Car Wash M&A, The Column

Pulse on Carwash M&A Activity

We’ve seen the shift in growth strategy for carwash platforms and how they are approaching scalability. The old playbook of acquiring existing platforms and blending down the multiple through Greenfield developments just doesn’t work today. The cost of building new units has increased, with budgets reaching $7.5 million or more, and delays in construction and ramp-up time further impact the overall investment. This shift has demonstrated that acquisition activity is becoming more attractive, with multiples generally coming in at the 8-10 range.

For owners, this means now is a good time to explore your options if considering an exit. The buyer pool remains focused on quality businesses with prudent capital deployment, strong same-store sales comps, financial discipline and a healthy growth trajectory. This is particularly true for geographic areas or MSAs that are harder to penetrate.

Democratization of Technology

Operators are laser-focused on improving margins and adding to the bottom line by maximizing efficiencies and strengthening their operations. With that, we’ve seen a democratization of technology available for the broader carwash operator. The emergence of more sophisticated companies looking to provide supplemental support solutions specifically geared toward the carwash space is freeing up time and attention for operators to focus on operations. What once required an expensive agency or dedicated in-house development team is now more widely available, and by engaging with these support and technology solutions providers, many operators are increasing efficiencies while delivering high-quality services and cultivating customer loyalty.

For example, AMP Memberships provides a custombranded mobile application platform solution developed by carwash operators to engage and nurture customer relationships while providing valuable data insights. By collecting demographic information and combining it with customer activity and business insights, AMP Memberships’ platform enables targeted marketing that aims to attract and retain customers based on their preferences and interests. This personalized approach allows carwash owners to connect with customers on a deeper level that in turn fosters long-term relationships that are extremely valuable.

Understanding the Lifetime Value of a Customer

The ability to assign a predicted lifetime value to each customer helps operators understand the expected revenue, operating costs and potential duration of the customer relationship. AMP Memberships platform uses your customer data to identify and optimize lifetime value through targeted actions. For example, AMP empowers carwashes to identify happy customers (e.g., they have washed three times in the last month) and ask those customers to leave public reviews or easily refer friends and family through the app — these actions increase loyalty and maximize the value of each customer. For more about leveraging customer data to cultivate long-term loyalty and grow memberships, listen to Episode 13 of Car Wash M&A, The Podcast, “Talking Tech: Data, Marketing, and Memberships,” featuring an interview with Dennis Dreeszen and Adam Trien, founders of AMP Memberships.

Processing customer inquiries and complaints can be a big pain point for operators, fraught with bottlenecks. Failing to promptly handle such inquiries negatively impacts a customer’s relationship with the company. Comprehensive customer experience platform Retention Express provides a white-labeled outsourcing service tailored for carwashes to handle customer inquiries, relieving operators of the burden, and allowing them to focus on core operations. By using professional carwash-focused call centers, Retention Express ensures that your customers receive prompt and quality service across various communication channels such as phone, email, text messages, and web chat. This is particularly beneficial during peak volume times, preventing distractions and long wait times that can frustrate customers.

Beyond simply addressing immediate customer needs,  this platform captures valuable data from these interactions, providing operators with a comprehensive dashboard that offers insights into customer sentiment, preferences and behavior. For instance, it tracks why a customer wants to cancel their plan, shedding light on what’s impacting churn and enabling businesses to make informed decisions to enhance customer satisfaction.

In a tighter economic environment, leveraging external expertise and technology can be a huge benefit in helping optimize your business. Partnering with the right solutions providers can help streamline operations, improve customer service, and gain actionable insights that contribute to the growth and success of your carwash without having to reinvent the wheel.

Saving Money as Cost of Capital Rises

As the cost of capital continues to rise, carwash owners are turning more of their attention to how to save and ultimately improve profitability and enterprise value. One way to do so is to take a serious, detailed look at your credit card processing fees. But frankly, no one wants to or has time for that. By engaging with a specialist to examine credit card processing statements, carwash owners can uncover easy methods to significantly reduce processing expenses. Merchant Advocate’s services take a deep dive into credit card processing fees by using a forensic accounting approach. They assess how charges are coded, search for errors, and seek to find savings without requiring carwash owners to switch processors or pay upfront fees.

In today’s credit card-driven world, a 2 percent difference in processing fees can make a substantial impact on your bottom line. By leveraging innovative technology and machine learning models, Merchant Advocate analyzes your credit card processing charges, compares them to your historical data and industry peers, and identifies unusual categories. They then work on your behalf to negotiate lower fees with credit card processing companies. For example, they can detect and rectify recurring charges associated with declined credit cards, which can accumulate into substantial expenses for multi-unit operators. In one case study, they identified $60,000 in annual charges for failure to respond for an 80-unit operator, highlighting the potential for significant savings.

Adapting to Market Trends

As mergers and acquisitions regain momentum amidst high capital costs, there’s good news for carwash owners considering an exit. With demand outstripping supply, buyers are seeking well-performing carwashes in desirable locations. Embracing new technology is crucial, as it streamlines operations and boosts cash flow. By adapting to these changes and implementing effective strategies, carwash owners can continue to thrive in an evolving industry.

Lanese Barnett is Senior Vice President of Business Development at Amplify Car Wash Advisors, the number one advisor of carwash chains nationwide. With a mission of creating wealth for clients, Amplify helps carwash owners sell, partner, or grow using practical experience as operators coupled with expertise in mergers and acquisitions and capital advisory services. Keep up to date on the latest carwash M&A activity with Car Wash M&A, The Podcast Lanese hosts monthly and sign up for Car Wash M&A, The Newsletter at AmplifyWash.com. You can reach Lanese at [email protected]

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