Fleet Clean heals self-made wounds
Mobile vehicle washing is Fleet Clean’s business, started as a side hustle.
Kill not the goose that lays the golden egg, warns an old English idiom.
Fleet Clean CEO Scott Marr has a new idiom for the franchise industry: Don’t kill it, but you can sell it. That’s exactly what he did to pay off debt and kick-start the franchise arm of his mobile vehicle-washing business.
“We started franchising in 2013. One of the reasons is because we had so much debt at the corporate level. And some of it was not advantageous and at a higher rate than was reasonable,” said Marr. “Leverage to me equals risk, and it just didn’t make sense anymore. So we had to say, lets refinance some debt and really grow this brand.”
The brand, which started as a side-hustle for the millennial CEO around 2009 during the height of the Great Recession, had grown too fast.
“I think with any business that’s growing, every founder or president or CEO will often find themselves where they’re either growing too fast or growing too slow. Fortunately we were on the growing too fast side,” said Marr, who said he regrets growing so fast so early. “The financial struggles were more or less self-inflicted. It wasn’t the outside factors, it was me. I was the problem.”
“I was the problem,” says CEO Scott Marr, about financial woes that are now in the past.
He said 2010 to 2013 was tough because capital was still hard to find or expensive for smaller companies like his. Growth amplified the capital challenge.
“Then the issues were multiplied, instead of needing one truck, we needed four then five—and they are about $75,000 each. Financing was tough, so we were in the position where we had to ask, Do we continue to grow at this rate or do we stop growing at this rate and pull back?”
He looked at refinancing, but that would have just moved the debt around without actually getting it off the books.
“We had a lot of revolving debt,” he said. “The equipment and stuff we had was already at the three- to four-year mark, and a lot of banks said, ‘Why would we refinance trucks that might not make it to the five-year mark?’”
So instead of forging ahead with more debt or slowing growth, he decided it was time to franchise. It was something he wanted to do already, but their situation accelerated the move to a franchise model in 2013. They sold one franchise, but to give the program a boost they refranchised corporate locations soon after.
Washing away debt
“We refranchised our flagship location in Atlanta as it was essentially paid for. So we said, ‘We’ll sell Atlanta, refranchise it and keep a royalty stream off it and it will kick-start our franchise system,’” said Marr. “It worked out really, really well, we were able to pay off 100 percent of our debt, and buy our corporate office.”
Since then, Fleet Clean has become a franchise growth brand, surging to 28 locations, 22 of which are franchised markets. Each of those markets is a little different. Marr said the tier-one markets such as Atlanta, Dallas or LA have more than 2 million people. In those markets, there is plenty of demand for Fleet Clean from limo fleets, car and RV dealerships and mobile sales people. There is also a lot of demand from local delivery trucks.
“Most of our business is really about the last-mile business—trucks that are going to stay in the same city,” said Marr. “Coca Cola for example, they’ll have a truck bring in Coca Cola, package it and load it onto their trucks to distribute to their trucks throughout the city. Then that same truck will come back to the same place every night.”
It’s a weekend-heavy schedule to clean those fleets while they are sitting on a lot. A single Fleet Clean truck can wash 70 to 80 trucks every day.
Marr said he’s looking especially for franchisees who can manage multiple trucks and crews to wash several hundred vehicles each day. While the system is growing, he said it’s a little tricky to explain to prospective owners.
“It’s not very tangible and it’s not something most people know about. A lot of people say they never even heard of this industry so we have to start at the beginning and tell them why it’s needed, what the potential is and show them the FDD and the Item 19,” said Marr. “People ask for a lot of data.”
Despite that learning curve for prospective franchisees, that data is compelling. Since August of 2016, sales have grown by 63.5 percent across the system. The best markets average $1.25 million to $1.3 million with margins starting at 25 percent and ranging north of 30 percent in the highest-grossing markets.