How Long Will the Market Stay This Hot?

Why now may be the right time to sell your car wash

The car wash industry has seen a significant increase in valuations, and operators are asking themselves is now the right time to sell? Is it better to take some chips off the table at what could be peak valuations, or continue to roll the dice? If we’ve learned anything from previous business cycles, things can’t stay this good forever. Here’s what you need to know now if you are considering selling car wash business.

Private equity-backed chains are getting more aggressive.
Demand by private equity is strong with record money entering the space as the last 12 months have provided solid returns during this recession and COVID economy compared to other retail investments. Private equity sees the professional car wash industry still at an infant state regarding consolidation. But as more private equity-backed brands achieve scale in a market, at some point it becomes cheaper to build than to buy an existing location.

Regional chains continue to develop at a tremendous pace.
Regional chains are racing towards the 100-unit mark. It wasn’t that long ago that car washes were building two or three car washes a year. Now, there are several groups that are looking to build 25, 50, or even 100 car washes a year, with a primary goal of expanding their own footprint, even if that means developing a site across the street from an existing location. The old days where there was an assumed agreement amongst car wash owners that you would stay out of each other’s immediate space are gone.

The biggest risk to your business valuation is development.
As markets become more saturated, the value of smaller chains starts going down. When brands become established, continue to build up and develop out, it makes the small operator less valuable. The current market is looking to build dominant brands in regions, so there is an opportunity if you have something of value. Right now, there is so much interest and the valuations are so good, but as the field becomes more crowded and development is at an all-time high, that will change in the near future.

Rising inflation could make it more costly to build, therefore lower return on the exit.
A company’s cost of capital is a key factor in determining valuations. Rising interest rates results in greater borrowing costs, thus increasing a company’s cost of capital. The cost of capital has an inverse relationship with valuations. In other words, if a company’s costs of capital increases, valuation multiples typically decrease.

Credit availability may tighten if loans begin to default.
Despite a recovering economy, the lingering effects of COVID can cause loan defaults for companies and consumers with exposure to certain industries that have been disproportionately impacted by the pandemic. Banks putting capital aside for loan loss provisions could limit the amount of funds available for new loans.

A change in tax law could adversely impact the incentives of both buyers and sellers.
It is widely expected that some combination of changes to the treatment of capital gains, corporate tax rates, and bonus depreciation could occur in the future. If taxes on capital gains increases, sellers could be less motivated to trigger a taxable event by way of a sale. Similarly, changes in the handling of depreciation could impact the relative attractiveness of the car wash industry to buyers given the capital-intensive nature of the business.

Conclusion
The car wash industry has changed dramatically in the last 10 years. It is evolving from a mom-and-pop, local business and pushing towards mega-branded chains with 20-30 sites in a market, and some chains with aspirations to grow on a nationally recognized level. So, if you are considering selling your car wash, now is the time to really explore your options while you have the interest of buyers racing to scale.

Jeff Pavone, Partner, at Amplify Car Wash Advisors, a national full-service car wash advisory firm with expertise in mergers and acquisitions and capital advisory. Amplify helps get you the most for your car wash by discovering the true value of your business through a proven competitive bidding process that positions you with options beyond accepting the first offer that comes your way. Learn more at AmplifyWash.com or contact Jeff at [email protected].

Jet Brite Car Wash

With decades of hands-on experience as operators, when it came time to sell our car wash business who we sold to was important to Sam and me. Chris [Jenks] and the team at Amplify listened to us throughout the entire process. They found the right buyer in ZIPS who would be a good steward of the brand and helped find the best path forward for us where we can continue pursuing our passion for manufacturing high-quality car wash equipment.  

Jet Brite Car Wash  
Dave Delesandro  | Founder

Quick N’ Clean

My relationship with Commercial Plus over the past 20 years has been a very professional and trustworthy relationship. The feel of trust is very important in this business, and Jeff Pavone and his staff have exhibited a level of trust that makes me continue to feel that they have my best interest front of mind. I deal with many brokers across the nation, and my best experiences and results have been achieved with Commercial Plus representation.

Quick N’ Clean
Richard Karle | Owner

Zips

It’s been a great experience working with Amplify Car Wash Advisors to bring these sites into the ZIPS portfolio. We look forward to serving Dallas area customers with an enhanced car wash experience unique to ZIPS, with the added benefit of our extensive network of stores. This year we have continued our aggressive growth track with the goal to truly shine in our efforts to be the best express car wash provider in the industry and it’s acquisitions like this that help us reach our goals.

Zips
Gene Dinkens | CEO

ModWash

It was truly a pleasure to work with the Amplify team on our most recent acquisition of three additional operating locations in our home state of Tennessee. Their team provided great support and ensured a timely and seamless closing process, and we are excited for the additional growth opportunities this relationship will produce in our near future. We know this is the first of many transactions we will successfully complete with the Amplify team as we grow from our current operating store count of 23 to well over 200 locations across 14 states in the next two years.

ModWash
Brian Thornton | COO

Busy Bee Car Wash

For years I’ve talked to a lot of brokers with the same goal; sell your car wash chain as quickly as possible. But I chose to work with Amplify because they were interested and invested in the emotional side of selling my business and truly value long-term relationships. They weren’t forcing me to take a deal just to take a deal. They listened to my concerns and goals then educated me on all my options. And that’s how I decided on the right partner for my chain specifically. I went to bed at night after I signed the papers knowing I got the best deal possible versus just having any deal put in front of me that is only about money.

Busy Bee Car Wash
Jim Mulholland | Owner

Q Car Wash

We really appreciate Jeff and his entire team at Amplify. Their expertise and deep industry knowledge helped us navigate our options and best showcase our strengths to maximize our value. Caliber is a good fit for Q Car Wash as they look to expand in North Texas.

Q Car Wash
Viran Nana | COO

Cobblestone Auto Spa

I have known both Jeff and Bill for over thirty years combined, and respect them both as experts in our professional car washing industry. Their unique and individual strengths bring very strong talent and advice to operators, sellers, and buyers with sharp knowledge, client’s best interest in mind, and an actual personal touch. They hold the expertise and performance track record to hold a very high level of respect within this rapidly-changing car wash industry.

Cobblestone Auto Spa
Tuck Bettin | CEO

Oasis Car Wash

Turning over a business you started from one shovel of dirt 25 years ago and grew to several locations is a difficult and even uncomfortable process. So, when it came time for Larry and me to sell, we chose Amplify Car Wash Advisors to guide us through the process because of their strong reputation and thought leadership in the industry. Their team was professional and did a great job walking us through each step.

Oasis Car Wash
Dallas Hawkins | Partner

Busy Bee Car Wash

Selling our business after 52 years is big deal and certainly not a decision I took lightly, turning over our family legacy was an emotional process and I appreciated that the team at Amplify respected that. They helped me understand my options and found the best deal for me.

Busy Bee Car Wash
Jim Mulholland | Owner

Ducky’s Express

I have been a multi-site developer and operator in the car wash industry for over 30 years. Four years ago, a partner’s health concern forced me to sell a portion of my portfolio, and during that process, I was introduced to Jeff Pavone of Commercial Plus. I was immediately impressed with Jeff’s knowledge of my industry and his volume of successful deal closings. In a very short period of time, Jeff found the right buyer at a very fair price, and the transaction closed shortly thereafter. I was looking for a team with honesty, integrity, and a proven track record of success, and I found all of that in Jeff.

Ducky’s Express
Richard Miller

Trademark Car Wash

These are some of the most exciting times for car wash owners. As we grew 350% in revenue in just one year, we recognized the time to partner up with a top-tier team that has mastered growth in retail and specifically the automotive industry. Amplify Car Wash Advisors had helped us acquire, raise capital, and was the perfect partner to help us reach this next chapter of the Trademark story.

Trademark Car Wash
Andrew Goldberger