W20352

EXPRESS BIKE WORKS: WASHING IN STYLE

Arun P. Sasi and Amol S. Dhaigude wrote this case solely to provide material for class discussion. The authors do not intend to
illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other
identifying information to protect confidentiality.

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Copyright © 2020, Ivey Business School Foundation Version: 2020-04-28

On the cold and breezy evening of April 26, 2018, Niraj Taksande, director of Express Bike Works (EBW),
was sipping hot coffee while contemplating the service delivery model and retail format of his new venture.
Should EBW go for self-owned stores or opt for a franchise model, and what would be the most appropriate
retail format? A much-awaited meeting for raising funds (series B) with investors was scheduled on May
10, 2018. The investors wanted Taksande to provide insights on the retail business format and the expansion
strategy (self-owned stores or franchise model). As the business concept was novel, the issue of acceptance
of EBW’s services by the market was making Taksande restless.

EXPRESS BIKE WORKS (EBW): COMPANY HISTORY

EBW, which was founded in June 2013 by three young and talented engineers, was going to change the
motorcycle washing landscape in India. The unique selling proposition of EBW was to wash any two-wheeler
motorcycle (or scooter) in just two minutes, using only an optimal quantity of water and human effort.
Taksande was one of the founding directors and solely responsible for machine design and development. He
was an avid biker and had toured India multiple times on his motorcycle. Like most bikers, Taksande
considered his motorcycle very close to his heart and always wanted to provide it with the best possible
maintenance and care.

The idea of EBW stuck with Taksande during his business school days. He had periodically taken his
motorcycle to be washed, but the long queues and unprofessional behaviour at the washing centres, which
used manual processes, always frustrated him. He wanted to find a solution to this problem, and during his
master of business administration summer project, he designed India’s first fully-automated motorcycle and
scooter washing machine in his garage.

With the help of his two friends, Taksande gathered a modest amount of seed capital and manufactured the
first working prototype of the machine in late 2013. The first public disclosure of the machine took place
during the prestigious Auto Expo 2014 at Goa, India. Everyone greatly appreciated EBW’s motorcycle
washing solution, and inquiries soon started to pour in. One of them was from a prominent motorcycle
manufacturing company from Japan, which installed the first commercial machine at its service station in
Mumbai; the pilot project was a huge success. However, EBW required additional funding for product
development and market expansion.

This document is authorized for use only in PABLO MARSHALL - THOMAS REYES - ALVARO CHACON's MG-ONLINE 2022 TOMA DE DECISIONES BASADAS EN DATOS at Pontificia
Universidad Catolica Chile (PUC-Chile) from Oct 2022 to Dec 2022.
 Page 2 9B20E009

SERVICE DELIVERY PROCESS

EBW’s motorcycle wash concept was new and innovative. The washing process was designed to optimize
time, labour, space, water, and other ingredients for washing. The machine consisted of a rectangular metal
box with transparent glass walls.1 This allowed the biker to watch the motorcycle getting cleaned in real
time. One employee was required to operate the machine; the job consisted of parking the motorcycle inside
the machine and pressing the start button. The machine did the rest of the job in just two minutes. After
that, the operator removed the motorcycle and returned it to the customer along with the bill.

EXPANSION PLANS

After successfully implementing motorcycle washing machines in multiple locations in Maharashtra,

Karnataka, Jharkhand, and a couple of overseas locations, Taksande wanted to expand his business by opening
independent stores in key locations in South India. The three strategic locations selected for expansion were
Udupi, Chennai, and Bangalore. Taksande researched the market potential of these three locations and found
that there was a 70 per cent probability of having a favourable market. The steady growth of two-wheeler
segments along with the boom in electric vehicles in these cities had a positive impact on market potential.

The expansion could be done by following one of two models: self-owned stores or franchise stores. If
EBW expanded through self-owned stores, it would enjoy greater control over technological expertise and
other propriety resources. In comparison, the franchise model would be relatively economical, and EBW
might benefit from the expertise some franchise owners would have in marketing, sales, and operations of
motorcycle wash services. Taksande estimated that he would generate a profit of ₹143,0002 per month in a
favourable market and ₹68,000 per month in an unfavourable market if EBW expanded through self-owned
stores. If it expanded through franchising, Taksande expected to receive a franchise fee of ₹132,000 per
month in a favourable market and ₹82,000 in an unfavourable market.

EXPERT OPINION

Taksande consulted with Varun Pai, who was at the time the owner and operator of multiple car wash locations
in Udupi, Manipal, Chennai, Mangalore, Bangalore, and Hyderabad. Pai, who had extensive knowledge of
the market scenarios in these major cities, informed Taksande that if the self-owned stores were located close
to petrol stations, the overall profit generated would be at least 15 per cent higher than Taksande’s estimate
of ₹143,000 per month. In the case of self-owned stores in other locations, the profit generated would remain
the same as estimated by Taksande. However, due to enormous demand and space constraints in these cities,
the probability of getting locations for self-owned stores close to petrol stations was about 35 per cent.

Pai also estimated that, if the expansion were done through franchise stores, the overall profit generated by
locations close to petrol stations would be 18 per cent higher than Taksande’s estimate. If a franchise store
was opened in association with an authorized motorcycle service station, the overall profit would be as high
as 25 per cent more than Taksande’s initial estimate. For all other locations, the overall profit would remain
the same as that estimated by Taksande. According to Pai, the probability of setting up a franchise store
close to a petrol station was 40 per cent; that of setting up near an authorized motorbike and motorcycle
service station was 20 per cent; and that of setting up in other locations was 40 per cent.

1
The demo of EBW’s bike wash could be seen online at “EBW—Automatic Bike Wash Machine,” YouTube video, 5:24, posted
by “Express Bike Works,” May 5, 2018, accessed March 15, 2020, https://youtu.be/ttODC2RgT6o.
2
₹ = INR = Indian rupee; ₹1 = 0.015 USD as of April 30, 2018. All currency amounts are in INR unless otherwise specified.

This document is authorized for use only in PABLO MARSHALL - THOMAS REYES - ALVARO CHACON's MG-ONLINE 2022 TOMA DE DECISIONES BASADAS EN DATOS at Pontificia
Universidad Catolica Chile (PUC-Chile) from Oct 2022 to Dec 2022.
 Page 3 9B20E009

THE CONSULTANCY FIRM

While Taksande was busy in his office, he received an email from Pai. Pai had come across a well-known
consultancy firm that provided information on the service distribution strategy. The consultancy firm had
been operating since 2013 and provided information on a fixed-rate basis. Pai hinted to Taksande that, for
EBW’s expansion plans, the consultancy firm would charge up to ₹20,000 for information about expansion
through self-owned stores. Pai also highlighted that the consultancy firm did not operate in the domain of
franchise models for the business handled by Taksande. Finally, Pai shared a document regarding the
performance of the consultancy firm on self-owned stores in previous years (see Exhibit 1), which made it
possible to estimate the accuracy of the firm’s predictions.

THE DILEMMA

The dilemma faced by Taksande was to decide on a distribution channel—whether to go for self-owned
stores or opt for the franchise model. Both options had strong implications, financially and strategically.
The decision, further complicated by the probable locations of new stores, had multiple implications for the
future growth of EBW, including its ability to raise Series B funding from investors. One of the investors
had expressed a strong desire to fund EBW, provided that its distribution strategy was impressive. Taksande
was not sure about paying a high premium to the consultancy firm but was keen to factor in the information
for the expansion strategy. After several sleepless nights and a few days of gathering and modelling data
for self-owned stores versus the franchise model, Taksande pondered the selection of an appropriate retail
format. As he looked at his empty coffee cup, he remembered a famous idiom: “Experience is something
you do not get until just after you need it.”

Amol S. Dhaigude is faculty in Operations and Information Science Management at the T A Pai Management
Institute India. Arun P. Sasi is a second year PGDM student at the T A Pai Management Institute India.

This document is authorized for use only in PABLO MARSHALL - THOMAS REYES - ALVARO CHACON's MG-ONLINE 2022 TOMA DE DECISIONES BASADAS EN DATOS at Pontificia
Universidad Catolica Chile (PUC-Chile) from Oct 2022 to Dec 2022.
 Page 4 9B20E009

EXHIBIT 1: HISTORICAL FORECASTING DATA ON LOCATIONS OF SELF-OWNED STORES

Predicted Locations Obtained Locations

Number of
Year Petrol Other Petrol Other
Predictions
Stations Locations Stations Locations
2013 65 27 38 21 26
2014 95 32 63 25 47
2015 116 41 75 34 61
2016 134 61 73 56 61
2017 160 58 102 54 88

Source: Created by author using company documents.

This document is authorized for use only in PABLO MARSHALL - THOMAS REYES - ALVARO CHACON's MG-ONLINE 2022 TOMA DE DECISIONES BASADAS EN DATOS at Pontificia
Universidad Catolica Chile (PUC-Chile) from Oct 2022 to Dec 2022.