program to impose uniformity across all of his operations, provide a better work environment for his 300 employees and take the first step toward franchising The Gentle Touch Car Wash concept in tandem with the company’s recently introduced Griffin gasoline brand.
Kan talked with Smart Business about how he’s building his carwash and gasoline business with a performance-oriented culture and proprietary brands.
How have you changed the management of the company since you came on board?
The big thing for me is accountability, so one of the changes I made immediately was to meet with my four district managers … once a week on Thursday morning. I want to see them in my conference room, and one at a time they report to me the previous week’s numbers.
If they’re behind target, I want them to tell me why and what they’re going to do about it. If they’re exceeding their targets, I want to know why that is and what the other district managers can learn from their success.
They know that these numbers have an effect on their careers. That Thursday meeting is how I keep everyone on the same page, make sure everyone is reporting to me what they’re doing in executing their business plans for each of their profit centers.
How do you and your senior managers keep tabs on the company’s overall performance?
We all have our own dashboards. Mine is more macro, and as you go down, there’s more dials on theirs, if you want to use that analogy.
Their numbers become more micro. I look at the large numbers and I say, ‘There’s a problem here.’ Sometimes if you miss a problem, by a month later you’ve lost 50 grand. I look at the big numbers and if I see a problem, I kick it down to my operations guy. And he identifies, as he should, a lot of problems before they get to me.
How have you changed the gasoline business model?
Three years ago, we went from a dealer classification to becoming a distributor for BP Amoco. … They would supply us, tell us how much it’s going to cost every day, and that’s it. Everything had to get their approval.
One of the advantages of being a distributor is a much lower buying price. Now, as a distributor, we have the capability of supplying other stations as well as our own. We can get into another stream of business, which is supplying other dealers.
Why did you make the change to wholesaling and establishing your own brand?
Traditionally what we’ve done is buy locations that we saw as a good deal. What we’ve done is buy those locations without much of a strategy; we’d just buy them as they became available. We built the business with the lowest gas price possible, and with that low price attract customers to come in for a car wash, our high-margin item.
Unfortunately, the market has changed. What we’ve been seeing is a huge emergence of large, independent gasoline brands coming to the Greater Philadelphia area and beyond, all along the East Coast. I saw that back in 1999, that it was going to be a problem for us. It was exactly the same as our model.
It used to be very much a mom-and-pop business. Starting on the gas side, I started to try to figure out how to reposition ourselves.
Why are you offering your own brand of gasoline and how does it benefit the company?
The easy answer to why we’ve done it is price. The reason we decided to go with our own brand is that we’ve seen that, over the years, customer behavior has greatly changed, and the more gas prices go up, the greater the change.
Customers, for the most part, don’t care about brand, they care about price. Oil companies used to enjoy brand loyalty. There were customers who wouldn’t use anything but a particular brand — and there still are a few of them — and the oil companies didn’t compete on price.
We came to the realization that it didn’t make sense to pay a premium price for this brand while the market share was being eroded. We just opened a new Griffin store. We took down a Mobil sign, put up a Griffin sign and our business went up 50 percent and our margin increased.
That’s the clearest indication to me that brands don’t matter much to the customer anymore.
How are you developing the Gentle Touch Car Wash concept?
The carwash brand, Gentle Touch, is something we’ve been developing for several years. One of the first things I realized when I came to the company was that we had to launch a brand for the carwash.
We have a product in our carwashes that no one else uses on the East Coast, which is a lamb’s wool material. It’s a feature that we wanted to promote, so we came up with a logo with a lamb holding a washing mitt.
I standardized our uniforms, created a training manual so that service will be, as much as possible, standardized.
We created detail centers for customers who wanted that kind of service at eight of our carwashes. We try as much as possible to have uniform pricing and an aggressive advertising campaign on radio, TV and sponsorship of sports teams.
How are you strengthening the Gentle Touch brand?
The new thing we’re working on is Carwash University. I’m following the McDonald’s model of Hamburger U. They’ve probably got the best corporate training program to standardize their service.
I said we need the same thing. We need to be a true brand, not just locations with a logo on them.
We hired a local company with a training camp, and we’re developing a training curriculum for everyone from assistant manager and up. It will be a two-day course and it won’t just be all on the technical aspects of running a carwash location.
It will be on management skills, it will be on some of the human resources issues that we all face now. We’re very excited about it, and I think it will really set us apart. It will also assist in the next phase of our strategy, which is another change on the carwash side.
How will you implement that next phase?
There are some locations that make sense for us financially to run ourselves and there are places that don’t. There are locations where an entrepreneur and his family, for instance, can run very profitably.
For us, it might not be possible to run the same location at a profit. I want to grow the company, but I don’t see doing it simply by buying locations and staffing them. It’s not the most effective way to grow it. We’re not just going to go out there and buy anything available at a good price.
Going forward, I can see us purchasing locations but not necessarily running them ourselves; that is, to franchise the brand. Potential franchisees need to see a value in having your name on their building, and we want to provide that to them.
How to reach: American Auto Wash Inc., www.gasnwash.com; Griffin Petroleum, www.griffinpetrol.com
