Context of Problem
The current problem for Bernard “Bernie” West, the owner of Bling Max Car Wash is choosing between installation of new equipment for blow-off, which will cost around $11,500 and would leave the car wash at risk. The loan requires taking out equity of the car wash and additionally paying 6.5 percent interest. The problem of not taking out the loan is that, if any competitor opens up nearby it is possible that some of the customers might choose the other car wash service. Currently, the business is doing well with business cost 35% of the business revenue. But, it could be due to the reason that there are no other car wash outlets nearby and lack of competition gives customers no other option or due to the continuous demand, which leaves the car wash empty only 6% of the time when it rains.
Current Situation
The main dilemma for Bernard West is to either to take out a loan and pay interest, or choosing to keep the same facilities and lose market share to a new investor. By taking the loan the car wash faces investment risk and without the loan the business competitive risk. In both cases, there is a significant business risk associated with the long-term survival and financial success of the company. An action needs to be taken by Bernard West; either he needs to take out a loan to add new blow-off equipment or to maintain the same facility at Bling Max car wash.
