The Homa Files

“Excerpted from WSJ, “Mr. Clean Takes Car Wash Gig” By Ellen Byron, February 5, 2009

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Now Procter & Gamble Co. wants to wash your car. The giant manufacturer of household staples including Pampers diapers, Crest toothpaste and Gillette razors is forging a new business model: franchising car washes.

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.”

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.

Procter & Gamble has been quietly experimenting with service businesses in recent years. Since 2007, it has operated two Mr. Clean Car Washes  … Professional car washing, which rings up about $35 billion in sales a year in the U.S. 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 … 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 …

Procter’s previous attempts at entering the service industry have failed. In 2000, P&G operated a laundry service called Juvian Fabric Care, which it sold in 2003. Other efforts at company-owned stores, including one called Culinary Sol, also fell short …

P&G marketers are also eager to see if Mr. Clean Car Washes dotting roadways will help boost the image and exposure of the overall brand … Unlike most franchise start-ups, which require enormous marketing investment, Mr. Clean Car Washes come with a 51-year-old brand name, which P&G hopes will lure potential franchisees …

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 …

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Full Article:
http://online.wsj.com/article/SB123379252641549893.html

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