Franchises and Technology and Real Estate & Retail

Hands-on strategy turns Mike's Carwash into industry model

September 22, 2008

Mike's Express Carwash makes money the old-fashioned way. The second-generation family affair, now celebrating its 60th year, has invested its reserves in steady expansion, becoming a model for the $23.4 billion industry in the process.

And its owners still sweat the small stuff.

"Our business is all about the details," said CEO Bill Dahm, who runs his own vehicle through one of the Fishers-based company's 36 carwashes several times a week. "How's the landscaping? Are we picking up trash? Are we wiping off the stainless steel trash canisters?

"It's not any one or two or three things. There's about 50 things that you have to do well to create a great experience for our customers."

Indeed, Mike's hands-on philosophy has helped the company attract twice as many customers each year as its average competitor--and more than seven times the revenue.

That effort also earned the company IBJ's 2008 Enterprise Award, an annual prize recognizing entrepreneurial excellence.

Founded in Fort Wayne in 1948, Mike's has operations there as well as in central Indiana and Ohio. And it's planning to double in size in the next decade, starting with a foray into the South Bend/Mishawaka market.

Dahm would not disclose revenue for the privately held company, saying only that it exceeds $60 million a year. Even so, that's more than $1.6 million per location, well above the $230,550 average for the nation's 101,500 carwashes, according to statistics compiled by the International Carwash Association.

The idiosyncratic industry is anything but small, yet there are no national and precious few regional chains, and no successful large-scale franchising programs.

"Most carwash owners own just one carwash," said Tim Denman, assistant editor of industry trade journal AutoLaundry. "It's usually a small family business. To find someone like Mike's is rare."

Indeed, about 6 million customers use the company's services annually, or more than 160,000 per location--nearly double the industry average of 90,000 vehicles per carwash.

Mike's can move customers through in such volume in part because it's an exterior-only shop. Industry experts say it is the largest such chain in the country and one of the top 10 of any kind.

Slow start, slow growth

The industry--at least in its current form--got its start in 1946, when the first "automatic" carwash (one that dragged cars through a washing tunnel) debuted in Detroit.

Fort Wayne brothers Joe and Ed Dahm grasped the new technology's potential and purchased the system, built by a company called Minit Man. They called their business Mike's Minit Man Carwash.

"Dad said it was a 30-second decision," recalled Bill Dahm, Joe's son. "'Let's start a business. What do we call it?' Well, the only equipment they could buy was called Minit Man. So they added Mike's to that, because they just liked the sound of the three Ms."

At the time, there was no Mike associated with the business--and there wouldn't be until Bill's brother came along years later.

Now Mike Dahm, 44, is vice president of operations, living in Ohio and managing the company's seven locations there. Older brother Bill, 57, lives in Indianapolis and oversees 23 central Indiana carwashes, including ones in Terre Haute, Lafayette and Kokomo. Their cousin Jerry Dahm, co-founder Joe's 54-year-old son, is executive vice president in charge of the six Fort Wayne locations.

The first generation of Dahms stood pat with a single location at the intersection of Clinton and Baker streets in Fort Wayne until 1971, when they finally opened a second outlet. It took them several more years to find a business model that eventually would fuel the company's growth.

Until the late 1970s, Mike's was a traditional full-service wash, with customers getting out of their cars and standing around while crews did the dirty work inside and out. But company leaders wondered what would happen if they eschewed the interior service and focused instead on providing a fast, efficient exterior wash, allowing customers to remain in their cars for the entire procedure.

What happened was an immediate explosion in volume, which fueled a slow-but-sure expansion strategy that continues today. The company changed its name to Mike's Express Carwash in 1978 to reflect the new approach.

In 1985, the company entered the Indianapolis market and in 1990 moved its headquarters here from Fort Wayne. Three years later, ownership passed to Bill, Jerry and Mike Dahm.

These days, Mike's aims to grow about 10 percent per year, which works out to about three new locations annually.

Three factors

Bill Dahm attributes the company's success to three factors: location, technology and people.

The location part is easy to grasp. The company pays a premium to cozy up to major retail centers and traffic arteries.

"It's all about convenience, convenience, convenience," Dahm said. "We are not afraid to spend money to buy choice real estate."

The owners also aren't afraid to spend money on new technology--anything that cleans cars better and gets customers in and out faster.

"We do not get behind," Dahm said. "If we have a breakthrough, we install it in every one of our locations. For example, we came out with a new wheel-cleaning system about six months ago. We went to every store and spent money to put that in."

Some of those innovations are purchased from manufacturers, but the company develops about half the equipment in a Mike's carwash tunnel itself. Even the soap is a proprietary blend called Mike's Signature Shampoo.

"For big, multi-site carwash operators, that's not very unusual," said Mark Thorsby, executive director of the International Carwash Association. "A lot of the new equipment that's being offered in the industry is being developed by carwash operators who are building prototypes for use in their carwashes."

But the lynchpin of Mike's success, Dahm said, is getting the right workers. Each location has about 15 employees, composed of a small group of full-timers and a larger cadre of part-time help. The part-timers, incongruously decked out in white dress shirts and ties, can be seen spraying the bugs off customers' tires before they enter the wash.

"Every one of those kids looks like they've come right out of a Disney training program," Thorsby said.

Dahm likes to see his 600 employees well-groomed, smiling and helpful. He believes the success of his company hinges on them.

"We live and die on repeat business," he said. "We remind our people of that all the time. The focus of our training is not, 'How do you turn on a pump?' or 'How do you spray the car?' It's more about, 'How do you treat people so that they really want to come back and spend money at your business?'"

Because it doesn't take a very big staff to run a location, the company can be choosy about whom it hires. Dahm said Mike's gets about 50 applications for each new hire. Employees get hours of on-site, computer-based and classroom training.

That people pleasin' mentality can be seen in the stuffed animals carefully positioned throughout the company's locations. They originally were placed there to help small children cope with the intimidating spectacle of riding through the dark, noisy carwash. Now they've become an institution, regularly dry cleaned and replaced and even rating their own line in the budget.

"We have training on how to clean them, where to place them, what kinds of animals to buy," Dahm said. "It's just part of the experience. If you can get people to smile while they're going through your business, that isn't bad."

Still going and going and ...

Although economic times are tough, Dahm said neither the threat of recession nor steep fuel prices have made a dent in volume.

"I was a little concerned as gas prices got above $4, but to my amazement, our business has held up," he said.

Indeed, conventional wisdom holds that the carwash industry is fairly recession-proof. When money is tight, people hold on to their cars longer but still want them to look clean and shiny.

But just in case, Mike's has introduced an early-bird program that offers customers a discount if they show up between 7 a.m. and 9 a.m.

And despite the financial turmoil, the company's expansion plans continue apace thanks to its strategy of self-financing most growth; bank loans are tapped only occasionally.

Mike's leaders have set their sights on the South Bend/Mishawaka area next and hope to double the number of locations in the next 10 years. The company might grow faster if it went public or franchised, but Dahm rejects that notion.

"As much as we like to grow, our No. 1 priority is keeping our reputation," he said. "We feel we can do that better as a private family business that doesn't have to worry about quarterly results."

He finds franchising equally unappealing. Few potential franchisees, he asserted, have the deep pockets to kick in the $3.5 million to $4 million needed to secure a primo site and build a state-of-the-art facility. Or, for that matter, to run it.

"Frankly, people have no idea what it costs if you want to go first class," Dahm said. "It looks pretty easy when you come in as a customer, but there's a lot of stuff that goes on behind the scenes. It's truly a team effort."

The other stumbling block is the fact that franchises would dilute the hands-on family supervision that's a keystone of the company.

Put simply, a bunch of newcomers might not "get" the Dahms' management style.

"We're really in the people business," Dahm said. "We just happen to wash cars."

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