About the Episode:

In this episode of Car Wash M&A, host Lanese Barnett chats candidly with Matt DeWolf, chief marketing officer of the International Carwash Association and host of CAR WASH, the podcast, before a re-broadcast of an interview Matt had recently with Amplify Founding Partner Jeff Pavone. Jeff, who now proudly bears the honor of ‘most featured guest’ on Matt’s show, reviewed notable highlights and trends that emerged in the car wash industry during 2023 and shared predictions for the year ahead.

Tune into episode 19 for behind-the-scenes commentary with Lanese and Matt where these long-time friends talk shop, nerd out about car wash marketing, and dive further into themes from the episode.

For more from Matt DeWolf and CAR WASH The Podcast, you can subscribe wherever you like to listen, or you can download the CAR WASH Magazine app to keep up with industry news.

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More about Matt DeWolf:

Matt is the Chief Marketing Officer for the International Carwash Association and Editor-in-Chief of CAR WASH Magazine. With a passion for helping people tell better stories, he’s spent the last 15 years visiting car washes across the globe and telling the stories of the professional car wash industry. When he’s not visiting a wash or asking people more questions than they want to answer, he’s spending time with his three children and his wife Kacie. He also loves to play baseball, drink wine, and consume as much content as humanly possible. He currently serves as the Alumni Association Board President for Simpson College.

More about Jeff Pavone:

Jeff Pavone is a leading advisor to the car wash industry, successfully completing more than $5 billion in car wash-related transactions. A lifelong entrepreneur, Jeff is the owner of Commercial Plus, a real estate and business brokerage firm, and a partner at Amplify Car Wash Advisors, a mergers and acquisitions and capital advisory firm specializing exclusively in the car wash industry. Leveraging his longstanding relationships in both the car wash and investment banking industries, Jeff partnered with car wash veteran Bill Martin in early 2020 and launched Amplify Car Wash Advisors to address the evolving needs of car wash owners. Together, Jeff and Bill recognized the need for providing guidance tailored specifically to car wash owners when it comes to selling or scaling their business. Today, Amplify has completed complex transactions for some of the most well-known and widely respected car wash chains in the country and is the only group that bridges the gap between investment banking and car wash operations.

Check out the full transcript below:

Lanese

Hello, and welcome to episode 19 of Car Wash M&A, The Podcast. Today I have Matt DeWolf, who is also the host of CAR WASH, the podcast by the ICA, the International Car Wash Association. First of all, welcome, Matt, thank you for joining me today.

Matt

Hey, Lanese, it’s always good to see you.

Lanese

Yeah, you too. So you and Jeff Pavone, our partner at Amplify Car Wash Advisors, recently recorded for your show an episode, and we’re going to re-broadcast that show in its entirety after this, but I just wanted to take a few minutes to chat with you about what big themes stuck out with you from your conversation with Jeff, and then just dive deeper into a couple of those that I found really interesting as well. First, what was the most surprising thing that Jeff shared in that recent episode about what he sees going through the end of 2023, or coming into 2024?

Matt

First of all, it’s always fun to have Jeff on because I always learn something, whether that’s what his favorite hooded sweatshirt is, or something cool about the industry. But I think one of the things that kind of bubbled up for me was just the reality of this pause state that we’re in. We kind of felt it, and you could see it in the news that was coming out, but to be able to sit down and talk and say, “Okay, what are you actually seeing? You’re on this side of the business, where you’re doing the deals and talking to many more people than I ever am…What’s happening?” And to have that kind of validated that, hey, it’s not bad. We’re just paused. We’re going to settle down for a minute. We’re going to work on our business; we’re going to really focus on being super efficient and super profitable. And we’re going to just keep going. And I thought that that was super, super helpful for me just to ground me and kind of what I look at every single day.

Lanese

Right, and I totally agree with you. We have this really fevered pace of just interest in general in the car wash industry. And you know, when the party is going, it seems like it’s going forever, but also when there is a pause in the music, it doesn’t mean that it’s completely stopped or that everything that was good about the traction, and the momentum is gone. But it does have to have a more stabilized or normalized pace at some point. You can’t go at the highest gear all the time. And so it seems like this is just helping that reset and recalibrate as an industry for continued interest and success overall.

Matt

Yeah, I mean, the follow up to that, honestly, was this whole conversation around getting back to our roots really. Jeff was talking, and I think he made some comment about the great car washers was built car wash companies; they don’t just do a great job of washing cars, and I thought that was so resonant, especially because in my mind, I was thinking about how quickly everything was going. And then as you talk to people that started to slow down, they were always talking about, well, we’re going to take this time to focus on our infrastructure. And it’s like, man, I get the idea that, you know, people talk about how we’re trying to build the plane as it’s going down the runway and taking off. And that’s an approach, but you can’t really do that if you don’t have the parts in place.

Lanese

Right.

Matt

And so that was missing. That’s what’s always been missing, I think.

Lanese

Or the mechanics to build anything! You have to have some of these things there. Otherwise, that’s just a hope and a dream. I loved that, too, and the idea that the successful car wash companies are successful companies. Period. They are successful entrepreneurs; they are focusing their time and resources on their team, their leadership, their ability to build a culture within their organization to then take that culture and outwardly showcase that to their customers to be able to provide that great experience. But they need to feel like they’re empowered and they know what’s going on and feel part of the team, feel validated so that they can share that. And this is a feel good service where we want people to come and enjoy the experience of getting their car washed. A lot of times, this is 5, 10, 12 years ago, but we would talk about people putting washing their car in with going to the bank, getting their dry cleaning, and that it was this chore or commodity that was very interchangeable that was like on this checklist of like womp, womp, womp, womp, womp. And then now, it’s a totally different experience. And I really value the car wash industry for embracing that experiential nature and really pushing the boundaries on how we can, you know, lean into that and do more and be creative. And I think that’s a really cool part of it,

Matt

Well, and I think it’s only going to get better. I mean, now that we are so much more visible, and there’s so much more interest, both just in general terms, and from a financial perspective. All this money came into the industry, and we can do so much more, and it’s pushing so much innovation, and it’s pushing all of these really great entrepreneurs in this industry to think differently, and to like stretch those muscles, right? People were kind of building up their businesses and maybe were getting pretty comfortable doing that. And now, there’s all this new challenge and all this new pressure. And it’s a really kind of perfect place, I think, for those folks who do a great job to really expand and disrupt in new and exciting ways. I’m super excited to see what comes out of that.

Lanese

Yeah. And it’s mirroring that strength in the core infrastructure of just the sound business practices, but also the ones that are more apt to lean into innovation and embracing new technologies or trying different things that just because XYZ has been done a certain way doesn’t mean that there’s not another way to do it. And I know you guys touched on some new technology and different things that are coming out with kiosks or with how companies are adding locations or maybe having acquisitions, and then how do they fold those into their system? And there are new and creative ways that companies, that the solutions providers, are providing that answer or that option to look at it differently than just the same one way that’s being done, like rip everything out, you know, put the same system in or however.

Matt

Yeah, I mean, that’s the area where it seems like we’re most ripe for kind of disruption. And at some point, when money is expensive, and there isn’t enough of it, you’ve got to make some decisions. And so I think the technology that’s coming out of that is going to be super fascinating. And it’s something that we’ve been talking about for a long time, right? When are we going to get to be at a point where we have stuff like the McDonald’s pay stations where you are just tapping in your order? Or how are we going to leverage some of this data that we’re able to start collecting now and use smartly to create better customer experiences? I think we are so early on and all of this, it’s going to be super exciting.

Lanese

I do, too. And I always love sharing in that enthusiasm with you on like the kind of nerdy marketing and experience side and just watching the industry over time. And I mean really coming from: Are you going to laminate your piece of paper on your clipboard when you put it in the customer’s window? Are you going to make them memorize the script? There are so many things that have advanced that we have been, as an industry, we have the opportunity to keep pushing this further. And with money being more expensive, necessity breeds innovation, so it does make that ripe time, and all the kind of right ingredients, to explore new ways of doing things that can be really exciting.

Matt

Yeah, I think you’re absolutely right, Lanese. We didn’t have to, for a long time. Nothing was pushing us to, so if somebody got a really great idea, and they wanted to try it, they could, and they could go do that. But they didn’t need to. And now, now you do need to. You need to be differentiated. And I think the thing that you made me think about as you’re talking about kind of data and experiences that we shouldn’t leave out is the employee experience, right? I mean, the way that we can enable employees, and make them feel good about their experience every day, is being totally enabled because of data, because we can see how they’re performing. We can optimize for that. We can get our own operational numbers much faster than we ever could before. And we can start seeing that in a dashboard that helps us make decisions. And then our employees feel good about that. And they feel the whole success of the organization, instead of waiting for a quarterly report to come out and wondering, oh, well I tried this change in my sales tactics. And I don’t know if it worked until three months later. That doesn’t feel good.

Lanese

Right, right. And even with that, having the employee have that onus to where they have to make the change in their sales tactic to see if it works, when really we need better training or to think through how can we empower them to have these tools and resources to be successful? I was on a car wash tour with one of the associations. And I saw at one of the places inside the office area — it was an express exterior, but they had an office with the employee lounge and things like that — they had a table, and it had headphones with it. And it was a dedicated training area. And I just loved it, because this is a new employee’s desk that has their training computer or tablet setup that they’re going to go to, that they’re going to complete these modules, but the idea of the dedicated space for a new employee to have a temporary home while they’re getting things figured out. And watching so many, especially young kids, come in, and maybe it’s their first job, and they just are so… They don’t know what to do, and they don’t have a place yet. And so that intentionality of like this is your training area, just watching things like that. I love seeing that and seeing the thoughtfulness and how we can keep taking those ideas, and there’s endless possibilities to just keep going. And so you and Jeff talked about where are we in kind of the inning cycle, or the life cycle, but I’m with you, I see that there’s endless possibilities to keep advancing. And every time I think I have even something figured out, there’s this whole other, you know, universe behind there that is, well, that’s the tip of the iceberg.

Lanese

That’s so true. Yeah. I mean, it’s not any different from, you know, when we discovered the express exterior model, right? It’s like, “Oh, look at this amazing thing!” And here we are. Look at what that has bred!

Lanese

Doesn’t that sounds so funny? Guess what? We’re going to have them stay in their car.

Matt

Free vaccuums.

Lanese

They’re not going to do it! They won’t do it.

Matt

Oh, my gosh, that’s crazy. So now I will say — I maybe have shared this story with you before — but I was on the customer end of being super uncomfortable in a car wash when I got a chance to visit Repsol over in Spain. And they were showing me some of their washes. And, you know, in that area, it’s a lot of in-bays. And they have a really amazing…

Lanese

I totally know that because I totally have been there, too.

Matt

Yeah, it’s like they have this awesome mobile app. And so they’re showing me how that all worked and how the kiosk was going to work. And we pull up, and you scan the thing. And then like, you pull the car up, you park in the normal spot where you would in a rollover or an in-bay, and you get out. And I was like, “Whoa!!! What are you guys doing?!?” And they’re like, “Oh, we’re going to go get a coffee while it washes our car. And I’m like, “That would not work in the United States.” That just… We would be so confused, and people would be so mad that someone left their car.

Lanese

They’d never come back! Yeah, it’s like when you see somebody going inside while getting gas, like they’re pumping gas for their car. It’s like, woah!

Matt

Yeah, get your gas, then park, and then go get your thing. Yeah. It’s funny.

Lanese

Oh, yeah, so the disruption of that. Well, and even in your conversation with Jeff, he was talking about indoor vacuums, and things like that, which, you know, we think, “Wow, indoor vacuums!” But this is just very… We have our own kind of places that we have advanced and brought the industry forward in certain areas. But then there are other parts of the world that have… they’ve been doing things in a different way for a long time. So it’s sharing that information and sharing that experience to kind of, you know, keep iterating what this looks like. And I love the travel that you guys do with the International Car Wash Association, and seeing those different ways, either that you can mix that, or take that, and learn from each other. And it’s still, I think, very communal, and people are happy to share information because they’re so jazzed about it. I mean, you just get these really passionate people that are really excited car washers.

Matt

Well, I mean, it kind of goes back to what we were talking about earlier with kind of driving innovation. And the only way you can do that is if you get out of your little box, and look bigger. And we’re starting to see this all over the place, right? You’ve got cool mobile stuff happening in the Spanish market. You’ve got some really awesome point of sale stuff happening in Australia. You’ve got great operations happening in Germany, and in the Netherlands, like we always know happens. But even in the US now, you’re starting to see some of this disruption as it comes down to mobile apps and the whole customer payment experience. We were talking earlier, about how we got the video of the new kind of kiosk from AMP. And it’s like, you know, I never thought I’d spend nine minutes of my life watching a video about a payment terminal, but I sure did.

Lanese

I know! I mean, I was like, Ooooh, white! Oh my gosh. Yay.

Matt

Ooooh, and then you do what? Oh, great!

Lanese

Yeah, I loved it. I thought it was very, very cool, very well done. And I love the sophistication that we’re seeing in the industry and this, not just the professionalization, but taking those ideas and making them sharp, and look cool, and be user-friendly and sleek. And that’s really, really so fun to watch. And especially when you see the benefit on the customer side, and the operator side. They’re getting a better user interface, but also the customer is getting a better user interface as well. It’s simultaneous.

Matt

Well, the reality is, customers expect more. I mean, especially now with the membership model and the introduction of that, they really do expect more. I mean, that is their car wash, right? I’m a member of that car wash. That is my car wash, and it better be great.

Lanese

Right. Yeah, they’re paying you, whether it’s used or not. And yeah, they expect definitely a certain level of service. And there’s kind of a little bit of a, for better or for worse, the entitlement of yeah, this is mine, because I have paid into this.

Matt

Yeah, I paid for it.

Lanese

Yeah, exactly, so better give me my free towel.

Matt

Yeah, and I’m probably going to steal it. Just for the record.

Lanese

Yeah, some of them are good. I’ve got a couple of car wash towels. I’m not gonna lie.

Matt

Yeah, I mean, I have a box of them. Sorry. It happens. It happens.

Lanese

Yeah, and I mean, there are cameras everywhere, so yeah.

Matt

Yeah. What are they gonna do?

Lanese

I don’t know. I’ve seen signs that say: Be prepared. There are RFID tags in these towels.

Matt

Oh, that’s funny. Maybe that’s the new innovation. That’s going to drive profitability. And I feel bad for the person that has to sew those RFID tags into all of those towels.

Lanese

Yeah. That’s why you’ve just got to put some marketing on them. And then, you know, good. They have it in their car floating around with your name on it.

Matt

It’s a cost center. It’s totally a cost center.

Lanese

I agree. I agree. So Matt, we could talk forever. You are one of my favorite people to talk all things car wash with. And I appreciate your time coming on today. And I loved hearing the conversation with Jeff, but also just the chance that you and I get to just chit chat about all of these great things as well. And so thanks for your advocacy for our industry and just being such a great voice for us. And a good friend, and a good human being, as you have on your show.

Matt

Oh, thanks, Lanese. I appreciate everything you guys are doing. I love that I’m not the only person podcasting in this space. It’s nice to talk shop a little bit. But I’ve always appreciated your approach to when you were on the operator side, to how you market, and how you get information out, so I’m just grateful for your friendship.

Lanese

Oh, that got me a little teary. Thank you, Matt. I really appreciate that. Thank you, everyone, for joining us today. So stay tuned here: you’ll hear the full episode of The Great Market Pause with Jeff Pavone and Matt DeWolf.

Transcribed by https://otter.ai

Intro to CAR WASH The Podcast

Welcome to CAR WASH The Podcast your source for real stories and real business insights from the experts both in and out of the car wash industry. So put it in neutral, feet off the brakes, and take your hands off the steering wheel. Here is your guide on this journey, CAR WASH magazine editor in chief, Matt DeWolf.

Matt

Hey, everybody. Welcome to this episode of CAR WASH the podcast. This is the podcast, of course, that makes you a better car washer, and a slightly better human being. Now for a long time, we’ve been talking about this booming industry, this crazy carwash industry and how fast everything’s been growing and changing. And we’re going to talk about how it continues to change today. And to do that I’m gonna bring in Jeff Pavone, from Amplify Car Wash Advisors. He’s going to talk to us a little bit about how maybe this thing is slowing down a little bit, and, and how we might need to rethink what we thought was happening last year. Because things are changing, as they say. Jeff, welcome to the show.

Jeff

Hey, Matt, thank you. Again, as always, just pleasure to be on the show, and I look forward to a good interview here.

Matt

Well, I was just saying before we got started that I think you hold the record for most appearances on the podcast, and I don’t know if I should congratulate you or say sorry.

Jeff

Well, we appreciate it. And at the end of the day, this space is definitely volatile. And it’s changing in real time. I do think keeping the information fresh and in real time is important.

Matt

Yeah, so the last time we had you on would have been the end of the year last year, and we were talking a lot then about… I think we called that one The Great Market Reset because the year leading up to that was pretty crazy. Then we started talking about the market resetting. What are you seeing? And maybe what have you seen over the last kind of 12 months? 10 to 12 months in the market now?

Jeff

Yeah, you know, I really would say we had… I’ll call this the great pause for 2023. Right. And I think there’s a variety of reasons. When you look at all the headwinds, which we were sitting here with interest rates that continue to grow, we had no control over inflation at the time, labor reports weren’t very good, and then credit came to a screeching halt for most platforms. And so, you know, the pause really had to be… It had to see, first off and foremost, most platforms had a look at their own debt structure, and say: how do we fix this going forward? And it wasn’t easy. I mean, because, you know, not only was it expensive, it was really hard to come by. So that was, I would say, a priority. The second thing I think most platforms started to do is they really, you know, for the first time, they had a platform, they had data. they have a lot more information, and they’re smarter. They’re more educated. And they had to take a step back and look at, you know, how are their platforms performing? How are their platforms performing to projections? You know, really getting a much better feel for what they own was important. I think they had to get a better grip around the investment community and where multiples were going to settle in at. We had a lot of factors here that just said, You know what? It’s time to pause and just see how this all shakes out before we can move forward.

Matt

Yeah, you know, we have this period where… I think I said before that the whole industry was sort of like the surface of the sun. It was so hot, and it was growing so fast. And a lot of that initially was through acquisition, which is what we’re kind of talking about with the platforms. They were going out and buying up a lot of locations. And then we got into this phase where it was like, “Okay, let’s build our own,” because everything’s getting a little too expensive to go acquire, so let’s build our own. Let’s do some greenfield development because we can do that more cost effectively. Now, it seems like we’re sitting in this space where we’ve got to be really great operators. This is what kind of what you’re talking about with now we have KPIs. Now we have some metrics. Now we can look at our overall kind of wash portfolio and say, ‘Okay, where do we need to move and change and adjust and really get efficient with what we’re doing. What are you seeing people… Especially I know that you talk a lot with some of the platforms. What are you seeing people do? I mean, there’s a little bit of… In the social media space, you know, people are starting to identify some store closings, right? Is that something that you think we should be worried about?

Jeff

Well, you know, I don’t know about worried, but, you know, at the end of the day, all businesses have cycles. And we were certainly in an environment of get big fast. I don’t know if you remember the internet days, but that was sort of the mantra: get big fast. And then, all of a sudden, we saw the internet space implode, right? Because it went from get big fast to get profitable fast. Did it mean the internet was a lousy business? No, not really. It meant that the quality companies were going to go long term; this is a marathon. And so in the car washing space, I really think it went from get big fast, and was all about unit growth. And then it became obvious that you’ve got an operating business here. And I think today, going forward, we’re seeing the operators really reassessing everything they’ve bought, and it really is getting profitable. The bottom line is they’ve got to service some very expensive debt, and they’ve got investors that are expecting return. And so, you know, now it’s no longer a matter of just deploying capital for for the sake of growth. It’s got to be deploying capital, and then they want to return on growth. So I think you will see some units, if it makes sense to close. I think you’ll see, on the Greenfield front, you’ll see much more selective discipline Greenfield. I think on the M&A side, you’ll see M&A being done, but it’ll be done, I would say, a lot smarter. At the end of the day, they have a lot more knowledge, the buyers. So, you know, the way to characterize this is they brought professionalism into the space today. Before they had nothing to base it on. They were just buying without having a lot of experience. Today, it’s becoming very professionalized, and the business is trying to stabilize. So I think you’ll see an emphasis on quality versus quantity. And so if there’s some stores closing, you know, it’s probably for the right reasons. And you’ll see, again, a real focus on driving more value from each of the assets that they currently own.

Matt

Yeah, and I mean, that’s just good business, right? I mean, you need to run a profitable business. You can’t live in this space, where, you think, “We’re going to have some loser locations, and we’re just going to hang on to those!” That makes no sense. And I think that’s what we’re seeing with these groups now being able to be smarter about how they’re running business. They’re just making the hard decisions, and they’re doing what’s best for them.

Jeff

I think you’re right. I think this is a… The good that’s come out of this is we actually do know what’s a good business. We’ve got very high acceptance rates of memberships. Memberships have stayed stabilized, if not growing. The consumer loves the product, and we’ve got a really high margin business. And so this is a really good business to be in. I think you’ll see stabilized growth going forward. I think you’ll see some of the platforms are going to come out of the gates very soon, with fresh capital on their balance sheet, and look to really start expanding, but they’ll do it with with a lot more knowledge behind them, and it’ll be a very controlled smart growth, which is, long term, good for everybody.

Matt

Yeah, and steals a little bit from, you know, some of the great operators in this industry, right? Those groups that we’ve watched over the years since kind of the inception of this industry grow at really, really strong conservative paces, where they had everything set up, they had great infrastructure, they had their processes down, and they could then scale that very smartly. That’s starting to move over into into this platform space as well. So that’s going to be fun to watch.

Jeff

And Matt, you know, when you look at this, the great operators have one thing in common. They build the carwash company; they don’t just build car washes. And it’s consistent. If you look at all the top brands out there, they have a tremendous infrastructure and team, not only on their car wash locations, but at their corporate level, that’s driving volume. And now you’re seeing some of that professionalism flow through to a lot of the platforms. They’re getting it, and they’re going to be using that to their advantage.

Matt

So when you think about… we’re talking about platforms having more data now, and having a little bit more experience under their belts, as they’re kind of coming in to this thing. Now, is that something that you think the smaller operator needs to be concerned about? How does this play out for, you know, the people that have 2, 5, 10 and 20 locations as this dynamic shifts?

Jeff

Great question. I look at it, and I go, you know, first off, take the platforms. The data they’re going to be looking for could be, you know, competition. They’re going to look and dive deeper and say, “Okay, is it really… is it cannibalizing?” At the end of the day, you know, if you’ve got two or three car washes that are in the market that are both all convenient, there is going to be some impact on your numbers, right? And so when you look at, you know, how a smaller operarator would be looking at this thing is, they’ve got to be looking at it and saying, you know, some of the some operators, even great operators, I’ve seen, have just incredible numbers, but they’re not immune from having competition that’s just come in their their market. And at some point, even if they lose some share of their market, it’s just real. You’re not going to get your carwash two or three times a day, like a cup of coffee. It doesn’t work the same way, I think, you know, you’ve got to be very sensitive to what’s going on around you, and who’s building, because, you know, most of these new ones coming in, you know, even if it just takes a fraction of your business, it’s going to slow down some of your growth. And I look at, you know, a lot of the trends right now, you’re gonna see… There’s going to be… You’re gonna see the customer experience. I think for a long time, you know, it was all about adding units and growth through units. I think today it’s going to be: how do we differentiate? How do we improve our customer experience? We’re seeing a lot of innovation in technology, that’s going to start having a way better educated operator that’s going to know just how many times you’ve been to the site, how frequently you are coming, and more importantly, how to keep you coming back and building more stickiness. So I think the smaller operators have got to also start playing in that same game of looking at, you know, what technology is out there, to really make sure that they’re staying in the forefront of knowing everything they can about the customer on their lot and how to keep them.

Matt

Yeah, I love the sophistication that is starting to come with all of this, right? All of this ability to really think about that customer experience, end to end, and even from before they get to your actual wash. That’s only possible because some of these groups came in and started thinking that way. And it’s like, “Oh, yeah, that makes a lot of sense.” And to your point, Jeff, about differentiation, you have to be different today. Because let’s be honest, an express car wash, you can only build them so many different ways. And to the average consumer, unless you’re really doing something crazy on your location, you’re not going to look that different from the one that’s maybe down the road. So this experiential focus, I think, is going to be super important as we go forward.

Jeff

Right. And the good news is, we’re seeing a lot of a lot of technology, a lot of solution that’s coming into the tunnel, that’s going to be… And it’s here now. And so, you know, I do think you’ll see some really exciting, cool things happening on a site level, where, you know, people will get… They’re going to figure out what to do with all this data they’re getting, and how to maximize that into a return for them.

Matt

Yeah, it’s like you were talking about right? First you’ve got to get the data. And as you’re collecting it, now you’ve got a baseline. Now you know that you’ve got something, and you can start dissecting it, and analyzing it, and diving in, and doing all the super fun stuff that will really set you apart. I want to talk a little bit about that technology space and that innovation space. What do you think… where do you think we are ripe for some disruption? Kind of going in the next couple of years?

Jeff

There’s certainly a lot of talk about, first off, cost. This cost has gotten expensive to build these car washes. At the end of the day, we’re finding a lot of concern about how do we drive this cost down? And I do think you’ll start looking at parts of the business, whether it’s a POS, or whatever else seems to be the hot topic today, where that market is going to go. But I can tell you, there’s only so much tolerance for costs going up, and I think every part of your build is going to start looking at it. And so from an advancement in technologies, I do think you’re going to see that there are some young, nimble companies that are going to be able to give you the tools to interact with your customers better. They’re going to give you ways to get them on the lot, and to keep them. And with some of these younger innovative companies, they’re going to have a real advantage on cost, but I do think you’re going to find tremendous pressure from the big players to start driving costs down. You know, cost of chemistry, they’re going to look at every line item now to make sure that they can get these things profitable.

Matt

Yeah, it’s interesting. I mean, good operators do this already. They’re looking at stuff pretty closely. But when you get to the point where you’re having to ask yourself, what level of profitability am I comfortable with now that competition has taken some of that away from me? That question changes a little bit, and you look a little harder for those little pieces. It’s a real thing.

Jeff

That’s right. I mean, and any advantage you can use to your… you have to be getting it. And I do think the advantages will come down to… First off, let’s assume you all build a great facility. It’s going to come down to how well do your customers? How do you interact with them? How do you reach them? And there are really powerful new apps and tools out there that, you know, if you come into my wash, let’s say once or twice, I can go: “Hi, Matt! How’re you doing? How are you enjoying the experience?” And you’ll start seeing some more personalization going on. But the other kind of tools you’ll see out there are, you know, take memberships… We all experience churn in this business. The question is: are you learning from the churn? And there are tools out there and companies out there and now that, you know, we know of that will take that data, and you can… It could be one rogue agent. It could be all of a sudden getting more churn at one of your locations because that demographic is a little weaker, and it just got more… maybe it’s the economy affecting a location. But I can tell you, that kind of data is going to be the stuff that’s really going to be in the forefront, I think, of car wash operators going forward.

Matt

Yeah, it’s fascinating stuff. And it’s an exciting time to be kind of hanging around this space. That’s for sure. What does all of this mean, as you think about… I mean, obviously, part of your business is to help people do deals, right? Are deals still happening, Jeff? Is everything okay?

Jeff

Sure, certainly, you know, I’d say Christmas has slowed down, right? We had Christmas every day last year, and in the last few years. You know, I’d say deal flow, you know, plus or minus, came down 75%. You know, I think the market just had to take this pause. We as a firm, you know, again, maybe it’s just the advantage of being older, right? I’d been through cycles before. And I knew when things are going up and were that good, I knew the market couldn’t, long term, continue to go at that pace. And so, you know, we invested heavily into converting our firm to a full service advisory firm, you know, so really sitting in there and saying, the question that we’ve always got to ask is how do we… we want to be value creators, and how are we going to drive value? And again, at the end of the day, if you’re an emerging firm and building out, you’re not ready to sell. And selling in a market that you have very few buyers is probably not a smart thing, either. Today, the good news is we are finding buyers coming back, by the way. We have a very, very strong… The good news is that the buyers came back, and we’ve got a strong fourth quarter of closing deals. So we’re excited about that part of it. But we’re still… we’ve evolved to a point where we do want to help operators. The advisory side is looking at… let’s say you’ve got a chain, and you’re paying $1 a car for chemistry. And we can get your cost down to 60 cents. There are a million line items that having more data, and having more expertise… because again, we’ve got guys on our team that have been around for, you know, 40 plus years, on the highest level on operations. We’re going to dig deep into knowing these costs, help benchmarking some of it. We’re also going to sit there and help operators understand: what are buyers looking for today in real time? You know, there’s a lot of talk about multiples and valuations. I can tell you the only ones that matter are what things are trading today. And so, you know, I do think there’s going to have to be a lot more education, to the smaller operators. A lot of them, you know, are working really hard on their own company, and they don’t have the exposure to all of the advancements that are happening in the space, or even some of the KPIs. And so, you know, for us, it gives us an opportunity to step in, and really provide that kind of value to an operator. And eventually, at some point, if you create value for them, hopefully, at some point, when they transact, they’re going to use you.

Matt

So talk about that evolution a little bit for you all. So you started down this path of kind of making sure you had all the elements of an advisory firm in place. What were you kind of watching when that started to happen? Like what did you see?

Jeff

Well, I mean, at some point, the pain points became… That get big fast kind of process went on, and we sort of realized that there’s going to be real integration problems and stresses, right? We also looked at it, you know, coming out of a technology background… We also looked at how fast technology could impact the growth of this business, and we felt that there was real, real opportunity. So you know, sometimes we’re, where we see some of these things going on, we’ve got to look and say, it’s not all bad. We’ve got to just look at where are the opportunities here? And so, you know, we’re fortunate to have… we’ve got a wall street level investment bankers on our team to understand where the capital markets are going. We also have some of the best operators in the country to understand, you know, how these operators should be performing. And so, you know, I just think today, for us, it’s all about trying to put that knowledge out in the hands, so we are giving you the advantages that some of the other folks have. But, you know, we just started seeing, again, like I said, 18 months ago, when people kept buying at a furious pace. And again, the buying was more done on a matter of fear of losing a deal than anything else. And we knew that that’s not sustainable, right? And so, at some point, we had to look at this thing and say, what role do we want to play? And we were happy to do those deals. There’s nothing wrong with it, but we knew at some point, we needed to get down to how do we help stabilize this business long term, and add value? But I think the platforms have gotten really smart, really fast. And I would say, they brought professionalism into the space. You know, if you look at some of the leaders now running these companies… look at some of the other companies out there that have brought in just absolutely very, very smart guys that understand how to scale retail. I think that professionalism is going to go a long way. And for us, as we started looking at that, we had to help prepare the operators to fit within that box, too, right? How do they get more professional in the running of their business?

Matt

As you were talking about, kind of where Amplify is going and kind of the changes that you’ll have made, it made me appreciate what you all do, because you guys have always been all about being that trusted advisor, right? You want to be there alongside the operator and help them get the best possible situation for themselves, and that comes out in lots of the deals and stuff that you all do, but I think honestly, while that’s core to who you are, it’s also just really darn smart, Jeff, because you’re able to position Amplify in a way that’s like, “Who else would we use?” We worked with this group to help us become a super profitable organization. We built this car wash company, and now it’s time for us to do something else. Of course I’m going to use the person that helped me turn my business into something amazing. I think it’s smart, but not to be missed, it is core to what you guys have always been, which is in it to help operators maximize their experience in this business, so I love that part of it.

Jeff

Appreciate that.

Matt

It’s also smart. Talk to me a little bit about what the next two year looks like, right? What are you kind of watching as we go forward into ’24?

Jeff

So here’s the really good news. You know, I couldn’t say this a month ago. I could tell you today, we’re seeing inflation come under control. I mean, I don’t know… I think what I’ve read as early as this morning was, you know, under three, you know? We’re seeing the Feds pause. You know, I wouldn’t… The one thing I won’t expect: I think we’ve seen the valuations, now, really reset. And I don’t see that changing. The operators that are looking to say that, at some point, interest rates are going to drop, and there’s going to be this major reset. It’s just not going to happen. I think interest rates can go down a little, but we’re going to see a very disciplined buyer that has a lot of data now, and they know what they’re looking at. But on a go forward basis, the good news is, you’ve got inflation that’s under control; I think you’ve got a consumer that’s proved to be resilient and looking good. Are we out of this recession fear? Maybe. But it certainly feels like, from an economy standpoint, we’re doing quite well. The consumer is still quite stretched, if you’re looking at that side of it, so we’ve got to be a little concerned about that. And really important is that the majority of the platforms that are going to be around for a long time, are getting fresh capital, and you’re going some announcements any day now coming out, and you’re going to see some really… I think you’ll see a push by some of these stronger platforms that were disciplined, look to expand and grow, because this is going to be a tale of two sides. You’ve got some some platforms and chains that probably just didn’t grow as smart as they should have. And you’re finding others that that really took a a very good controlled strategy now come with fresh, really, really fresh capital. And I think we’ll see some… I think we’ll definitely see more deals closing in the coming year than we did this year. But I think they’re going to be structured. I think that the operator and the seller, there’s going to be some creativity and a structure to how deals get done. But I think you’re going to find that buyers now, they’ve recapped their balance sheets. They’re ready to go. They know where they want to grow. And so I think that’s going to be positive. You know, from the public markets, you’re seeing a lot of bad news that happened over the recent times. You know, and I think going for it, we’re already seeing Mister come out of it. Mister hit a low, maybe about a week and a half ago, they’re already up almost I think 30% in the last couple of weeks. So I think we’re just going to be… I think all together we’re going to see a stabilization going forward, and a much professional buyer going forward. But I do think that’s good for everybody. So, you know, we’re excited to see where how this market shakes out. But we’re going to see, again, innovation and technology. You’ll see really fast growth in 2024. I think we we started to see the tip of the iceberg in ’23. I think in 2024, you’re gonna see accelerated technologies coming in these tunnels like you’ve never seen before. AI and some other really cool things are going to be happening. So, you know, we’re looking forward to 2024 has been an exciting time for the car wash market. So, you know, cheers.

Matt

Yeah, absolutely. I mean, as you’re talking… I think maybe one of the first times you were on the podcast, we were talking about what inning are we in of this whole consolidation thing. And I think, at the time, we were still thinking we were in pretty early innings. At some point in the last couple of years, we thought that maybe we were getting a little further along in the game. I feel like, Jeff, honestly, it seems like we’ve gone backwards in earnings, because of this kind of pause, right? We’re still looking at… When you look at the top car wash organizations by number of locations, from a market share perspective, that is still so unbelievably low, which I think is great, because that means there’s still tons of opportunity out there for folks. I think sometimes it’s just a little hard to see that opportunity when you’re kind of in it day to day, and you’re looking at these numbers, and you’re getting these data points. You’re spending too much time watching the stock prices of these larger groups. That’s not indicative of what’s going on everywhere. There’s tons of opportunity. There’s lots of space to grow still. I’m pretty excited for 2024, too, but I will ask you, and maybe we’ll switch the analogy. Instead of what inning are we in, what quarter of the basketball game are we in, Jeff?

Jeff

You know, I still think we’ve got a long way to go. I mean, we’re maybe, call it, in the second half, right? You know, because when I look at it, there’s still whitespace. Now, with that said, you know, what we are learning is there are certain markets that have got less whitespace, that are starting to get saturated. When you look at markets like Phoenix, Boise, some of these other markets, you know, and you start looking at the amount of car washes, you know, you only need so many car washes per customer, right? And so some of these markets are starting to feel that saturation point. But there’s other markets that have a lot of growth, I do think you’re going to see, you know, in 2024, you’re going to see a few of these brands come out of this, and look a lot different than next year. I think you’re going to see some real winners that are going to have some fairly aggressive growth. I wouldn’t be surprised if we don’t see, you know, a couple of consolidators come together. You know, you’ve also got to look at the gas c-store guys that have entered the space, and they’ve entered it, I would say, with initial acquisitions. They’re still trying to learn to market, figure it out. But as they get smarter, you’re going to start seeing them continue to grow. So, you know, I do think, from an innings standpoint, we’ve still got plenty of opportunity to continue to grow. I just think it’s going to be… For sure, I think we’re in the second half of this. I think we’re just going to fill in the markets that we’re in a lot smarter. And we’re going to try to get more out of it. The other thing that could surprise you is going to be I think some differentiators that are going to come to market, we’re already seeing some guys playing around with, you know, indoor vacuums. Maybe some flex washes. You know, I just think the one size fits all model that was building out there… I think you’re going to see a few guys start getting a little more innovative and creative. Because I think the customer wants it.

Matt

Yeah, well, I will put this out into the universe as my one crazy idea that I’ve been thinking about for awhile. I am interested in seeing someone do an interior clean only. Okay? Think about that. Interior Express only. So the flex side of the business, but no wash components. Now, maybe that’s a dumb idea. And it’s probably is. But that’s the kind of stuff that might happen.

Jeff

I’ll tell you some of the innovation. I’ve seen in person this year… I’ve been in a warehouse, and I’ve watched the inside of a carwash being cleaned by robots.

Matt

That’s crazy.

Jeff

So when I say there’s still a lot of innovation ahead, the labor side of it is probably one of the biggest challenges that we all have, right? But I think you’re going to find labor coming together with technology to start solving the problem, I don’t think you’re going to solve the problem with just labor alone. I think you’re going to see technology is going to be a very important component in the car washing. So you’re just going to see… I do think we’re going to see innovation like crazy this year. Because, you know, especially… The good news is you’ve got a lot more tunnels; you’ve got a lot more customers. So it becomes more profitable. But we’re going to see innovation come from from all angles, because it’s still a very good business, a very profitable business, so it’ll be fun to see some of the new stuff that’s going to come out.

Matt

I can’t wait. I can’t wait. I’m excited to see what the wash of the future looks like. I think it’s going to be super fun to watch. The question I have to ask you to wrap this all up, Jeff, is one of my favorites. Because it gets back to the idea of making people better humans. So you can answer this however you want, but I want to ask you about something that we can do today. Whether we’re an operator, whether we’re just a human being at home with our families… What’s something we can do today, that’s going to make us better tomorrow?

Jeff

You know, I can tell you how we approach things, and it’s all… Our culture is built around being generous, by being givers. You know, in everything we do… There’s a lot of people out there that are always taking, taking, taking. I would just say, in general, be a giver, right? I mean, if somebody needs help, give them some advice. You know, there’s a lot… You know, at the end of the day, most of us have more than we need. There are a lot of people that can use our help. I mean, you know, we as a business are down significantly over the years past, but our giving went up. We did not stop our giving. And at the end of the day, we felt, for us… we have car washes. We’re continuing to tie to communities. And again, that’s another way of how, as an operator, you can become successful is become a part of the community. You’re not just a car wash, and so set up some giving programs. But I think, in general, I think all of us can really look in the mirror and say, How can we be a better giver? And I promise you, it comes back to you tenfold.

Matt

Yeah, I mean, the reality is, is that that piece of advice, be generous, be a giver, is something that can really differentiate you. Because not everybody is. Not everybody is, and so that stuff, when it’s genuine, like you all do, really stands out. And I think it’s something awesome to see.

Jeff

I appreciate it. And you know, for us, it’s all about relationships. You know, the a way we look at everybody is we want to listen, we want to hear what your concerns are, or what’s going on in your life. And really try to build a bond and relationship. We’re not in it for the short haul. This is, again, just like the car wash chains and operators, I think this is a marathon, and we run our business like a marathon. We’re not looking short term. And I think, you know, we’ve got to make smart decisions; we’ve got to be looking ahead. You know, if you just look at the world, and the way it is today, it scares the heck out of you. And it’s hard to watch the news, and what’s going on around the world. But I think at the end of the day, you know, what we can do is we can impact as many people in our circle as possible. And that’s all we can do.

Matt

Yeah, I love that. I love that. Well, Jeff, I will let you get back to your busy, busy day here. As your deals have been picking up, that’s great news for Amplify. But I just want to say thank you so much for for being on the show today. I expect that we will have you back again, so thank you again, Jeff.

Jeff

Anytime, Matt. Thanks, again, for having us.

About the Episode:

Do you know how your customer really feels about your business? What keeps them loyal to your brand? Or what’s contributing to membership churn? As the car wash space continues to experience a tech boom, it’s important for car wash operators to know what resources are available and identify the specific technology solutions providers that might be a right fit for their business to boost operational efficiencies and enhance the customer experience.

This episode examines how one company is capturing consumer sentiment, categorizing and quantifying customer data, and leveraging it to provide real-time actionable insights to operators to help make informed decisions about their business. Host Lanese Barnett talks with Director of Operations Michael Pelikan and Founder Bobby Thomspon of Retention Express, an omni-channel, white-labeled customer experience support provider specializing in the car wash industry, about customer retention and retention of revenue.

Sign up for Car Wash M&A, The Newsletter. | Follow us on social media @AmplifyCarWashAdvisors on LinkedIn or Facebook. | Connect with Lanese on LinkedIn.

More about Bobby Thomson:

Bobby Thomson has a tremendous amount of experience, including 22 years at AT&T Advertising, where he was in sales and retention leadership positions. Bobby was responsible for preserving, growing, and protecting $225M in MRR. Thomson coached and developed hundreds of sales and retention specialists in one of seven call centers for AT&T. He launched a new retention call center division for AT&T with 500,000 customers nationally.

Thomson became a consultant in the car washing space for a high growth operator and found that the churn rate was a problem for owners and operators with no proactive solution. Because of his experience with retention call centers at AT&T, that led to the creation of Retention Express! Learn more about Retention Express on their site and connect with Bobby Thomson on LinkedIn.

More about Michael Pelikan:

Michael brings ten years of experience in contact center and business process operations, having previously led the Delivery organization within the End User Support practice of the Managed Services division of a large staffing agency. He holds a degree from Concordia University – Saint Paul, where he majored in Business Administration and played on the football team.

Check out the full transcript below:

Lanese

Welcome to Car Wash M&A, The Podcast. This is episode 18, and today, we are talking about a subject that is so important to all car wash owners, especially right now. It is about how you can leverage data in your business to really drive profitability and boost operational efficiencies. As we keep moving through the rest of the year, and looking forward to next year, that operational efficiency component is so important. So without further ado, I would like to introduce my guests today. With me today I have Michael Pelikan with Retention Express. He is the director of operations. And I also have Bobby Thomson, who is the founder of Retention Express. Today we’re going to talk about what they do to help really provide resources to car wash owners on how to understand their customers better, understand their business better, and provide these solutions for cost savings for operators. Hi, everyone. Thank you for being on the show today.

Bobby Thomson

Good morning.

Michael Pelikan

Morning, Lanese!

Bobby Thomson

Congratulations on episode 18. Big deal!

Lanese

Right? Thanks. And just as a reminder for our listeners, Bobby was featured on an early episode of ours, on episode five. So if you’d ever like to go back and hear more about the origin story of Retention Express and hear that early conversation, you can find that on Amplifywash.com/podcast, and you can search for Episode Five. Okay, so Michael, would you please first give us a little background on you and what your role is at Retention Express as well as just a quick overview of what the goal and mission of Retention Express?

Michael Pelikan

Yeah, absolutely, Lanese. So again, my name is Michael Pelikan. I’ve been with Retention Express for about six months. Prior to joining, I worked at a large managed service company where we were doing a lot of outbound contact center driven work within Fortune 500 state and federal governments. And Bobby gave me an opportunity to join about six months ago into kind of the startup environment. And my role as director of operations is to really look at our processes, our procedures, how are we operating from a contact center customer experience perspective, and not only manage our current environment to be successful, but also to build our processes and procedures to be scalable. We’re continuing to add new customers every month, and what we’re building needs to be sustainable, not only for now, but also in the next three to five to ten years as this company continues to evolve, not only in the carwash industry, but potentially into other verticals. My job is to be hands on with our agents, to be hands on with our clients, to be able to provide the feedback that we’re seeing, but also to ensure that the customers of our brands are really getting top notch white glove service. Not only do I manage the performance, I get on the phones, Bobby gets on the phones, we interact with these customer brands all the time, and it’s really great to get a pulse of the customer from a firsthand experience.

Lanese

Before I ask the next question, Bobby, can you give a quick overview of Retention Express and why you felt that there was this need for for your company when you were starting out in 2020?

Bobby Thomson

Yeah, great question. Part of my background, which I’ve told before, being at AT&T, we had a huge problem. It was a $2 billion company, and when you don’t listen to your customers, that can definitely contribute to your churn. It creates a lot of other problems. When I was in a role working with car wash owners and operators, the problem existed even down to a one site location, let alone multi sites. I felt like there’s definitely a really good opportunity to help owner operators to improve efficiency, right? Really listen to the customers to gather the data and the insight because really what goes away from day to day on how employees operate and manage. They’re busy on site. They don’t have time to capture the data, which is really what you need so you can get away from kind of that gut feeling. Or here’s what we hear quite a bit. And an issue that may be one or two times, you know, you blow it up, and it becomes a big ordeal, and it’s really not a big ordeal. The data kind of really tells you what your problems could be, let alone what are the good things that you’re doing, too, because customer feedback comes in all forms, shapes and sizes, and you want to get that outlet to your customers. And moods! Believe me, we get every mood swings coming in, you know, on behalf of these different operators that we work with, and when you deal with the public, you know, it’s funny. There are some funny people out there for sure. But at the end of the day, we want to make the experience a really good one for the customers, help the owner and operators get better in handling their operations, let their employees really kind of focus on what you want them to focus on on site, and we help them really on an off site. But the key thing I think that we drive and do is communication, right? Our collaboration, every day, throughout the whole day, of how we communicate to site managers to owner and operators, is very visible. And when we share a partnership, the partnership is, “Hey, the customer has a problem. We need to help solve it, but we need your help to do it.” So we work together. And the fact is, we can keep track of that process from start to finish to ensure that the customer doesn’t get left behind, and it doesn’t drag on longer than it needs to. The whole goal is to really shorten the gap of how we communicate, make sure that customers are being taken care of, whether it’s a cancellation, whether it’s a refund issue, whether it’s a billing problem, right? Double billing happens quite a bit, and it is real, so it takes time to investigate it. And more importantly, customers want to ensure that everything is taken care of.

Michael Pelikan

Yeah, we’re a white label, white glove, customer experience, third party support, so we handle predominantly inbound contact for our owners and operators. We’re taking that lift of that customer interaction, and handling the majority of that back office functionality, which gives our owners and operators the freedom to be able to focus on what really matters, which is the customers on site location, making sure that their wash experience is positive. We handle all of that volume, and then partner with our site providers to ensure that we’re providing this feedback to this data, the leading reasons for cancellations or, you know, what sort of feedback are we receiving. We handle in all incoming contact, as well as then produce and perform some outbound campaigns as well.

Lanese

Perfect. And thank you for that background on Retention Express and also both of your roles. So Michael, earlier you said that part of your role as director of operations is making sure that the company itself, Retention Express, is scalable, but also a mission of Retention Express is being able to help car wash owners and operators scale their business by solving some of these major problems or issues or challenges that they have with how they interact with their customers and how they communicate with them, especially off site. And then also what do they do with the information that they receive? So if it is a customer issue, and a customer calls the location, maybe it’s answered, maybe it’s not answered, even if it is resolved, was that information captured? And then is there this aggregate data that then can drive decisions for the owner operator on how they move forward or how they make decisions about their business. Could you share with us some of the examples of data and information that you capture, and where that goes? Then ultimately we’ll talk about what you do with it.

Michael Pelikan

Yeah, absolutely. Great question, Lanese, and I’ll share my screen here in just a moment. But the way our company operates is out of a telephony and ticketing system, and what that means is every customer call, text, email, web form submitted, live chat, is a recorded ticket, and our agents document that ticket in a very detailed way. It’s obviously the brand, down to the site location, down to the reason for that ticket. And as Bobby mentioned before, it could be for a number of things: it could be a member that is looking to dive into their billing and why they were double billed. It could be a retail customer who’s calling in about hours of operations. We detail and document all of those categories to really paint a picture. And with that, we provide all of our customers with access into our Power BI dashboard. It is a client dashboard that funnels in the data from our telephony system and provides various dashboards in terms of specific areas. Areas that we highlight are obviously cancellations. Cancellation data is critical. It gives you the opportunity to really view and look at trends that could be happening in the business to be able to pivot, so we provide our customers this access so they can get a real time sense of what’s going on. I’ll share my screen here just to kind of highlight briefly what we kind of have from a customer view perspective. On the screen here, you will see that this is for 2023, and it gives us a snapshot of the cancellation reasons. The amount of cancellations we’ve had that have just been a natural discontinue, so a customer calling in three weeks before their billing, for whatever reason they’re saying they want to cancel. It is a natural discontinuation of that membership. We also track terminations with refunds. What could those reasons be? Why did those terminations occur? And also tracking the refund amount. Was a month? Was it two months? What led to that?

Lanese

Michael, for our listeners that are listening via audio only, can you just give me and paint a picture for the listeners about what it is that your clients and these car wash owners see on the dashboard through Retention Express?

Michael Pelikan

Absolutely. Great point, Lanese. They’re able to see various data points, such as number of cancellations that occurred over a set period of time. Within that we have another graph that will highlight the cancellation reasons top to bottom for their leading categories down to their their lowest categories. Constantly, we see the leading category is always lack of use. And we’ve actually had recent calls with customers about how do we drive lack of use down what is the strategy behind Retention Express as well as are our clients to say how can we get use and lack of use as their leading reason to maybe drop that down by several percentage points. We also provide customer exit sentiment, and I think this is a really important one. We try to capture how that customer is feeling on the exit. Are they a promoter? Are they someone who’s saying, “Hey, you know, I love this brand. Right now, money’s tight. I’m going to go back to single washes, but I love y’all. We’re gonna continue to represent and promote you to all my friends and family!” That is a positive story. We also capture passive people that may just not use the wash enough; they really don’t have much of a way of saying, am I promoter a detractor? Then you have the detractors, the ones that you really want to dive in on: what was the experience that led to someone leaving? We also provide a graph that highlights what are the different areas of customer exit sentiment for us to really be able to attack and ensure that we continue to have those high promoter scores, as well as low detractor scores. So that is on the dashboard in a one screenshot.

Lanese

I love this, because from an operational experience for myself, it was really hard to capture why people were canceling. Because you don’t have time. If you’re on site, and it’s a busy Saturday with a line of cars, finding out all that information can be a real challenge. This sounds like, because this is your agent’s sole job of communicating with customers, that there is a different a different capability to dive into what that is, and then what you can do about that information. Having it, and then also seeing patterns and different points of data about it.

Bobby Thomson

I’ll jump in real fast too. So the whole point, when we talk to customers are looking to cancel, we’re all about trying to retain customers, too. It’s not like we’re just support like saying, “Hey, why are you canceling?” Then we move on. There are actually really reasons if people give it to you that we can actually help them to solve their problem where they can keep their membership active. And an easy one that we found is when people wrecked a car. They’re like, “Hey, I need to cancel my membership.” “Well, did you know that we can transfer your membership?” Literally, they are not aware that it’s a simple process to do that. We really try and help keep revenue on a continuous path for the owner and operators and not have a break in it. Because if you get a break in the billing, you may or may not get them back. And if you can keep them going, then obviously you increase that LTV, the lifetime value, of that consumer. It is much better for the bottom line. When we tie in the customer exit sentiment, if we have a lot of detractors, we’re getting that feedback of why they do not want to do business with that brand. That’s immediate feedback that we provide to them. Sometimes it’s controllable, and sometimes it’s not. If they feel like you scratched their car, and they’re just really upset, and you’re not going to approve a damage claim, you’re probably not going to get them back. But we capture that sentiment to really let them know what that exit is. It is basically a deeper view of their customer, and is there a good opportunity in the future, when they do leave the brand, will they come back to them? That’s what we want, right? The exit of an exiting member doesn’t mean they’re not going to come back in the future. We hear all reasons. And it does vary throughout the whole year. Right? May and June, all of the Florida customers are going back to Canada. You make it difficult for them when they come back in the fall… Or Scottsdale, right? Yeah, it’s seasonal. There’s a lot of seasonality that goes on throughout the whole year. And those are the people you definitely don’t want to make upset, and they’ll find somebody else. We really try and make it easy for them and capture the sentiment, and if they’re a promoter of the brand, we love that. We love getting more of that feedback.

Lanese

So Bobby, something that I hear you say, and we’ve known each other for quite some time and I’ve been following why you made this business and the purpose that it serves, which is to really help car wash owner and operators protect that back door of their business. Just like you were talking about with the customer exit sentiment, even though somebody might be leaving a membership plan, they could still be a retail customer. But as you’re putting all these efforts into marketing and to attracting customers, but really making sure that you’re not losing customers, and you’re lowering that churn, or if you are experiencing higher churn, what actionable strategies can you take to do about that. Protecting that back door, I think, is just so critical. But the other thing that you were really touching on here is being the voice of the customer. And that’s another really, really powerful piece of this component that I feel is unique to you guys is that you want to find out what that customer voice is, what their concerns are. But you also, again, have that time to really dive into it and explore that with them in a very different way, than perhaps an onsite manager or a customer service attendant may be able to with the other operational obligations that they have throughout the day.

Bobby Thomson

Totally, I mean, it’s kind of a known fact that, you know, customers will leave a brand. If they have one problem one time that doesn’t get resolved, about 65% of them will maybe never come back. So if you don’t give them an opportunity to tell you what their issue is, or what their positive feedback is, because we do get that on how they want to compliment employees… you do work hard, and it’s 102 degrees, or in Phoenix, it’s 120, you know, they’re working hard out there… People do want to recognize them for the good, but also for the bad. You should give them an outlet to express, and you can do that not only in talking to them, but in responding to emails. You can do it in your surveys, right, and how you respond back to them and the feedback that they provide. We work with all different marketing companies that help these owner and operators, OptSpot, Welcomemat, they do a really good job working with these owner and operators. They’re all trying to get the feedback from the consumer. Our customers who use those platforms, we can extend the messaging, so if a negative feedback came in, we actually take it a step further to call a consumer back to try and get them back on site with a free coupon or just really understand what their issue was, and pass that feedback on because it’s just really invaluable to the owner and operator to get the feedback and let the customer be heard. And honestly, we get we get feedback from the customers who thank us we’re calling them when they never expected even get a call back. That helps drive the brand loyalty there, too.

Lanese

Right. And Michael, this is something that in training and working with your agents, just to clarify, when this car wash customer is getting a call back, they’re getting a call back from the brand that they frequent, so they have no idea that you even exist as Retention Express because your agents are operating in brand as the car wash that they serve, so that’s an extension of the service that the brand provides, and how they’re able to communicate with customers and everything.

Bobby Thomson

100 percent.

Lanese

You have such an integral role in extending the communication line and the communication opportunities with customers in a very direct and meaningful way.

Michael Pelikan

Absolutely. And the one thing I’ll say is the thing we see the most is we are truly that extension of the brand. The customer experience on site is one element. What is their experience when they call the back office? What’s the experience when they call with a problem. Oftentimes, our site partners are providing them with a card that says this is our customer experience team, they can handle this, and they give us a call, or they shoot us an email. So we truly do provide that extension. We always stay in brand; they don’t know that our operators have potentially outsourced this service. It can be viewed as that they don’t care when they outsource something, that it is not as important, but it couldn’t be any further from the truth. They’re spending money to dedicate a service so that they’re getting the best customer experience possible. And we have the infrastructure and technology as well as the training, the agents, as well as the background from Bobby and I with, you know, well over 30 years of contact center experience to really be able to drive that and really improve that element of the back end and the back door, as we’ve talked about, while the operators focus on the things that they do best, which is running that car wash effectively and efficiently and giving a really great onsite experience.

Lanese

Yeah, and just in thinking about the advancements of technology, specifically as relates to the car wash space and how we’re able to capture so much more data between license plate recognition and these other different marketing services that have a different communication outreach and channel to customers. But still, the thing that’s different about Retention Express is that you have the the live communication component to where it’s not one set piece of data that maybe is captured kind of existentially about a customer, like a license plate, or a phone number and email, or things like that. You get to get their their thoughts, their sentiment, their story. You can ask different questions on the phone based on where the conversation is going in real time and then categorize the information that you receive to then paint a better picture of your different types of customers or feedback, or that sentiment, which I find really interesting, that there is the opportunity for it to, you know, continue to grow and evolve. And you can learn to ask new questions based on that of what you’re finding out.

Michael Pelikan

Absolutely. And the one thing I’ll say is… and Bobby and I always note this to our brands: we are not an answering service. We are not getting on the phones to quickly get someone off of it; we are problem solvers. And Bobby and I refer to this all the time, it’s either the customer journey, or the customer story. It is more than just looking at, you know, their usage. It is really diving into their billing, into their issue that they may have. Hearing them out about their experience they had on site. And you mentioned it before, Lanese, if you’re an on site operator, and you handle a cancellation, it’s really viewed as a singular transaction. Always with our singular transactions, the data and the stories and the feelings that our agents are able to take from those calls, and then bring forward to our leadership team, we can make quick and effective change on site. Oftentimes, we hear that the sales component at the pay station is often not very clear. And when we’re here that several times our agents are aware enough to say, “Hey, this isn’t a one off. Something’s happening at this location where customers are not having a good experience in terms of how the memberships are being sold and articulated.” And we can provide that feedback to those operators, and they can add additional training to those attendance to clean that element of that interaction. Because you only get a few seconds with them. You’ve got to be clear, you’ve got to be concise about what they’re signing up for. And if they feel deceived, if they feel like they’ve been misled, that is going to lead to that negative sentiment, that quick exit, and they’re not going to come back. By us being able to, again, capture that customer journey and those true feelings, we’re able to give a lot of insight back to our sites and let them know how people are feeling in terms of just their overall journey with the company.

Lanese

As we started this, and just talking about the theme of this series that we’re working on of how data can be a tool and help boost your bottom line, it’s one thing to get the data, but then it’s another thing to categorize and organize it. And then it’s a further thing to have that make a difference in your business in a very impactful and meaningful way to enhance your operational efficiency and to provide greater customer service or enhanced customer experience. As we talk about these different actionable insights, one of them being what people or sales agents are saying when talking to customers, and you can reveal if there are incongruencies with what customers, their car wash customers, are saying back to you of of what they heard there, and then offer suggestions and insight on how they could adjust to those messages that they have. What are some other things that that you guys find?

Bobby Thomson

Typically, with new members, when they get signed up on location, it is easy to kind of pitch a promotional offer that you’re providing to them. And that is where the expectation has to begin to create the best experience. Oftentimes, you know, it happens quite a bit. It could be new people, It could just be people in contests, right? Whatever it may be… you never want your end user to feel like it’s a contest, like they’re getting hard sold, right? A lot of times, they will call in and go, “They told me it is only for 30 days,” and they just never take that next step to go, this will automatically renew in month two. And people, they want to blame it on the employee every time, because it’s not their fault, right? But those are things that you can just tighten up from a training standpoint that help out, and when we get a lot of feedback, we definitely pass it on to the owner and operator. We just go, “Hey, your churn is kind of going up, and we’re getting a lot of people that are upset because they felt like they didn’t get the correct information at the time of sale.” That is a very controllable thing for an operator. Much more than, “Hey, I’ve moved out of Scottsdale and went to Utah.” Things like that, you really want to identify, what are the controllable issues that you can manage and control at an employee level? And then look at the other things that are maybe uncontrollable, and sometimes there’s nothing you can do about it.

Lanese

And we don’t have to dive too far into this. But just to make sure our listeners understand, too, that your team and your agents have access to the point of sales of the brands that you represent, so that they’re able to take that resolution step.

Bobby Thomson

First call resolution. Yeah, the whole goal is first call resolution as much as possible. Part of the playbook that we build out with the owner and operators is the empowerment level. That was the one thing I learned at AT&T is you’ve got to empower people to solve issues if you want them to be problem solvers. If you just want them to answer the phone, but you’re not going to give them any empowerment, you kind of hold them down. They’re not going to solve customer problems, and it creates more time for somebody else to actually go fix it. So with empowerment, they get more enjoyment out of the role, and the customer feels much better about the brand. So getting access, we work in every point of sale provider. I don’t know of one that we do not operate in every single day. So all the major brands we work with, the app memberships we work with, every one of them, we work every day in. And it doesn’t matter if you’re a private equity and you’re acquiring other brands, and they go from DRB on one site, and then you acquire another group that is Sonny’s, we can fill in immediately. And we already are kind of experts in these point of sales at this point, that we can step right in and help them from day one of any acquisition or new store opening, let alone new owners coming in, like you’ve mentioned before, with all the new people coming in.

Lanese

Gosh, I’m so glad that you brought that up, Bobby, because it is a really important overlay of these different POS providers they have, or these different sites, especially from an acquisition level, it’s very costly to change out the equipment. And there’s time and cost associated with that. As brands are growing, and they have a mix of different POS providers, this is really a solution for operating seamlessly with inside of multiple types of it, but within one brand, that is really helpful as regional and private equity backed… or just chains looking to grow, as they’re looking to do that, this is a real tool and solution for some of those challenges that they can face.

Bobby Thomson

Yeah, we have customers that have five different POSs. When a call comes in, the first thing we have to do is identify, you know, where are they located, location, things like that, because the location, you know, even in a given market, you can have three different POSs in one given market. So it’s really important that you don’t waste a lot of time in one POS, you can’t find them because you’ve got to identify if they’re in one of the other two. But it happens every day. And it’s pretty common, I think operators know this. It adds another level of complexity, and complexity adds the time. That’s one really key value, I think, that we do provide is that we’re agnostic; we can work with them in any POS. And the goal is, you know, we are trying to help the customers. Some of these investigations do take 20 or 25 minutes to really dive into it. That’s time that somebody would have to spend to do it effectively for one customer. Not, you know, for five! Just for one. We get that kind of detailed level end service.

Lanese

Right. Michael, as you are working with your team, and you have multiple brands that you all represent, are there any trends that you’re seeing, from an industry perspective on things that are coming up that maybe you hadn’t built into the original model that you’re seeing as a thing now that wasn’t a thing before? Are there any industry trends that you’re noticing as you work with more and more car wash owners across the country?

Michael Pelikan

For me, it’s tough, because I’m only five months into the industry as a whole, so I don’t have a long road of what it was like before. But what I will say is I’ve really noticed a strong trend of people being very driven by these promotional offerings and being very tied to them. We have a lot of brands that are sending out potential offerings to specific locations, but based off their marketing, that customer may go to one location, hear about a 9.99 offer for three months, and we have to talk through that that kind of trend in terms of is this offer to you? Is it not? A member calling in saying, “Hey, so you guys are giving off a great deal right now! I’ve been with you for a year. How do I get that?” And so one of the things we’re seeing is just how the customers are engaging, from a promotional standpoint, both active members in terms of what it means for them, and a lot of our customers are starting to look towards, okay, when we do these promotions, our current customers may feel slighted, they may feel like “I never got this when I signed up a year ago.” And so we’re really starting to see several brands start going to more of like a loyalty program where they are may be giving swag. They’re looking at tenure, wash activity to say, “Okay, this person washes with us five times a month. They’re obviously a heavy user.” What can we… Is there a club that we can put them in? Can we give them certain offerings? Can we give them, you know, anything that could just put them above just a normal user. And so, we’ve really started to see how not only just how the membership model has changed, but how the brand loyalty and like a VIP type club, that they’re looking to take care of their biggest promoters, are really starting to come to fruition. I can say at least three or four different brands that we work with have something in the pipeline to roll out in the next three to six months in terms of how do we take care of our most loyal customers and really show that we care outside of just giving them a great wash experience.

Lanese

Right and thanks for sharing. It’s that retention of the customer, so keeping especially your most loyal and your happiest customers happy in perpetuity, and making them feel recognized and part of it, and having that identification with the brand and that relationship with the brand.

Michael Pelikan

Absolutely. I mean those type of customers are the ones that have to have their own vehicles on a plan, or their whole family has a membership, or they’ve recommended 15 other people and friends and family, and so it’s so much further than just that single interaction for that customer. They truly represent, they promote, and they drive further revenue that’s really tough to capture unless you provide them with a referral code. But the value in the input, in the drive to membership, is really truly there with your absolutely most loyal customers that truly love the brand and love to promote it.

Lanese

Yeah, definitely. Bobby, anything you want to add to that?

Bobby Thomson

Well, I think you see a big push for technology coming in. As membership volume is multiplying for owner and operators who are really gravitating to the model, and they’re really trying to expand on it, technology is coming more into play: how do you communicate with your people better? How do you manage memberships better? How do you engage with memberships better? How do you use automations to help them? Rinsed and other platforms are very visible in the car wash community, trying to make it easy to do business because in scale, it is very difficult to do it one by one. And automation is important. You have AI, you know, that’s out there. And there’s ChatGPT, right, that can help you write better scripts. It can help you, you know, determine the sentiment of people, of how they communicate, and make sure your reply back to them is at the right tone. So I just see technology coming in to really help us in the industry in a lot of different ways, all the way down to how you train employees, right? How do new hires get to come on board? There’s just so much out there of organization and process improvements. And I think the old days of car washing, you know, just kind of figuring it out, is kind of, you know, definitely the old school way. There’s just so much out there that I think people are realizing what technology can really, really help them help their business.

Lanese

And something that’s really great about this emerging technology for car wash owners as these operational efficiencies and solutions tools is the collaboration and how these different platforms work together. So I know, Bobby, that you guys have relationships and work very seamlessly amongst other technology solutions providers, like you mentioned Rinsed, or I know AMP Memberships, and these other areas, as well as the the POS provider, but we know that they have to have that. But it’s these other even third party technology solutions providers that that you work with.

Bobby Thomson

Totally. We’re trying to help them. Our commonality is we’re both trying to help the owner and operators. So we always want to partner, you know, be a good steward of a partnership, not only the owner and operators, but how do all of their investment in marketing and technology, how can we help them become even better? Because at the end of the day, we are the people element in a world of automation that is getting bigger and bigger. You can’t do it on automation alone. When the automation breaks down, who’s going to fix it? When customers can’t get that solved through any kind of automation, somebody’s got to go in and do it. Someone’s got to follow up with the customer, so we are the live agents, the human interaction, you know, the element piece to it, that really kind of brings everything in. We’re full technology platform ourself. I’m a technology solutions partner, so I can help people with their phone systems, and everything else. The whole goal is how do you leverage it? And more importantly, once you do have it, whatever you put into it is what you get out of it. So it’s one thing to have technology, but you got to dive deep into it to get the most out of it, to make it the most effective.

Lanese

Yeah, totally. And I think that that has been one of the most interesting things that I’ve seen, from my point of view, just watching the industry and being involved with it over the last decade plus of seeing how this new technology has emerged, and then how there’s multiple solutions that all work together to enhance those efficiencies. And you were talking about the role of technology and that there’s things that we can automate. And there’s things that we can have, systems in place that are without human oversight, but not all of it. Like it’s like some things you can tactically use AI or use automated functions, but you still have to have the human interaction. And we have seen that from kind of an industry perspective of a time where there was a shift to contactless transactions at the pay gate. So you know, pay gates came around, and then do you have someone there / do you not have someone there. That can be up to the certain brand of the location, and there can be all kinds of reasons why you would or wouldn’t do it. But on a broader scale, people identify with other people. So the brand can be great, and the products can be great, but that connection with a specific location and people more than just automation alone. So that coupling of that and the marrying of that is still really important, no matter what technology advances we have.

Bobby Thomson

Yeah, and look, people are busy today, and people are very mobile. And we just find that your website can be beautiful, it can be well built, full of content, and people will call with the most basic questions. And what that tells me is they literally get on their phone, probably go and google, type in your location and the brand name, and just hit call. They don’t even take the time to go look for the information themselves. So having the people element there is definitely critical. And I just think that behavior that exists in the marketplace is not going to go away anytime soon. We don’t see it going away. People still want to get a hold of somebody and talk to them and try and get their issue resolved.

Lanese

You know, that’s such a great example, because it’s so true.

Bobby Thomson

We’re all like that, right? I do the same thing! It’s easier to get a phone, to call, and keep your day going or keep driving, If it’s legal to talk on the phone in your state while you’re driving.

Lanese

But also how great if you are the caller, when you have somebody answer and solve your your question right away. I mean, that’s totally a win/win. And that’s something that I see for Retention Express that, you know, you’re looking for the win for the brand, and the win for the customer, and it’s representative of both of those.

Bobby Thomson

It’s a win/win model 100%. It’s all about retention of revenue, retention of customers, which makes it a win/win for both sides.

Lanese

Absolutely. Thank you guys both. This is such a great conversation today. And I always enjoy talking about customer experience and how we can provide better experience and a better service to our clients and how the car wash industry is evolving, and really focusing on their customers and their experience on the washes and off the wash sites. It’s just a different conversation on a much deeper level than it was in the past. Because we have different tools and resources and technology like you guys available to be able to understand this and to dive further in than say 10 years ago. So Michael, you have been in the cars industry for a little over six months. What is the biggest thing that has surprised you about the industry in your journey so far?

Michael Pelikan

That’s a really great question. I have to be honest, I was not a heavy carwash user previously to joining Retention Express. My wife loves it, she’s always been… I actually take her car more than I took my own. But just the passion on both sides, the operators, the attendants, the passion they have for the work that they do, but the passion of the customers. They really care about getting their car washed. And we see that from the angriest of customers who are upset by their experience to the customers that just love these brands so much. I spoke with a woman yesterday. And she called in to say she wanted to give the entire crew at this location a huge shout out, and that she goes almost once a week, she knows them all by name, she brings them waters on hot days. And like she just wanted leadership to know that like they’re fantastic… their energy, the way they connect with the customer, she just loved it. And I was like, you don’t see this everywhere. You don’t see people calling Netflix to thank them for everything that they do. And these customers really connect with these sites. They know these attendants, they know the site managers, and they build a bond. And that has been probably the most surprising to me, it was just like the connection and passion that the whole industry has and the people that leverage the service have as well. And so it has been infectious to me. I now have a membership. I go once a week, and I take my wife’s car. So I will say I’ve redeemed myself. I have one now, but I see it. I feel it. And it is wonderful to go to these washes and to see how hard these operators work, and how these people truly connect with these attendants. And so that’s been the most surprising element for me so far.

Lanese

Oh, thank you for sharing that. I ask that question off and on throughout the years. And that’s a little bit different take on the passion part of it, which I really, really like. And especially when you’re talking about, you know, passion can go both ways, you know, negative or positive, but it’s because there’s a caring, and there is a connection. Otherwise it would be indifference. I like that. But most people that I talk to say that it’s something about the people.

Michael Pelikan

Oh yeah, it is. And I swear, it’s animals, children, and your car are the three things that people care most about. And people are really serious about taking good care of their vehicles, and it is evident in all sides. And so I couldn’t agree more with you, Lanese. It is a passion industry. And I love it. It’s been infectious for me as well.

Lanese

Well, we’re happy to have you. It is neat to see how people get exposed to it, and then talk about retention. Most car wash people don’t leave. So if you become into the car wash industry, you just stay because of all of these great things about it. But really just to kind of sum up what we’re talking about today is we’re passionate about making sure that we are providing tools and resources and information and insights to car wash operators and professionals on how they can run a successful business because we love this industry and it’s a great place to be, and we want to be looking forward to all of the things that it can continue to grow into and be successful and provide successful careers and lives. hoods for folks. Thank you for sharing about what Retention Express does on capturing data, but more importantly, what you can do with that information to make critical decisions about your business and have it be more successful and have it be more efficient and boost your sales and all of those kinds of good things wrapped up in one.

Bobby Thomson

Absolutely. Well, thank you for having us. We enjoyed it. As always!

Michael Pelikan

It was a pleasure, Lanese.

Lanese

Yes, thank you guys so much. And so for me here in Texas, it is hot as all get out. You guys are in Atlanta. How’s the weather there?

Bobby Thomson

We’re going to hit triple digits, and it’s going to be miserable the next two days, so welcome to the south.

Michael Pelikan

Little steamy.

Lanese

Yeah… Does steam get the cars dirty, too? Some mineral deposits from that somehow?

Michael Pelikan

I’ll keep you posted. I’m actually taking my wife’s car this afternoon. I’ve got to do my weekly trip. So we’ll see how they’re doing over there at the wash.

Lanese

Awesome. Well, thank you guys so much for sharing. And if any of our listeners want to find out more information about Retention Express, you can go to retentionexpress.com You can call Bobby or you can call Michael. And I’m sure they would be more than happy to connect with you and share their passion about what they do and how they can help you.

Bobby Thomson

Absolutely. Thank you everybody.

Michael Pelikan

Thanks, everyone.

Lanese

Thanks.

About the Episode:

The prompt on the gas pump to buy a car wash isn’t new. In-bay automatic car washes have been a regular add-on to many gas station chains for years, though usually as an intended customer convenience and not a core focus. But things are starting to change, and big-name gas/c-store companies are actively participating in more car wash M&A transactions. Earlier in 2023, we saw the parent company of Circle K acquire True Blue, and recently QuickTrip bought Bubble Bath, both with intentions to keep building their conveyor car wash footprint.

So, what’s driving this shift? In this episode, Lanese Barnett and Jeff Pavone dive into why gas/c-store companies are increasingly interested in the express car wash space – with plenty of dry powder to deploy – and what their presence ultimately means for existing car wash owners in terms of rising competition and current valuations. Lanese and Jeff discuss topics like EVs’ impact on gas stations, synergies in technology solutions throughout the automotive landscape, as well as cross-vertical marketing advantages to encourage brand loyalty.

Listen in as Lanese and Jeff navigate the twists and turns of the car wash industry, bringing you the latest insights and trends to keep you ahead of the curve.

Sign up for Car Wash M&A, The Newsletter. | Follow us on social media @AmplifyCarWashAdvisors on LinkedIn or Facebook. | Connect with Lanese on LinkedIn.

Check out the full transcript below:

Lanese

Today we are live from our studios in lovely Scottsdale, Arizona. It’s nice to be here in person with you, Jeff. I always love coming into the office, and I’m excited to chat today for episode 17 of Car Wash M&A, The Podcast. Today we’re going to talk about a different topic. We’re gonna dive into why there has been a reemergence of interest from gas into the car wash industry in particular, and just kind of what that means for owners, what that means for the industry, and what are some of your thoughts and some of what you’re seeing as we look across the board. So first of all, if you could share with our listeners a little bit about what you’ve seen as far as gas C-stores, what trends you’re seeing with what interactions we’re having today.

Jeff

Thank you, Lanese. First, gas C-stores are just coming off of record years. They’ve been minting money. Some of the most profitable companies in the country have been oil companies. From that standpoint, they’re sitting with a lot of cash, looking for opportunities to go deploy it. Really, I’d say one of the biggest drivers is now with EV coming. It’s just a foregone conclusion that it’s going to erode some of their volume from gas. Every year we’re seeing more and more electric cars on the road. So as it does that, these oil companies are looking ways to maximize their other profit centers. Car washing now, with memberships, becomes really an attractive add on. They’re also looking at the loyalty component that car washing brings. And so you’re seeing, even now, if you go to your local convenience store, you’re seeing a lot more loyalty. You’re seeing a lot more digital activity. They’re coming up with apps to build more stickiness with their customers, and the car washes play perfectly into that.

Lanese

So you talked about the stickiness, and I can look at the gas space as a consumer still. You know, I’m just a normal consumer, and I do have my preferences, but I also realize that I’m not as loyal to one particular brand as I would be on the car wash side. I think that there’s the code that’s been cracked with the memberships and how that really builds loyalty on car washes. Because historically, people kind of had that same perception of a car wash is a car wash. You know, they’re kind of ubiquitous, but now that’s changed. What are some of the ways that gas companies are looking to leverage that stickiness that the car wash industry has garnered?

Jeff

Well, I mean, one big way is just discounts, right? If you fill up, you’re going to get a discount or a free car wash. Now it’s almost the reverse. Let’s say you sign up for a membership. They can give you a $20 discount. There’s going to be a lot of play back and forth. And you’ll get a new card every time your membership is. They’re going to have a lot of advantages to really offering benefits to consumers to use both. It just makes perfect sense. At the end of the day, you’re right. A consumer is going to go where it’s convenient to get their car washed. Typically, gas stations are in really convenient locations, and they’ll stay if it’s a high quality product. And so as they begin to really figure out how to wash good cars, I think the customer is going to keep going.

Lanese

This isn’t the first time that there has been the gas C-store car wash combo, but it seems like what was being done over the last 10 to 15 years was such an afterthought on the car wash side that it didn’t work. You know, I couldn’t imagine going to the unmanaged car wash mini tunnel at a gas station now as a more educated car wash consumer, but there’s also a lot of real opportunity with rethinking that relationship and making it better with having it not be an afterthought of having intentionality put into the car wash side.

Jeff

So with the calls we’re getting, and we’re dealing with quite a few now, they’re setting up business units, specifically for the car wash business. Like I said, before, it was kind of an add-on thing; it was going to be part of your gas station, and you’re going to go through an in-bay rollover or something like that. Well, they could only watch so many cars an hour. They’re now figuring out that having memberships, and again, if you can have a significant amount of amount of memberships, and tying to loyalty together, it’s a major part of their business. You know, a last thought could be that as gas station multiples are selling at x, right? They trade at one number. Car wash multiples, because of the reoccurring revenue side of it, trade significantly higher. So a part of the long term thinking could be that if they’re able to build up a large amount of membership to go with their gas stations, their value of their business just went up.

Lanese

Absolutely. And with that, the options for consumers of that added value. If they have the relationships with either one or the other, it makes a nice synergy to continue that with a high quality product. We talked a little bit about the diversification for gas companies to have, as EV becomes more popular, to have these other profit centers. What are some of the other reasons that the car wash industry particularly has been attracting them? Some of the things I think about that we talk about often are you know the durability of the carwash industry and the resilience through economic downturns, through COVID, that that membership model has really given that a whole new stability in the face of economic headwinds that we’ve experienced.

Jeff

Well, first off, it’s no longer a little piece of their business. So if they’re operating it properly, it could be a major part of the revenue, driving profitability to their gas stations, right? Separately, you know, with competition in every business, even in the gas C-store business, they differentiate. If they’re able to add a car wash component and execute in a good way, they’re going to differentiate from from the other chains that are growing, and it becomes a huge win for them. For gas C-store companies in general, they’ve already got really good real estate, they’ve already got good real estate teams, they understand how to get stuff entitled, they know how to operate, so for them, this is just such a natural opportunity to grow this whole piece of their business.

Lanese

And what do you see… We’ve kind of touched on this, but why now? Why are we now seeing these C-stores like Circle K, like QuikTrip, it seems that those both came at relatively the same time, so there’s got to be a reason.

Jeff

It’s not only those two, but it’s… I can only tell that you every  — not every, but I will tell you, a lot of major oil companies — even some independents with 100 locations, they’re all looking at ways to give them additional profit centers with EV coming in. That’s sort of that one piece. And again, they’re sitting there with more cash now than they’ve ever had in their history, and they’re looking at ways to really… the whole loyalty thing. And if you look at gas C-stores in general, you’re seeing a big emphasis on loyalty. Digital marketing! You didn’t see that before. This plays in imperfectly to help expand that whole business concept, right? They’re looking at the competition from Amazon, and all these other people out there for delivering foods. This is just another opportunity for them to become “Amazon proof” so to speak, right? Giving a consumer more reasons to come to their store, whether it’s for gas or one of the food products. They’re looking at this as really just a tremendous opportunity to build loyalty to the brand, and again, build stickiness. Before they just didn’t need to.

Lanese

Right. We talk a lot about the interest from private equity groups that have come into the car wash space. How is this group different than that in what they’re looking for, or their trajectory?

Jeff

Great question. Private equity groups typically have a timeframe, five to seven years, and they’re going to,  typically after a five year window, they’re going to take that investment and they want to go back and monetize it. Oil companies are long term investors, so they could be looking at this thing as they have no gun to their head to get in and out from an operator standpoint. They could learn the business, they can invest in the business, because at the end of the day, they’re not looking to flip it. It becomes a much more longer term business proposition for them, which makes it, from a competitive standpoint, way more viable than a lot of private equity back groups out there.

Lanese

And with that, because it’s a long term focus, there’s likely more focus on building out the infrastructure, so having a stronger team there on site, not cutting labor or being as mindful about keeping those costs down when you’re looking at a longer term plan for growth and continued strength of operation, so I see that as a good sign for the carwash industry as well.

Jeff

Sure. And again, this is definitely another viable option in the car wash world, but we’re still going to see the really great owner operators and the brands in a market being able to offer memberships. This isn’t an easy business to learn, so there’s still a long learning curve to knowing really just how to get customers on your lot, how to process cars, and assuming you’re doing a great job, I still think those kind of operators will continue to flourish and win, but this is definitely something to make sure you’re taking in consideration as you build out your business.

Lanese

And it seems like, speaking to your point, that this is not the only path forward but this just adds another layer of people and groups that are interested in investing in the car wash industry, which for folks that are considering making an exit, this is a whole other group of interested buyers, potentially. There are more people coming in.

Jeff

When you look at a brand in your market, that is a very good option for a buyer in your market as well, if that’s what you’re looking to do. On the other hand, again, you got to take a look at coffee. The convenience stores sell coffee, so does Starbucks, and now you look at Dutch Brothers, and all these other successful chains. You’ve got all these successful chains going, so there’s room for everybody. And I still think, at the end of the day, it’s still a such a great value. The more experience consumers get with getting their car washed, the better it is for everybody. This is just going to be one more, and I take it they’re very serious about getting in this space.

Lanese

With some of the bigger names that have entered this space, it looks like they’re trying to do it thoughtfully with the intention of hey, we want to engage the car wash community and learn from them. But this is with much more intentionality.

Jeff

For sure they have a lot more to lose, right? So if you look at the C-store brands out there, like a QT, or Circle K, or somebody, they’re going to be very, very sensitive to diluting the brand with anything they do. So they’re not looking to come in here, and do this on the cheap. They’re going to be looking at building… Like their stores, they’re going to look at building a very consistent brand across their platform. So they’re definitely not going to go on the cheap. It’s going to be consistent. Whatever their brand is, they’ll be uber sensitive to making sure that this lives up to it.

Lanese

Right, absolutely, that this is mirroring the core principles and service offerings that they have. You know, I think of QT with their clean bathrooms, and they have friendly staff on site. And so making sure that if there is a partnership and that brand recognition, that that is a synergistic extension of what they’re already good at with that.

Jeff

And I wouldn’t forget… I mean, again, I think you’re going to see it a couple of national players for sure, that we’ve talked about. But there are definitely… I mean, we’re having conversations with large regional chains as well, because they’re realizing they’ve got to get in the game, too. Where the conversations are going, though, a lot of them have tempted to get in the game, and they’re realizing it is way more difficult to execute on this business than it is what they’re currently doing. And so they’re out seeking help to say, “Okay, how do we how do we do this?” You’re going to see a lot of these guys have interest in it, but we’ll see, at the end of the day, how well they can execute. Some of the groups out there are going to bring in really solid talent, some guys will continue to try to do it on their own, but they’re going to find out that this is not an easy business to run well, and the ones that do figure it out, are going to have great success.

Lanese

Absolutely. And that’s something that as we talk with fellow car wash seasoned professionals that it is that recognition that this is not an easy business to run. And that takes time and it takes effort and training and structure and all of those things that don’t happen overnight, and they don’t run themselves at all. With these new groups, what does that look like as we continue to go through the year, and as we look forward kind of on a little bit of a longer term basis, what are some of the possibilities of what what this might look like down the road?

Jeff

You know, I think they’re here to stay. I don’t think this is an experiment to see if it works and they’ll get in or out. I think it’s here to stay, and I do think you will see them continue to really expand aggressively in the markets they’re in. We’ve got a long way to figure out where consumer saturation is because everybody’s sort of… that word keeps popping up. I still think there’s a long way to go, but I do look at it that they’re here to stay. And I would look at the regional companies that start in it are going to look to expand in their own markets, and they’re long term. They may not come out of the gate building 50, but they’re going to be long and hard and steady developers of car washes.

Lanese

And let’s talk a little bit about what those potential growth strategies may be and that we’re seeing already — that it’s a mix of acquisitions and markets that have a strong car wash presence already, and maybe they have their gas stations there as well, so they going that way. But then also, I’m assuming, you know, being on new sites, new gas station sites, that they would look at potentially building there as well.

Jeff

So I think they’re… I mean, they’ve got to be within, I would say, three miles or less of an existing store. And again, one of the big drivers is this is technology, right? With technology, they now could have an app. And they could they could communicate with their customers, even if it’s not on site. You know, before you had a drive up on the lot. You saw car wash, and you got car washed. Today with technology, they’re going to be able to be more engaging with the customers. You’ve got to look at all these C-stores. They’re all getting into the app business, right? They’re going to create this loyalty program, and as long as it’s still relatively close to their store, they’ll learn how to tie the two together.

Lanese

We’ve seen the advancements in technology so much over the last several years in the car wash space. We have our Amp Ventures partners, AMP memberships, and some of the really cool stuff that they do with engaging customers off site and the gamification of it and just making that interaction more available and more exciting than I’m physically there, and this is a person that can make a sales pitch to me, but they’re building that brand loyalty, and then that extension of how how they want to engage with them.

Jeff

And then they can sell right at their pump. They’ve got a lot of traffic on a site, and they’ve got a lot of marketing billboards, just on their own sites and at their own pumps, so they’re going to have some advantages to really building out that membership base.

Lanese

Yeah, absolutely. And it seems like there’s a lot of really exciting things ahead that we kind of didn’t have on our radar maybe several years ago that this has shown up. And, you know, we talked about the first half of this year of 2023 with M&A deals in general slowing down. There was a lot of uncertainty on where the market was going to go, and then also where valuations are going to land and what that looks like. And after going through that first half, now we’re looking towards the second half, and it looks much more optimistic and stable as far as returning to kind of a normalization in the car wash industry that can be a good thing for us.

Jeff

Yeah. You know, we’re seeing really bullish signs in the second half. We’re expecting a very big second half of the year. Right now, the deal flow is coming at a heavy clip. We’re seeing a lot… we’ve got a lot of deal activity. We expect to close a large amount of business in the second half. And part of what’s driving it is just… There’s a few things, right? One is that the economy hasn’t crashed and burned. Consumers are proving to be more resilient than most. And I think that the weather impact of sort of that first part of the year was sort of confusing, right? Was it weather? Was it the economy? Was it the consumer pulling back? And we’re finding… we’ve got data and numbers from May and June, and the car wash… And the numbers are coming in strong.We’re seeing some really, really strong results around the country. So what I think a lot of these buyers are looking for… They’re seeing how do we underwrite these deals? They’re seeing numbers stabilize and grow again, and they’re also seeing interest rates stabilize, so they can underwrite it, and then we’ve seeing, from the seller side, the sellers now realize there’s still a healthy multiple out there. It may not be the deal that they would have gotten a year ago, but generally speaking, it’s a really healthy number. And it’s not going to go back to what it was. At the end of the day, we don’t have free money anymore, so we’re not going to see those numbers. So buyers are adjusted, sellers are adjusting. And I think you’re going to see a lot more transactions happening in the second half of the year, and it’s just still a very healthy business to be in.

Lanese

Right and, you know, looking at, okay, so it’s not the numbers that it once was, that were anomalies. But what we haven’t seen is this fall off the cliff. And so that’s really encouraging for that stabilization and normalization and the health of our industry.

Jeff

So one of the key drivers is it still comes down to operations in this business, and we’re in the membership business. If you’re not, you’re probably in the wrong business. And memberships have proven to be making this business very stabilized. And the margins are incredible, so it’s still a very, very exciting business to be in. We’re finding that a lot of the buyers that did enter the market before, are still anxious to get in and get deals done. Part of the problem is we haven’t had the quality of the platforms in the first half of the year that we were seeing in the last two years. Until now. We’re about ready to take out a couple of major platforms out to market, and they’re high quality deals. But they weren’t out there because I think everybody was sitting on the fence, waiting to see what happens. So, you know, look for a really exciting second half of the year. And you know, you’re right. I don’t think we’re going to see things fall off the cliff. In general, car washing has proved to be a very resilient business. And even under bad economic times, you know, you may have a drop of up to 10%, call it, not like other industries, because it’s so affordable.

Lanese

Right, and it has that feel good factor. So I think about a gym membership. A gym membership feels good only after you’ve been there, but it’s the getting there, and all of that part of it. There’s guilt involved sometimes. And the car wash relationship subscription doesn’t have that as much. It’s a quick in and out, and you get the immediate effects of that feel good lift. And there’s something to be said about that, that people continue to want to have that. So that’s the good news. Is there anything that you’re particularly surprised about with the conversations that you’re having with gas C-store, with these groups that we’ve been talking about, just in your kind of relationship history of your line of work? Are you surprised by any of it?

Jeff

You know, I’m not. I still think they’re trying to figure out the business. They bought into the thesis that car washes, and tunnels, in general, and memberships is a good business to be in. Now with that said, they are also realizing it’s easier said than done. And, you know, I can only tell you that it’s still coming down to this business is an operation business. And I would tell you that not all operators operate great. I think the C-store convenience guys are figuring out that this is a little bit more challenging, but they’re going to work hard at figuring it out. But it is going to come down to having the right people in their company and organization or getting that kind of expertise to help figure it out.

Lanese

That’s an interesting aspect for potential sellers, too, that maybe if you’re not ready to be completely out of this industry, that there are other opportunities to explore with these partnerships or with the need for car wash operations expertise from multiple people that are entering into this space; that that’s still a very sought after skill that doesn’t just grow on trees and, you know, find on  just any Indeed listing. That is a specialized skill to have and to be able to execute well.

Jeff

For sure. Yeah, absolutely. We’re still in… Again, I travel the country, and I’ve seen probably more car washes than just about anybody. And we’re still seeing lots of upside opportunity from an existing operation to greenfields, but this business is coming down to the guys that know what they’re doing. Because you’re going to find that the ones that don’t know how to operate or really build up their memberships… I think there’s going to be challenges from all directions. So you know, it is still it’s going to be a business, that’s going to be, I think, flourishing for years to come. But I do think we’re finding that, even the regional operators, to even the new players that are coming in the space, it’s all going to come down to execution, being able to deliver a quality product, because we’re certainly building enough carwashes to make it convenient for a consumer. And it will come down to who’s going to give me a clean, dry, shiny car, and those guys are going to win.

Lanese

Well, and it’s not like it’s cheap to build a car wash, so as that cost continues to rise, having the path forward and the confidence of being able to get a return on that investment is important. And I think that’s one of the interesting things that you touched on with this particular gas partnership with the car wash industry is that long haul mentality and that long term relationship to really hopefully, you know, strengthen those infrastructures and strengthen those operations, which serves consumers. That’s helpful, and it’s helpful for our industry. A fun fact, I want to ask, or a fun question. So you talked about seeing more car washes, then who knows… How many car washes have you seen this week?

Jeff

This week? Today’s Wednesday. I’ve seen at least… I’ve been to at least 20 car washes, through 20 car washes like literally getting a car wash from about 20 car washes in three days.

Lanese

That’s a lot of car washes! That is, but you know what? Like you’ve experienced, and like I’ve experienced, once you see one, it’s not like you’ve seen them all because they’re all different, and they all have something that’s either… you make a mental note of that was really neat or cool, or that you would do differently, or what the opportunities are. And it really gets to be, I wouldn’t say an addiction, but it is an ongoing motivation to continue to want more.

Jeff

One of the great joys that I have is when I do travel somewhere, and I see an exceptionally run chain, where everything runs great. And you see that.

Lanese

Oh, so when you go visit Bill at Metro?

Jeff

Well, Bill’s a pretty high bar. But lately I’ve seen a few really outstanding run chains. And when you see it, it gets you excited still. So I’m like a little kid, when I see somebody doing just an amazing job running their business, it made that travel worthwhile. On the flipside of it, I’ve seen some less than exciting operation, so we still know there’s a lot of work to be done on on that side of it.

Lanese

Absolutely. And just talking about the saturation aspect of it, you’re here in the greater Phoenix area, which has a ton of car washes. I don’t know if it’s the most per capita or what the actual statistics are. But there are a lot, but there’s still the consumer demand. I think that that’s another good reference point to look back on is, like you touched on with the coffee aspect, that the more convenient it is, the more adoption that consumers have, the more we can continue as an industry to meet that need. And for those that execute it exceptionally well, you know, that’s a great bar to set to attain.

Jeff

Yeah, I still think there’s… Even in this Phoenix market, you’re seeing car washes being built, and they’re building them because they make money. The guys in the space now are not newbies, they’re some of the best operators in the country. And they’re building them because there’s still gaps in their footprint. And I still think, you know, at the end of the day, when you’re selling car washes $20 to $30 a month, consumers will pay it if you make it convenient, so I still see a long runway of growth and opportunities. And in some cases, you know, when you have more car washes in a market, it’s better for everybody because your consumer understands what that product is. They’re familiar with a membership. You go to some markets that have very few car washes that are newer, and it’s almost the opposite, right? The consumer has no idea what they’re doing, and so those numbers are fairly low, so I still think we’re gonna see… That’s why when the gas C-store gets in the space, it’s not doom for everybody. It’s actually just another opportunity, I think, to continue to educate the consumer, but it will challenge operators to to really focus on their A game and delivering a quality product because there are options now.

Lanese

Yeah, absolutely. So for our listeners, what’s the takeaway from this? If you have to give them one or two things that are the most important things of our conversation that you want them to keep with them…

Jeff

Yeah, I’ve got to go back to, first off, if you’re operating at a really high level, and you’ve got, let’s say, 5 or 6,000 members, if you take care of your members, and it’s convenient, they’re going to stick with you, right? It’s really, if you start slipping on what you’re offering, I’d say, “Beware!” Because there’s going to be someone coming after that customer. So it really is, you’ve got to continuously be evolving. Your site has got to be looking good, you’ve got to keep adding to your customer experience at all times. Because at the end of the day, if you don’t take care of that member, somebody else will.

Lanese

Absolutely! On that customer experience side, you know, some of these gas C-stores that have elevated what that means with their offerings that they have in there… So I’m in Texas, and we have several very large gas station convenience store chains that have totally changed what that looks like on this larger scale footprint, what the retail side looks like, and then adding in that car wash component. It’s exciting to see the new version of what can be out there.

Jeff

Yeah, and I would say maybe just parting words is as this business becomes more sophisticated, it’s not just somebody rubbing your car with a towel and a soap anymore, you better get to know your digital marketing, and figure out ways to stay in touch with your customers, I can tell you that there’s a lot of technology coming out, and you’re going to see a lot more coming out, but the emphasis on data and knowing who your customer is, and reaching them digitally, is going to be critical to long term success.

Lanese

That’s a whole other topic. But yes, not only capturing but being able to analyze and have actionable insights and strategy based on the data that you have captured, to make decisions on how to better reach your customers and how to market to them and then how to thoughtfully grow that will you know help that strategy for continued growth and scalability. So first, thank you, Jeff, for your time today. I always love the chance for you and I to talk about these conversations that we have just kind of over the phone or whatever but it’s really important for us to be able to share the insights that we’re seeing on a level across the car wash industry and especially across the nation of what’s coming in, and what does this mean for the car wash community? And most importantly, what does it mean for car wash owners and, and our drum that we’ve been beating is the same: focus on operations, and provide a good product and keep doing that side of it, but also that there are options out there for whatever phase that car wash owners are in whether it’s wanting to continue to grow, if it’s looking at making a change or making an exit, but having somebody to advocate on your behalf and help you understand what the options are that may not be just right there available. That’s our goal is to shed some light on those other things. Well, thank you again for our time, and for our listeners, thank you for listening to our show today. And if you want to leave us a review for Car Wash M&A, The Podcast, you can do so on your listening platform of choice, and sign up for Car Wash M&A, The Newsletter on our website amplifywash.com, and we will keep in touch with you. Thanks! Have a great rest of the day. We’ll see you next month.

@Lanese Barnett Any thoughts about a title? I made a suggestion, but feel free to put whatever you think would work!  [AD1]

About the Episode:

Want to know the Amplify team’s key takeaways and market insights gleaned from The Car Wash Show 2023? In this episode, Lanese talks with Amplify COO Chris Jenks about themes and sentiments that emerged from this year’s show in Las Vegas. With the cost of capital high, mergers and acquisitions activity is picking back up as many platforms are adjusting their path to growth. This is good news for car wash owners considering an exit, with inventory currently lower than demand. But as buyers return to the table, they are more sophisticated and looking for well-performing car washes in strong MSA’s.

As the car wash industry evolves, so does its embrace of new technology, especially solutions providers that are bringing tangible benefits to operators and boosting their cash flow by streamlining operations. Lanese and Chris highlight case study examples of how businesses like Amp Ventures partners Retention Express, AMP Memberships, and Merchant Advocate can significantly strengthen operations, customer experience, and the bottom line. Listen in for these key takeaways from The Car Wash Show and how they can improve your business.

Sign up for Car Wash M&A, The Newsletter. | Follow us on social media @AmplifyCarWashAdvisors on LinkedIn or Facebook. | Connect with Lanese on LinkedIn.

Check out the full transcript below:

Lanese

Welcome to Episode 16 of Car Wash M&A, The Podcast. I am here today with my colleague, Chris Jenks. Chris is our COO at Amplify Car Wash Advisors, and he is also a car wash owner and operator with Driven Car Wash in the Chicagoland area. So Hi, Chris.

Chris

Good morning, Lanese. How are you?

Lanese

I’m doing great. And so today we’re going to spend a little bit of time just kind of giving some thoughts on The Car Wash Show in Las Vegas that happened earlier in May, and sharing some of our team’s takeaways from what we saw there at the show. So Chris, we’ll just dive right in. We’re going to cover three things that we really took away. We’ll start with number one, which one of the things that we really saw was that there are still a lot of buyers that are interested in quality car washes. So can you just kind of talk a little bit about that?

Chris

Yeah, absolutely. I think we saw a little bit of a pause here in transactional activity in the car wash space towards the end of Q4, going into the first quarter of 2023 here. And it was refreshing to see… I mean, there was certainly a buzz at the show. I think that speaks volumes to the overall continuation of interest in this space and the continuation of growth in the car wash industry. And I was personally just very encouraged to see that buzz. But as we talk specifically about deal flow and the transactions that are occurring in the car wash industry today, there is certainly a lot going on here. As we look at the second quarter now, you know, I mentioned the pause that we had, or at least the slowdown earlier on this year. We are shaping up now, as relates to our business, in having the record setting second quarter. In fact, right now as we look at deal flow, we have in excess of 90 units that are either under LOI or escrow at the moment. And again, this is record breaking for our business.

Lanese

Right. And I think that that’s really important because as we saw this lull or this a little bit of… I don’t want to say fear, but you know, there’s uncertainty in the marketplace, and it’s just showing the resiliency of the car wash industry and of that sector in general.

Chris

Absolutely. I think there’s a little bit more clarity in terms of where rates are expected to go to the future. As we look at what was an unprecedented series of rate hikes from the Federal Reserve, in fact the most aggressive series of rate hikes in excess of 40 years, a lot of these consolidators and financial sponsor backed platforms in the market kind of paused for a bit. Cost of capital is increasing at such a fast pace. But now as we look at the future state, I think there’s a little bit more certainty. Now granted, we have the upcoming budget crisis here that needs to be addressed. But nonetheless, I think as we look going forward…

Lanese

Always something.

Chris

Always something, always something. But as it relates to the Fed’s efforts to combat inflation, you know, we’re starting to see core CPI come down a little bit more clarity. So I think there’s a little bit more appetite interest now to get back to the table and get deals done. But definitely the type of deals are different. I’d say last year, we saw a lot to be let’s call it larger 10 Plus unit deals come to market. Today it’s more add on activity. So smaller number of units, let’s call it onesie / twosie add-on deals. And that being said, I’d say some other dynamics that are clearly evident here is just the length of time to get these deals to close is certainly a little bit longer.

Lanese

For sure.

Chris

Last year, you know, the seller had so much power, right? Now things have shifted where all of the power has shifted to the buyer. So you know before you’re able to get a lot of credit in your pro forma to get these deals underwritten, where now you know those pro formas are a little less meaningful, a little bit more on actual cash flows. And that said, you know, it’s a little bit longer to get these deals to completion. We saw a lot of activity last year closing it 30 days. Now it’s extended a little bit longer, a little bit more rigorous due diligence, and the appetite for risk is a lot less than what it was last year.

Lanese

And that’s something that we’ve talked about before that the playbook that buyers in the private equity firms and groups in general are… They’ve sophisticated their playbook, so they know what they’re looking for more; they know what the criteria is. But this isn’t all bad news. This is showing that there’s more of a normalcy in the car wash industry. Would you agree with that?

Chris

Absolutely. In general, I think that we’ve talked about this a lot over the last year. What we saw the past, you know, let’s call it three years… That wasn’t normal, right? That was unprecedented. We were in an environment with zero interest rates, cost of capital is free; you had such tremendous pace of consolidation in this space… I’d say that was not normal. What we’re starting to see now is normal. I’m personally, again, encouraged by what we’re seeing here. A little bit more discipline in the transactional activity. You think about that in the long run… that’s better for the health of our industry.

Lanese

Absolutely. And I think that’s one of the drums that we keep beating here is that just because things change, and there’s some uncertainty in the middle, the trajectory that we’re on, and the path forward still shows that this is a very healthy market to be in, and that the car wash industry does have that resiliency and that continued growth avenue for sustained smart growth in the longer run.

Chris

For sure. There are very few businesses… I mean, we still have conversations amongst our peers in the private equity community, and there are very few industries that are as attractive as car washing. You know, you look at kind of the secular growth story is still very much intact, the consumers continue to embrace the express car wash model. As you look at what average unit economics look like once you achieve scale, there are very few places to park your money to really grow a franchise. And again, still highly fragmented, despite a lot of the explosive growth we’ve seen over the last five years here. So you put all that together, and it’s still a place that’s very attractive for institutional investors, as well as these emerging platforms. And I don’t see that stopping anytime soon. Again, bumps and blips in between, a little bit more discipline in the underwriting process, but I think all that bodes well to the long term prospects of the car wash industry.

Lanese

Absolutely. And you know, we’re talking about the adoption of the general consumer to our current model of the express exterior car wash, and it just kind of dawned on me that at some point, I think that we may not even need to say express exterior. This is just what car washes are to a lot of people that are used to this being the way that it’s done. So it’s just as we keep going along, it has become the established norm and consumers have adopted it. And that’s now what they expect. So we don’t have to make that explanation that it’s not going to be the inside of your car. That might be crazy for some consumers to think, “You would go in my car?”

Chris

Yeah. I mean, it’s just the exposure to the product over the last couple of years with the growth and new units coming online. All ships are rising with the tide. They know exactly they’re getting into now the model itself is tailored perfectly for the emerging consumer today just given ease, convenience of just getting in and out in a very quick and efficient manner. You have the unlimited subscription base, which again, consumers have adopted and embraced across multiple industries. You put all that together, and I completely agree, Lanese. It’s now becoming the common product and a common operating model in the marketplace.

Lanese

As my last aside on that note, from a branding standpoint, it’s very exciting because that’s one less word that you have to fit in every time when you’re trying to make a logo. You just put car wash and people know what it is.

Chris

Yes. Just put car wash in big bold letters.

Lanese

Yeah, exactly. Okay, so we talked about that there’s still buyers coming to the table. Let’s talk about what we’ve seen and what we are seeing with platforms, growth strategy, and their scalability and their path to growth. How is that changing over what we saw last year?

Chris

Yeah, so the playbook up until the last year has been you get in, and you enter the space, and let’s say you pay a high teens multiple for an existing platform, You’re then able to blend that multiple down by way of de novo or Greenfield developments. For example, let’s say you know, a couple of years ago, you’re building a new car wash at, let’s say $5 million a unit. Let’s say that that car wash is expected to generate about a million dollars in EBITDA. So that new unit is essentially being built at a 5x multiple. Therein lies the blending down of that high teen multiple to get in by buying an existing, you blend it down by way of greenfields, and you’re at a little bit more of a reasonable valuation multiple in terms of your entry point. Those economics have completely changed here the last two years.

Lanese

Yeah, 5 million sounds cheap now!

Chris

5 million is cheap. I mean, we’re personally looking at budgets today with a seven handle on it, and it’s getting me a little queasy, but you know, you hit it right on the head. It’s now let’s call it six and a half best case up to seven and a half million dollars to build a new unit. I mean, again, it all depends on your market, how much you’re paying for real estate, and your above ground cost, and just your overall standard of quality of build. But for the sake of numbers, let’s just say it’s about seven and a half million dollars. So that 5x to build is more like 7.5x. I’m gonna further complicate that. Delays, right? It is taking longer to get these things built now. We’re in Chicago; we have a finite allotment of just concrete for our projects for the year ahead, right? We can’t take on more just because we have only so many resources. Rooftop units are still an issue, anything related to electrical panels… We’re still struggling to get transformers from our power utility providers on site. So why does that matter? Well, it’s now you take into consideration your ramp up time and your build time. You’re now out of pocket for… You could be looking at two years before that thing has cashflow and you’re breaking even. So if you think about the opportunity cost there, that 7.5x maybe is more like 9x, right? Because you’re now sitting on your hands for about a year to get these things built, or more. You have a ramp up period of about a year to actually get to a point where EBITDA is at a point where it’s attractive. It’s more like 9x when you factor in those costs. On the other end of the equation, now let’s talk about acquisition activity. Multiples today we’re seeing on the bolt-on side are anywhere between 8 to 10, which is almost parity to your new your new builds, your denovos. As you think about the economics and the incentives there, it’s not paying a high teen acquisition of blending down by Greenfield. I think those add-on acquisitions are certainly little bit more attractive than they once were.

Chris

Right. It’s just flipped. That’s bringing it down; the acquisition is what’s bringing it down.

Chris

Absolutely. The playbook is completely different today.

Lanese

And that’s not all bad news for sellers, though, because even though maybe it’s not those teen numbers that we were looking at, these are still fair, healthy numbers and multiples that sellers can expect. So it’s not bad.

Chris

Yeah, of course. I mean, especially if you’re a quality business today… And again, I want to emphasize: sellers, if you have a quality business, now’s a great time, because that buyer pool is so hyper focused on the quality of your business. If you could demonstrate, you know, prudent capital deployment, strong same store sales comps, just overall financial discipline, a clean balance sheet and a healthy profile and growth trajectory of your business, there are buyers out there today for you. I will tell you that for certain.

Lanese

And especially in certain geographic areas, or MSAs that are harder to get into, those are the ones that we’re seeing are the most attractive,

Chris

Of course. Absolutely.

Lanese

We’re seeing now that the people are still growing, but they’ve just kind of shifted the growth plan and how that looks. And then the other thing that was really apparent at this show, in particular, was this intense focus on operations and strengthening the quality of your operations, streamlining, optimizing… all of those things.

Chris

Yep. You know, it’s been interesting. Shows in the past have been focused more on the transactional side of things, right? How to get more deals done, how to pick up more units… I got a sense from this show that there was a heightened focus on just operations. And I think the reason for that is if you think about, again, multiples compressing… So that 15x today is more like 10x. You know, that’s a 33% loss to enterprise value just based on multiples compressing. How do you make that up? Well, you focus on operations. You improve your operating margins; you add more to the bottom line. And that’s how you make it up. And I think that that heightened sense of focus on operations was very evident in the show.

Lanese

Absolutely. And again, that points to the longevity and the health overall of the industry. As we’re strengthening the operations and providing the end user with a really quality service, that that’s protecting the car wash industry by making it and keeping it desirable for consumers. They’ve got ever-improving service that they’re receiving.

Chris

Yeah, I think in an environment of explosive growth, you could lose handle on how you operate your business. And I think now that things are pausing to a certain extent, it gives operators of these platforms a chance to take a step back and think about what am I doing my business? Effectively integrating teams after you’re after new add ons, preserving the culture of your business training staff, using new and innovative technologies and solutions to expand those margins and improve efficiencies in your operations… Those are all key themes today. You know, one thing I think was very interesting, and Lanese and I were talking about this is Innovation Ally was something that has been around the ICA shows for a little bit now. But the presence there this year was remarkable. A lot of really neat solution providers there; a lot of buzz around that particular section of the showroom floor. I think again, that just speaks volumes to just the heightened importance of using some of these new innovative technology solutions to improve your operations in today’s environment.

Lanese

And it seems like the car wash industry has kind of finally gotten to where it garners that attraction from outside tech innovators, that they see that the car wash industry is a really surprisingly robust market for them to tailor fit these solutions for, and I love that, and I’m sure you do too, because it just shows you know what we already know that this is such a cool industry. You gave a talk at The Car Wash Show, and it was on how car wash owners can use these emerging operational solutions, and partner with these operational solutions providers, to better the business. And you gave three case studies. And these are all Amp Venture partners of ours, so we are intimately familiar with their capabilities and everything, but they’re also phenomenal resources. So it was AMP Memberships, Retention Express, and Merchant Advocate. Could you just give our listeners a little overview of why you were sharing about those, and what they can do for operators?

Chris

Sure. As reminder, you know, Amplify was founded with the mission statement of serving the car wash community, right? We want to put the best interests of owners and operators first and foremost, and our legacy has been purely… I’m on the transactional side, whether that be M&A, capital advisory, or brokerage, we want to step up and represent the best interests of car wash owners and operators nationwide. And we achieve this mission by being operators ourselves. You can plug in any investment banker and M&A attorney or broker into a deal, and they’re going to run the same rinse and repeat process. What makes us unique is that we sit your shoes, we understand the problems, we speak a language, and that allows us to better represent you throughout the process, right? I always say you don’t want to have a ship captain land a plane, right? It’s important to ask for that has that real life industry experience.

Chris

Yes, that seems very true.

Chris

And we’ve expanded that mission statement towards Amp Ventures. You know, we’ve seen some really unique and innovative technologies and solutions, as we’ve seen kind of almost a renaissance of technology over the last five years. That said, there’s also a lot of creative marketing and Amp Ventures was founded to really vet and bring what we see to be some of the best in class emerging technology solutions in the car wash space. So we’ve inked a couple of partnerships. You’ve named all three of them right now: Retention Express, AMP Memberships, and Merchant Advocate. And with such explosive growth in the car wash industry, we’ve seen the tech and solution side follow suit. And there’s also been a lot of really clever and creative marketing. And these technology solutions have all been centered really around one thing: data. Data has been the lifeblood, and it permeates across all industries for really the last five to 10 years now. But really, the use of the data is only as good as a practical insights derived from that data set to improve your business. So but I wanted to do during that session was provide some practical and tangible use cases of how you could use data driven technologies to improve your business. So we had a couple of really interesting case studies. And I’m more than happy to talk through some of those in more detail. But again, I think the constant theme, and I’m gonna steal Adam Trien’s line from Amp Memberships: weaponize your data. There’s a lot of really interesting stuff out there, and you could use that data to improve your operations.

Lanese

So in that talk, you just gave kind of some high level descriptions about what it is. For example, with Merchant Advocate, it was “uncovering the black box,” or what did you say?

Chris

Yeah, adding transparency to the black box.

Lanese

Yes! I love that. Adding transparency to the black box. So really, just all of these tools that you highlighted… For example, that one where it’s related to credit card fees, but it’s just diving deep into these things that maybe you don’t even know about. So what are easy ways that can be low hanging fruit that just saves you money by partnering with someone?

Chris

Yeah, Merchant Advocate is a great example of that. So if we have anybody in the credit card processing, space listening, I’m going to apologize in advance. But, you know, if you ask anybody in the car wash business, or any retail business, for that matter, what do you pay in credit card processing fees? You’ll typically hear between 1.5 to 3.5 percent. In today’s world, where everybody’s moving towards credit cards, that 2% delta there, that spread, is incredibly meaningful. And just to make it a little more tangible, let’s say, you’re a 10 unit operator. Let’s say your average unit is processing $2 million in top line, about 95% of that or so is coming through credit card transactions. So you’re really clipping, give or take, let’s say $1.8 million in credit card transactions every year per unit. That 2% of that 1.8 is a big dollar amount, especially when you extrapolate that across 10 units. So what Merchant Advocate does is they essentially have a really neat, innovative technology in the back end; they use a machine learning model. And what that model is going to do is it’s going to look at just the activity of your credit card processing charges relative to your history as well as relative to like peers. And what it’s going to do is it’s going to learn from your activity, learn from peers, and flag categories that seem unusual. At that point, Merchant Advocate will dig into a little deeper, and they’ll advocate on your behalf to lower those fees. So, a really good example: at our carwash, right, we recharge the first of every month. And if that credit card declines, we’re going to keep trying to get you to recharge that card. What you may not know is that there’s a fee associated with that charge every single time.

Lanese

I actually did not know that.

Chris

Yes, there is! And that fee… let’s say it’s five cents the first time; well it might go up to 10 cents a second time, 25 cents a third time. And that could continue to increase with each subsequent recharge. Now you think about this: again, let’s say your 10 side operator, your average unit has 4,000 members or 4,000 charges. Those can be big dollars, so this is something where they have a model on the back end that could flag that as something that’s unusual. And they’ll go ahead and they’ll work with the credit card processing companies to lower that and bring that back to an acceptable range. Another really interesting example that I found to be fascinating… In that case study, they found a multi-site operator with 80 units, they were looking at their their credit card processing charges, and they were incurring $60,000 a year in charges for failure to respond. Now, I don’t know about you, but when I get our credit card processing statements sent to our office, I’m not opening those things up. To me, it’s like a cell phone bill. I just toss it; I’m not going through it line item by line item. I just don’t have the bandwidth to do so, and neither does my team. But if you actually dig into that, you’re going to see charges like that, and if you think about $60,000 a year, if your business is worth 10x, that’s a big, big dollar amount towards enterprise value that you could save.

Lanese

Absolutely. And I think the neat thing about that particular provider, Merchant Advocate, is that they do all of that. They’re not asking you to switch credit cards; they’re not the credit card provider. They’re just the forensic side to try to save money.

Chris

That’s exactly it. They’re forensic accountants at the end of the day, right? So, they are a consulting-based service. You don’t have to change your credit card, you don’t pay anything unless they bring you savings to the table, so it’s a model that’s truly aligned between the operator and the service provider.

Lanese

Just the last thing on that one, and all of these services… What operators really want, like you just said, you only have so many hours a day and so much bandwidth, even if you’re growing your team. There’s still a finite amount that you can do. And so how can you partner with these other solutions providers to help better your business that’s not making you reinvent the wheel?

Chris

Yeah, exactly. Interesting example here, that’s kind of pivoting from the the case studies at the show, something we’re actually doing in real time in our car wash… We use Retention Express. And, again, as a refresh, Retention Express is really a full suite, 360 degree customer experience platform. And there are really two components their service. One is the outsourcing of servicing incoming inquiries from your customer base, whether it be you know, outsource call centers, text messages, email, web chat… All of that is taking off site into a professional setting with a goal and intention to manage churn and increase retention, which reduces the overall churn of your membership base. But on the back end of that, they’re capturing a lot of the data from your customers and providing those insights through a comprehensive dashboard. I think that’s really important. If you look at kind of the bell curve of call volume on the sites, it almost matches perfectly to the bell curve of wash volume, meaning that your customers are calling more during the height of your peak busy hours in the car wash. So what you’re doing now is you’re taking one really vital resource away from the line, and plugging them into a situation now to service that incoming inquiry. And you’re really missing a big opportunity to (A) effectively serve that customer, and (B) take the insights from that dialogue and conversation. So good example here of how we’re using this. One of our locations, it’s on a really busy road right by the highway, fairly transient community. And I’m looking through our churn, and one neat features that Retention Express will measure the exit sentiment when a member calls to cancel their plan. So in other words, you have a score of 1 to 10: 1 is I’m canceling I hate your service and never coming back. 10 is I’m canceling for a reason; I really don’t want to cancel, I love everything, but unfortunately I’ve got to cancel this plan. This particular site, we’ve noticed that over the last 90 days, our average exit sentiment was 9.2, meaning people were canceling but didn’t want to cancel. So we dug into this deeper, and we found that a large reason why our members were canceling was because they’re either (A) moving, again it’s a transit community, or (B), they love the wash, it’s just not close enough to their home. So those are some good insights there. So now as we’re looking to expand our geographical footprint, we’re able to, through Retention Express, pull the zip codes of those cancellations, understand where customers are moving to, where they live, if they’re not using to help us in our development efforts to build our footprint there. And those are just some really, really important insights that otherwise would not be captured for your servicing on site.

Lanese

Totally, because just even recapping what you just said, when it’s the busy time of the day… It’s a Saturday, you’ve got cars lined up, there’s a customer that needs to cancel… The person that’s there at maybe the pay stations, or whatever, they have to go away from that. Now the line is longer, now all those people are getting more upset because they have to wait longer. And then they don’t have time to capture that data. So it’s moved, canceled, moved. That’s it. And so, you actually have no real data: if they really did move, or if they hate your service, or what it is. I love that, that they’re trained to do that, and that they don’t let any of those customers leave out, as they say, the backdoor unnoticed. And they’re talking with them. And they’re that first line of defense to showcase your other services. Maybe you do have a wash that’s coming into the area that they’re moving to that they didn’t know about.

Chris

Yeah, exactly.

Lanese

It’s It’s really incredible, so I love that.

Chris

It seems so rudimentary, but you hit it right on the head, right? You’re losing the battle on two fronts there. You’re losing it on site by distracting your staff from doing what you want them to do, which is service the customer, produce a clean, dry, shiny car. That is your focus on site… Fast and convenient. The on the back end, you’re losing those insights from that conversation because they are so distracted with dealing with multiple issues on site where you’re able to put in a this professional setting, how to train professionals to service those customers, know what questions to ask to extract those insights, but more importantly, provide that data back to the operator.

Lanese

And the third thing is that usually the staff that are being pulled away to facilitate these conversations on site, it’s… I’m going to go ahead and go on a limb… it’s not their favorite thing, so it’s helpful for them, too. Okay, so we kind of talked about that a little bit with Retention Express. And then let’s talk about AMP Memberships, while we’re on the topic of monthly memberships.

Chris

Yeah, another solution developed by car wash operators… That’s we love. As we talk about all these groups here, they’re all solutions and technologies developed by folks that have sat in all of our shoes as operators. And, you know, again, we just want to highlight the importance there. We believe in that philosophically on the Amplify and Commercial Plus side of our business that, in order for us to effectively serve the car wash community, we need to be from that community. And these folks have that same kind of DNA and background, which is why we love AMP. So AMP was founded by Dennis Dreeszen and Adam Trien. Dennis is a car wash operator himself, so they’re able to actually provide a white label app solution for car wash owners and operators. And really, the crux of their solution is to produce a mechanism to better engage and nourish relationships with your customer base, but what’s interesting about that is once you get that customer on this thing right here, a whole world opens up just data, and understanding your customer base. You’re able to pull in demographic information of their financials, how much do they earn, where do they live, age, sex, the type of car they drive. And when you mesh that together with your business insights, that can be a pretty powerful tool, as relates to marketing customers, attracting new customers, and retaining new customers.

Lanese

One of the programs that they’ve shared about is they were saying that they did this for Auto Wash, the service that Dennis has there in Colorado, that they were marketing about their local sports team, and they were sending out a blasts to their customers like, “Okay, you love the Colorado Rockies…” But not everybody does. Maybe they are fans of other sports teams. And so then they started drilling down, and they found out who actually they are fans of, and then they could start sending them marketing information based on that, but it’s having the ability to process that information, and to drill down and to gather it from their customers and then use it. So I just loved that even though my sports knowledge is not great. On the marketing front, I see that they are trying to really make connections with their customers, they’re trying to reach them and to show that they are giving as well as receiving in that relationship to try to get to know them.

Chris

Totally agree. And that’s what makes them new and unique is it’s not just data for the sake of of extracting data. It’s providing useful, tangible insights to again, Adam’s favorite word “weaponizing the data to improve your business.” The one thing they talked about at the show for their case study — and I think this is just fascinating, what they’re doing on this front — but they’re able to sign a essentially a lifetime value or prediction of lifetime value to each customer that uses your car wash. And again, going back to the power of just what you’re able to collect by getting that individual on your app, you could combine and understand. Okay, so lifetime value of a customer is essentially how much revenue they expect to bring in, what’s the operating costs associated that customer, and what’s the expected duration of that relationship. And then when you have those inputs, you could say, okay, my expected lifetime value for customer X is Y amount of dollars. But what’s interesting about that is by knowing the demographic profile of that customer, as well as how they interact with your business, you can predict what that number is. And you can optimize that lifetime value around that prediction. So a really good example, let’s say Lanese, you are a customer at Driven Car Wash. You have the demographic profile that makes you the perfect customer from a lifetime value perspective. But we noticed that you’re not engaging with our app when you’re on site and playing kind of the in-app gaming. And we know that as you’re engaging with our brand while you’re on site, that’s an important predictive factor of maximizing lifetime value of you as a customer. So I’m going to do is I’m going to incentivize you and try to get you to use that app while you’re on site, and nurture that relationship. Or let’s say, leaving a review or making a referral to a friend… We also know that those are two really important factors of maximizing lifetime value. Well, now I’m going to focus on you, as well as your like peers in the cohort of customers that I have, and I’m going to really target you, and I want you to make a referral to a friend because I know once you make that referral, and you commit, and you make that commitment out there in the universe, your stickier customer. So it’s a super interesting way to better understand your customers, but more importantly, break them out into cohorts to understand where you can optimize lifetime value to ensure that you’re maximizing every penny from that potential customer.

Lanese

I’m imagining in that situation that the incentive that that’s being offered to me in this example, is something that’s of value to me, because otherwise why would I do it?

Chris

It’s a two way street.

Lanese

That’s what I like to is that it’s a win win. It’s not pestering someone; it is trying to really find out what they want and to make the service more helpful, usable, stickier… all of those things. And then it benefits both sides of that equation.

Chris

Absolutely.

Lanese

Well, I love all of those. And again, it’s just, like you said, the goal of maximizing value for car wash owners, for their customers, and then for this industry as a whole. We really are so passionate about the car wash industry and the car wash community and want to be good advocates of any new solutions that are out there and just let people know that these are options available. And then also, it’s really great because we have you as a test case, so you can give us the real deal on on how it works.

Chris

We always love being the guinea pig at Driven Car Wash.

Lanese

Good thing! Okay, so I thought it was a great show. I had a lot of fun in Las Vegas, I won a little bit of money, so that was good. Not very much. But at least I didn’t walk away empty handed. And one of my other favorite things about traveling with our team, especially when we’re in Las Vegas, is just being together because we are a group of people that are geographically spread out throughout the US. And I just love that time to get to spend together. And then also with our peers in the industry, there’s a lot of this information that’s there at the show that, truth be told, you could find without being physically there. But what you miss is that camaraderie and that time together, and that shared experience on the personal level, as well as expanding and strengthening your business.

Chris

I couldn’t agree more. I was cut from the cloth of financial services. And that was, you know… It was actually this show that drew me to this industry, just kind of seeing the camaraderie, the tight knit relationships in this business and how collegial it was, and still is today. It’s always just a great reminder of why are we in this, and what are we doing? And I think we’re all here to serve under a common mission and a greater good. And I’ll tell you why. It’s just such a humbling experience to get the whole group together, you know, sit back at our booth and see everybody individually having engaging conversations with relationships across the industry. It’s just it’s special to see; it’s really something that you can’t put words to.

Lanese

I agree, totally agree. And kudos to the International Car Wash Association, I thought they put on a great show. I really liked the neat Las Vegas loop with the underground tunnel and just getting to try that stuff out. So that stuff is fun. But I really thought that this was a really well run show, and I appreciate all the educational sessions and activities that they put on. I think that kind of wraps up our time for today. If anyone has any questions for Chris, or would like to know any more about any of the topics that we talked about, we would love to share more about that. And if you are so inclined to leave a review for this show, you can do so on Apple or Google, wherever you listen to the podcast, or Spotify. And check back next month as we release a new episode the last Thursday of every month. So, thank you!

Chris

Thanks, Lanese.

About the Episode:

Well, folks, The Car Wash Show, hosted by the International Carwash Association, is just around the corner, taking place May 8-10 in Las Vegas! If you’re attending, be sure to listen to this episode for a sneak peek of the timely and highly relevant car wash market insights members of the Amplify Car Wash Advisors leadership team will share during various sessions and speaking times at TCWS. Hear Chris Jenks on Monday, May 8 at 1pm in a Pitch 20 Session talk about “Optimizing Operations by Partnering with Technology Solutions Providers.” Attend the education session, “M&A Trends in the Car Wash Industry, The Great Market Reset,” with Jeff Pavone and Paul Sigfusson on Tuesday, May 9 at 9:30am. And catch Jeff on the CAR WASH Magazine Live Stage in a panel hosted by Matt DeWolf, “So, you want to sell your car wash” on Tuesday, May 9 at 2pm with David Miller from Zips and Dave Dalesandro with Jet Brite.

Come by our booth, #811, located just inside the West Hall Atrium Entrance (W1) by the main entrance, to speak with the Amplify Car Wash Advisors and Commercial Plus team about how we can help sell or scale your car wash business. For car wash owners and industry professionals interested in booking a private meeting time, please reach out to Jessica Kortas at [email protected] for more information. See you in Las Vegas!

Sign up for Car Wash M&A, The Newsletter. | Follow us on social media @AmplifyCarWashAdvisors on LinkedIn or Facebook. | Connect with Lanese on LinkedIn.

Check out the full transcript below:

Lanese

Hello, and welcome to Car Wash M&A, The Podcast. This is episode 15 of the show. And today we’re going to take the time to just talk a little bit about the upcoming The Car Wash Show in Las Vegas that is put on by the International Car Wash Association. And for those of you who haven’t joined before, it’s a great show. It’s the largest one in the US for the car wash industry specifically, followed by the Southwest Car Wash Association Expo. That’s a regional trade show that, in my opinion, is also another really great one to check out.

In talking about The Car Wash Show in Las Vegas, we have several sessions where our team is talking about various things going on in the industry, a lot of which we talk about here on this show. I have my team members that are going to join us and just share a sneak peek about what their sessions are about and give a little insight on that. But I’ll go through some of the things that I’d like for you to know in preparing for this trip going to Las Vegas. So the dates of the International Car Wash Association trade show is it begins on Monday May 8th and it wraps up on Wednesday, May 10th.

On Monday, May 8, we have Chris Jenks, who is the Chief Operating Officer of Amplify Car Wash Advisors. He has a Pitch 20 session, which is entitled “Optimizing Operations by Partnering with Innovative Solution Providers.” That is on Monday, May 8 from 1:00 – 1:20, and it’s located in the Pitch 20 theater.

Then on Tuesday, May 9, from 9:30 AM to 10:30 AM, we have Jeff Pavone, partner at Amplify, along with Paul Sigfusson, who joined our team earlier this year and was formerly with KKR. Paul is our head of capital solutions. They will be talking about “M&A Trends in the Car Wash Industry: The Great Market Reset.” This is a really, really timely topic for us to reflect on what the last year has meant for M&A activity, and different options for funding growth and also what that translates to as far as the Look Ahead for the rest of this year and going into next year. We’d love to have you guys come out for that; it’s always a very well attended session. And for the folks that attend in person, you can look for a copy of the deck that I will send out or that someone from my team will send out following the presentation. It’s great information that you can take home with you. And we really encourage you to attend that. It’s, again, very much anticipated and it’s just jam packed with information that is super relevant and super timely to car wash owners and to all of those involved in the industry.

First up, I have Paul Sigfusson; he is going to share an exclusive sneak peek about the education session that he and Jeff are speaking on on Tuesday, May 9 at 9:30. This session is “M&A Trends in the Car Wash Industry: The Great Market Reset.”

Okay, so Paul, you are joining us at The Car Wash Show in Las Vegas, brought to you by the ICA. This year, you are going to join Jeff Pavone in his educational session that he’s done the last couple of years about M&A trends in the car wash industry. And I was wondering if you could share with us a little bit more about the perspective that you’re hoping to add to this session?

Paul

Yeah, look, I’m really excited to get on stage in a couple of weeks here. And we’ve been doing a lot of work to prepare for it. It’s been a really interesting last 12 months. And we’re looking forward to sharing our views around the changing landscape, the seismic changes that are happening in the industry. You know, there’s been a global reset in cost of capital and how businesses are being funded and how businesses are being financed. And we’re looking forward to talking a lot about those changes and how we see the the evolution of those changes coming through to the specifics around the car wash industry itself.

Lanese

What’s one takeaway that you hope that car wash owners, in particular, as attendees can leave with, armed with this information?

Paul

Yeah, look, I think the way that people have operated over the last several years is not going to be the case going forward. And I think people need to understand that the landscape is changing. It is changing rapidly; we’re entering a more restrictive credit environment. You’re already seeing some of those things sort of come through, so the way that people have thought about their sources of growth capital are evolving. And we’re having a lot of conversations on a week-to-week basis right now about that evolution. I look forward to sharing our point of view around what’s happening and how that’s going to impact the industry over the longer term.

Lanese

Well, we appreciate you joining us, and it’s so valuable having your perspective on our team, and so thank you for that. Kind of switching gears a little bit: what are your thoughts leading up to attending this show, kind of on the other side, if you will? Now that you’re inside of the carwash industry full time, do you have any different feelings towards it? Or more of the same? What are your thoughts on it?

Paul

Yeah, I think I’m looking forward to seeing some friendlier faces these days, to show up and have some friends versus being an outsider, so it’s been really fun to build and grow some of the relationships. I think this is an absolutely unbelievable event to continue to network and grow with the relationships you have and form some new ones. And it’s always fun meeting people and seeing familiar faces as you’re walking the floor. This is a very well-attended show. There’s a lot of relevant content that gets produced and a lot of relevant conversations that are happening. We’ve been very busy in Q1, and we continue to be very busy in Q2, and we look forward to sharing more about that with some of the conversations we have and some of the relationships that continue to grow in the space.

Lanese

You know, you brought up an interesting point, because we talk a lot, and I talk a lot, about the communal nature of the car wash industry and how this is such a tight knit group of folks. But the flip side of that is if you’re not inside of that tight knit group, you’re the other. Now you are inside, so we’re happy to have you. But I agree. I love these shows that are a place to have your friends and your colleagues come together. And you get to have that in-person time, whether it’s specifically talking shop, or you’re just kind of catching up and building those deeper relationships on a personal level. There’s a nice bit of fun mixed in and then having your yearly get togethers and having those opportunities to talk business. The last thing I want to ask you is: is there anything in particular that you’re personally looking forward to or excited about other than, you know, seeing people?

Paul

Yeah, no, I think [seeing] people is the number one thing for me. I think it’s a great time to check in with individuals who you don’t get to speak to regularly. And then, I’m always intrigued by some of the new and unwrapping evolution that’s happening in the space, whether that be technology, some really exciting sort of newer technologies that are out there that I think are beginning to sort of rear their head and come into the forefront. So I’m really excited to keep seeing those as they evolve. We’re obviously very relevant in a lot of those conversations between some of the partnerships that we as a firm have implemented and look forward to seeing others as they pop up.

Lanese

Yeah, definitely. Thanks for sharing, Paul. We’re looking forward to seeing you in person. I am, too, since our team is largely kind of spread around the country. Thanks for your time this morning. See in a couple weeks!

Paul

You got it.

Lanese

That was Paul sharing with us about “M&A Trends in the Car Wash Industry: The Great Market Reset,” the educational session that will be on May 9 from 9:30am to 10:30am. In addition to Jeff and Paul’s session, I also want to draw your attention to a car wash panel that Jeff will be participating in with Matt DeWolf, and this takes place on the Car Wash Magazine live stage on Tuesday at 2pm. So Tuesday, May 9 at 2pm. And this is a panel that is entitled, “So You Want to Sell Your Car Wash,” and we have Jeff Pavone at Amplify speaking with David Miller, who is the Senior Vice President of Business Development at Zips, along with Dave D’Alessandro, who’s president at Jet Brite Car Wash. And they are going to talk about why Jet Brite, who historically was not interested in selling, took another look at that and ended up having a really successful transaction with Zips Car Wash, and how our role is as Amplify Car Wash Advisors helped inform Dave and his team about what his options are, and what that could look like for the future of him and his team inside of the car wash industry that may not have been top of mind when he had previously been approached about selling.

This will be a really cool behind-the-scenes look into that transaction, and kind of what each party’s perspectives and thoughts are, and how it ended up being a win win win all the way around. I really encourage you to check that out. Again, that is on Tuesday, May 9 at 2pm on the Car Wash Magazine live stage with Dave, David and Jeff.

Here’s Jeff sharing a sneak peek about that panel, “So You Want to Sell Your Car Wash,” with Matt DeWolf, as well as the session that we spoke about with Paul earlier on M&A trends in the car wash industry. Jeff also shares a little bit about his general overall feelings for the show and his excitement to see friends and colleagues and meet with people.

Thank you, Jeff, for joining us. Again, I cannot believe that The Car Wash Show in Las Vegas is just a few short weeks away. One of the things that you have spoken about for the last several years is trends going on in the M&A space in the car wash industry, and then also financing trends. And so this year, you will not disappoint. And you will be hosting an educational session that’s called “M&A Trends in the Car Wash Industry: The Great Market Reset.” Could you tell us a little bit about what attendees can expect to learn from that session of yours?

Jeff

Sure. Well, we really want to make sure we cover where is the market value today. You know, at the end of the day, there’s a lot of information floating around. First off, are deals getting done? Who’s buying? who’s not? And I can tell you the reset has got a couple of components to it. One is sort of what are valuations? We want to dive deep into valuations and what they’re currently trading at today, to who’s buying? When you look at who was buying a year ago, it’s different than who’s buying today. Right now we’re still in a highly fragmented business industry; there’s still a lot of deals getting done, but I can tell you, the players have changed. And so, you know, it’s really helpful to understand who’s who. Next, we’re going to cover what are the options, because when I look at the market today, I’d say you’ve got different camps. You’ve got groups that want to sell; their timing is just ready to go. But we also have another group that are continuing to develop out their chain. And so what are we? How do we finance that growth? What does that look like? Then we’ll talk a little bit about more just trends, and where do we see this business going, you know, beyond this year. What does it look like next year? And so, you know, really, it’s meant to give as much data points as possible, so we can inform our audience about what to do and how to manage your business. And then it’ll let them decide where to go from there.

Lanese

For the last two years that I’ve been along with you and with the team, this is a really well-attended session because there is so much depth of information included there. And I think this year will be no different. One of the changes to the format this year, or the evolution of the format, is you’re having another one of our team members, Paul Sigfusson, join you to talk about options for funding growth and things from his perspective as well, right?

Jeff

Yeah, I’m super excited to have Paul alongside me. You know, Paul is probably the most informed guy in the country as far as where the capital markets are. And so you know, what does it mean to you? What it does for you is, first off, it’ll tell you sort of what are the dynamics going on behind the scenes, you know, so when you look at these large platforms, what are their challenges? Where’s the capital coming from? Paul can talk really intelligently about that, but more importantly, it is what are your options from a capital perspective. I can tell you, they’re changing. They’re changing rapidly by the day. And Paul is the guy on our team that comes from Wall Street; he’s got his finger on the pulse. He does. He’s researching this on a daily basis. So we really think, again, the audience is going to come away with some really good insights on where the capital markets are today for whoever could be buying and also just what are their options going to be from a from a financing standpoint?

Lanese

Yeah, Paul’s expertise on domain authority, adding to the team, has been really interesting to just showcase that bigger picture. Even in our monthly newsletter, I was working on the draft this week and having some more data points to include in there on a regular cadence that’s supplied from Paul’s research has really helped paint that broader picture of what’s going on and what does this mean for car wash owners. And that’s been a great asset for us to have on the team, so I’m excited to have him along with you, and to just continue building out that information that we can share with them. And as we’ve done for years past, after the session, for those folks that attend, you know, we’re happy to send out the deck with the supporting materials in there. And we encourage and welcome people coming by the booth, if they want to talk with us there or set up a private meeting beforehand, they’re welcome to reach out, as well. You can email [email protected], or reach out to me directly. But Jeff, on a personal note, what are you looking forward to most about our time in Las Vegas with The Car Wash Show?

Jeff

You know, I’m always really looking forward to meeting with the operators, hearing their stories, you know. I’ve got to tell you that this is the year that we all have got to work a lot harder, right? I think that we had a couple of years that were almost fool’s gold. So I’m really looking forward to meeting with the operators and really hearing their stories of what their challenges are and what their successes are. And it’s the one place where everybody comes. I can tell you, I think this is going to be a really important couple of days there to really dive in deeper with the operators to figure out what challenges they have. Now, the good news is our team is… we’ve been building out our team aggressively over the last year to address some of these issues. We brought in a capital markets expert; we brought in some real operating strength, and with our team, we’ve gotten involved in some venture products and services that will help manage your car wash. Beyond M&A, I just think we’ve been advocates for a while now about operations, and it’s really being able to connect with the operators, talking about some of the successes that they’re having, and then is there a way that we can help and be a good partner? We’d love to have that discussion.

Lanese

Right, and what our goal has been since the beginning is helping car wash owners maximize the value of their business, whether they’re looking to make an exit, they’re looking to stay in, or they’re looking to grow. Whatever it is, we want to come alongside as advocates for helping them achieve that maximum value through streamlining operations and all these different products and services that we can point them to. I think that even though our scope of work and our services have expanded, the core nuts and bolts and the mission of it is still the same.

Jeff

Well, yeah, Lanese, and there are a lot of people that got in the space. Because there’s so much money, and when there’s money, they’re going to find it.

Lanese

Because we make it look so easy!

Jeff

Yeah. And it’s like, you know, we’re just… At the end of the day, there are a lot of guys knocking on your door, and there are a lot of promises, and false promises, out there. And for us, we’re staying very true to our mission of just being really relationship driven. We want to be good partners. We will tell you; we’re going to be fully transparent and give you the honest truth. We’re going to give you facts based on what’s actually is going on in the market. We’re not going to sit here and inflate things; we’re not going to tell you what you want to hear, but we are just going to give good, sound advice. And if you look at the team, we’ve got really high-quality people that were we looked at, valued along the way, to all of our clients.

Lanese

Yeah, for sure. Thank you for sharing that. And it’s definitely true that we are all very relationship driven. And we care deeply about our fellow colleagues in the car wash industry and our friends. So this is a chance for us to get together with them. And you know what? Vegas isn’t that bad for two or three days! Have a lot of fun and see friends, but also get ready to get out and get home and sleep in your own bed.

Jeff

Where would you rather be on Mother’s Day?

Lanese

It’s actually not on Mother’s Day this year. So I had the terrible idea of having my kids and my husband drop me off at the airport last year, a crying two year old and four year old with the windows down going, “Mommy Mommy!” I was like, Why did I even think this would be a good idea? Not this year, so I’ll just sneak out as per usual. Well, Jeff, thank you so much.

And again, for folks listening, you can come by and see Jeff and our team at booth 811 at The Car Wash Show in Las Vegas May 8 through 10th.

Jeff

Thank you.

Lanese

Thanks to Jeff and Paul for popping on today to share a sneak peek of The Car Wash Show in Las Vegas. Our booth number is number 811. We’ll have people from both our Amplify Car Wash Advisors team as well as the Commercial Plus brokerage team. If you would like to learn more about scheduling a private meeting with either the Amplify or Commercial Plus folks, please reach out to Jessica Cortez before the show. Jessica’s email is Jessica@commercial plus.com, and you can find her email info in the show notes.

We have also done quite a bit of work with St. Jude Children’s Research Hospital over the last year, and we’ve had the opportunity to partner with them on different things and become a corporate partner with them. About four or five weeks ago, I attended their Partner Summit in Memphis, and we toured the hospital. It is so amazing and uplifting to see all of the great research development and advocacy that St. Jude’s does for children with childhood cancer and for children with other diseases of all kinds. They’re just really amazing folks.

We will have two representatives that are from the St. Jude organization in our booth and kind of walking around checking out the car wash industry and checking out The Car Wash Show. They came last year when we presented a $100,000 check to St. Jude. And it was such a cool moment because as we were on The Car Wash Magazine live stage, and we were presenting this check to St. Jude, our good friend Paul Fazio had made a very large matching donation as well on the spot, and it was just a really cool, special moment.

Anyway, we have two folks from St. Jude coming and would love for you to come by and say hello to them. If you have any questions at all about different fundraisings that you could do or activations at your car wash or on a corporate level, they have full plethora of different options, and I just really feel like for the car wash community, these can be great plug-and-play or customized community engagement and customer engagement and employee engagement opportunities that’s all supporting such an amazing cause of ending childhood cancer.

Come by our booth and say hello. Well, folks, we look forward to seeing you at The Car Wash Show in Las Vegas. It will be here before we know it! Thank you for tuning in today. Please come by and say hello. I will be glad to give you some Car Wash M&A magnets to take back to your place of business to proudly display as you’re a frequent listener. If you feel so inclined, go on to Apple podcasts or Google podcasts and rate the show and leave some feedback if you’d like. Thank you so much for listening, and again, we look forward to seeing you in a couple of weeks.

About the Episode:

With Q1 closing out, where is the car wash market today, and is now a good time to sell your car wash? In this episode, Lanese Barnett and Jeff Pavone discuss lingering negative headwinds like bank failures, rising interest rates, and increasing competition, but they also highlight how the car wash industry remains an attractive investment space, and the list of interested buyers continues to grow.

Matter of fact, there are currently more car wash buyers than there are car wash sellers. And while buyers are taking a more risk-averse approach, they have established their playbook and know what they are looking for. Operators in an A+ location with great execution and a path to continued growth in strong MSAs are still trading at healthy multiples – which is good news for owners considering an exit, especially while inventory is low.

Listen in for more expert insights on the car wash market as well as actionable strategies owners can take to maximize the value of their business.

Sign up for Car Wash M&A, The Newsletter. | Follow us on social media @AmplifyCarWashAdvisors on LinkedIn or Facebook. | Connect with Lanese on LinkedIn.

More about Jeff Pavone:

Jeff Pavone is a leading advisor to the car wash industry, successfully completing more than $5 billion in car wash-related transactions. A lifelong entrepreneur, Jeff is the owner of Commercial Plus, a real estate and business brokerage firm, and a partner at Amplify Car Wash Advisors, a mergers and acquisitions and capital advisory firm specializing exclusively in the car wash industry. Leveraging his longstanding relationships in both the car wash and investment banking industries, Jeff partnered with car wash veteran Bill Martin in early 2020 and launched Amplify Car Wash Advisors to address the evolving needs of car wash owners. Together, Jeff and Bill recognized the need for providing guidance tailored specifically to car wash owners when it comes to selling or scaling their business. Today, Amplify has completed complex transactions for some of the most well-known and widely respected car wash chains in the country and is the only group that bridges the gap between investment banking and car wash operations.

Outside of providing advisory services on a nationwide scale, Jeff is also a real estate investor and car wash owner. Before entering the car wash industry, Jeff was the co-founder of Law.com and founder of Medical.com and National Law Resource.

Check out the full transcript below:

Lanese

Welcome to episode 14 of Car Wash M&A, The Podcast. Today I have my colleague Jeff Pavone on, and we are going to talk about some really super timely topics that are going on, not just in the car wash industry, but in the market as a whole, but how it relates specifically to car wash owners and what they need to know. So, Jeff, since you need no introduction, I would love for you to just dive in and start sharing with us some of what you’re seeing on the horizon. And now that we’re a couple months in to 2023, just what’s your pulse on the market and the car wash industry?

Jeff

Awesome. Thank you, Lanese. Yeah, you know, I think it’s time maybe to sort of set the record straight, because there’s a lot of information coming out on what the market is, and there’s a lot talk about all kinds of negative headwinds. And I’ve got to tell you, what we’re seeing, on our side, is we’re still seeing lots of activity from buyers, with both existing buyers who want to continue to add on to their existing platform, and there’s still plenty of capital that wants to come into the market. Now, with that said, I’d say this is different than what it was the last few years that we saw. I think, in years past, it was almost over the top exuberance of just… it was a race to buy every deal. It was a frenzy, and it was like, Wow, we’ll pretty much buy anything. Today, it is way more cautious buying, way more strategic. Nonetheless, still, we’re seeing strong values being paid. I’d say the bigger issue is we just… There’s just a lack of quality inventory in the market.

Lanese

I think that is such an interesting point. Because it’s not the lack of buyers, it’s really the lack of inventory and the lack of sellers. And that’s part of our message out here today is that there’s still the interest from lots of groups out there that want to explore the car wash space or expand.

Jeff

Right. And I think when you look at the “what inning are we in?” or the opportunity to eventually have an exit, I can tell you that, at least my opinion is, there still whitespace out there; there’s still a lot of groups out there looking to to get scale. But I think as some of those white spaces get filled, that’s the part where I think you’ll start seeing less interest. But that may be… I think we’ve got another couple of years of good solid exits. So if somebody’s looking to sell, I think there’s still an opportunity to get a strong multiple and a good deal. But again, as some of these markets started to get a little bit more saturated than others, that’s a time it’s going to be a little harder to get a good price for your washes.

Lanese

So what are the factors that help move that needle and help get the attractive multiples still? What is it that potential sellers could be thinking about that they need to really focus on today?

Jeff

So I would say, first off, it’s the market. I mean, you’ve got to be in an MSA in a market that buyers want to buy in. So that’s certainly one. Two, lots of money still wants to get behind really solid operators. And I would say, if you’re selling car washes, it’s one value. If you’re selling a car wash company, or if you’re willing to stay in, it’s another thing, and a car wash company would include an infrastructure and a team that can scale the business. Really still strong interest, really healthy multiples being paid for those kind of chains. So I would say if someone’s really looking to get max value, first off, you got to, you got to remember the business that they’re in. And I was with a group yesterday, and I kept asking, “What business are you in?” And they said, “Washing cars!” And really the answer is you’re in the membership business. And I can tell you, if you are really looking at driving value, just remember that. At the end of the day, the more members, and the more of your revenue that’s coming from memberships, which is reoccurring, is far more attractive, far more valuable than just having car washes in general, because it’s something you can count on. Especially, Lanese, when you look at the weather pattern that we’ve been in, and this has been a funk for a while now, driving people crazy. I can tell you, having healthy membership base is the only thing that’s saving some of these guys! The guys without a healthy membership base? They’re getting hammered. And that just goes to the thesis of: What business are you in? You’re in the membership business if you really want to get max value.

Lanese

That’s something that has really emerged, you know, on the forefront, especially in the last couple of years. For example, when you go to the trade shows, and you see so many more technology companies that are looking to address these evolving needs of car wash owners who are focusing on the membership aspect of their business to help keep that stable revenue. And it keeps that track record and the performance history even when you do have crazy things like outlier weather conditions, which are becoming less and less outlier. But also… Those are things that we know are going on, but we have other things that are popping up, like bank failures, and other market conditions, that are affecting what car wash operators can do.

Jeff

Right. I mean, and I think certainly the capital markets have been a big concern for everybody, right? I mean, the guys buying the stuff, the guys driving the values are the private equity groups, and their cost of capital has gone up significantly. And just as importantly, it’s also gotten a lot tougher to get. So it’s not as easy… Before, everybody was flooding the market with fresh capital; they had all the money they needed. Today it is more expensive and way harder to get. I’d say it’s trickled down, to some degree, down to the owner operator level, where it’s gotten more expensive. I mean, it wasn’t long ago, people were able to borrow in the 3% range. And now it’s in the 6% range, maybe getting close to seven. The regional banks have been still supplying good growth capital, but I’ve got to tell you, they’re going to get more conservative. And you can’t predict… Right now, it’s still, I would say, available, but you just can’t predict what six months or years is going to bring, I don’t think we know the full impact of what some of these bank failures are going to mean on a regional level. And I would say, ask me in about 30 or 60 days, and we’ll have a better handle on it. But the money’s just no longer going to be easy or cheap. It’s going to be really for the well-deserving operators; it’s going to be more conservative underwriting, and it’s going to be more expensive. It is still affordable in all senses, but it’s just not going to be nearly as easy. And I can’t tell you what six months or a year predicts will bring the market. But I can only tell you that it doesn’t feel like it’s going to be getting easier. I think it’s going to get a little tougher going forward for everybody in this industry, in this business.

Lanese

I imagine I know the answer to this, but I’ll ask anyways. What is it that car wash owners and operators can do today without knowing what the future holds to help position them better?

Jeff

So you know, I say, you know, a couple things. We’ve been, as a firm, advocates of operations. We’ve been just pushing people to learn how to operate better. At the end of the day, the greatest way to pick up the value you’re going to lose, let’s say on a multiple — let’s say instead of 15, it’s 12 or something now, or 11 — you can still pick it up if you can operate. So I would say invest in in your company. Get to know your customers better; invest in marketing, and driving more members. And so that return on investment is probably the best investment you can make. The other thing is going to be that nobody is buying C or even B sites. So if you’re going to move forward on a development project, just make sure it’s an A plus site, or don’t do it. Because the line is going to be very short for those for those opportunities. But yet there’s still a great opportunity for great sights. So you know, my advice would be you’ve got to be hyper focused on quality on locations, and in quality in operations. That’ll go a long way. The other discussions that we’re having… If somebody is looking at doing something… Again, if you’re in a market where you’ve got a lot of private equity backed chains that are going to continue to grow, the last thing you want to do is be squeezed out where you can’t afford to grow against them, because it just don’t have the capital or want to take that risk on… You really, at that point, need to decide where you want to be in the next couple of years. Because if these chains that are that are now hyper-focused on growing down their multiple by building more Greenfield, and you’re in one of those markets, at some point, your value could start really getting impacted, because you’ll just become an add on deal for somebody. Now, there’s still a great opportunity, if they’re looking for an exit, or even looking for a financial partner, I’d say, look at it now. But if you think about it two years from now, if you’re in a market with really strong competitors, and they continue to grow, you may be a little bit disadvantaged, or boxed in, and your value is going to be impacted by it.

Lanese

It sounds like what you’re saying makes long term sense anyway. Run a strong, operationally focused business that’s scalable and that’s sustainable. If you’re treating your customers and you’re serving your customers well, then you’re already setting yourself up for success to have continued loyalty. But if you’re taking your eye off the ball, or not investing in the team or investing in the marketing, and in those memberships, you do have a more likely chance of being negatively affected by new entrants coming into the market that can out position you in all of those things.

Jeff

That’s right. And I think the independent owner operator still has the advantage, right? I mean, they’re hyper focused on their customers, if they’re doing a good job. Customers, like go into local-owned businesses. And I think the larger chains are doing a little more cost cutting just because it’s the environment we’re in, and that goes across everything they’re doing. And so you can still win with customer experience in that sense. I agree with you totally. I think, at the end of the day, the owner operator has got to make sure they’re just doing the best job, a better job than anybody else. And it’s hard to take away those customers once they become a member. So it goes back to, again, what business are we in? The membership business. As long as you continue to take care of that member, it’s really hard for somebody to take them away.

Lanese

In the last episode I had with the team over at AMP, one of the things that they talked about was brand loyalty over convenience loyalty. And that’s something that they look to help owner operators best position their customers and having those relationships with their customers that’s beyond “it’s convenient and close to my house,” but it’s because this is their brand, and they have that tie to it. And I think that that’s very similar to what we’re talking about that when you have that loyalty to a brand, that you’re now having a relationship with them instead of just a tick mark on your way home that you stop. It’s a two way street to have that relationship aspect of it.

Jeff

Yeah, and I agree for the most part. I mean, I think at the end of the day, if you look at some of the oil companies, they’ve done a great job at building brand loyalty, right? They’ve built really just an amazing… They were in the gas business, but then they got into really the loyalty business and really expanded the customer experience with their new footprints of stores. And for car wash operators… I still think it’s going to be convenience, right? At the end of the day, I’m not going to 10 minutes farther to get a car wash, unless the one near me is that bad. So I do think convenience is still going to be number one, but I do think overall if you can build a convenience along with a very strong brand, that’s the Holy Grail and hard to beat.

Lanese

Then you’re both. So you brought up the gas stations. Let’s talk just a little bit about some of the new entrants into the car wash industry that we’re seeing. We had the True Blue that was bought by or acquired by Couche-Tard. From our standpoint, we’re seeing more and more interest from different companies that are either revisiting or visiting the car wash industry as something that they want to be more active in.

Jeff

Sure. And I would say this year, I’ve had more calls from gas owners, from large national brands, to even real large regional brands, that are all wanting a piece of the action. And they feel that it’s just one more product they can offer their customers, and they’ve got an advantage because they feel they can tie it in, and the brand loyalty thing is going a big way. They can bundle in car washing with something else at the pump, and it becomes far more valuable. And I think where the winds are changing is it doesn’t necessarily have to be on site, on property. So even if the car wash was within maybe two or three miles from where their gas station was, they can still find a way to tie it in. And I think we’re just seeing the dip their toe in the water kind of thing, and sort of an experiment with it. But the bottom line is they’ve got a lot of money. These are very strong real estate companies; they’re very strong loyalty companies. They’ve gotten a lot of cash from the last few years. So I would say, certainly, right now, they’re behind from where some of the great operators are. But they are somebody that to look at because they’re also long-term invested money. So they’re not looking to be in this in the short term. So they can come in this market, and really play the long game where they will invest over time, without having any need for an exit, which makes their business strategy a little different than the current group that’s in the space.

Lanese

And that goes back to our starting conversation about why now is still potentially an attractive time for sellers to consider who their buyers are, their potential buyers are. And it may be more than they think, despite all of these other negative headwinds that we face as well, just in general, or within the car wash industry. But there’s still a lot of opportunity out there with these groups coming into the industry as well.

Jeff

For sure. We’ve seen a major shake up right in the last five years, call it, with private equity really realizing the opportunity in the space. And now I look at it, and I say, let’s look at this, maybe in the next five years: what does the world look like? And I just think it just keeps shrinking as far as what it’s going to look like. I think, you know, great operators and well-established family chains that want to stay the course for the next 20 years could still make it. Again, back to your brand loyalty, because they have brand loyalty. But they’re typically the companies that are investing heavily every day, and adding locations where their market is growing; they’re constantly improving their product with keeping up. And so, I think they can continue on that force for a long time. It’s sort of the guys that are in between… I’d say the guys that are in between, that are still growing their platforms with lots of greenfield development, this guys in between, I think those chains like that… They’re at a point where they’re going to have to make a decision whether to continue to do that, or bring in a financial partner to sort of de-risk some of this growth. And we’re having lots of conversations with folks, because right now they’re feeling the pressure of when I’ve got to build some of that $6 million or $7 million today, and my interest is going to be 6 or 7%, that’s a tremendous difference in the amount of risk that you’re taking on versus before. And as credit gets a little tighter, it’s going to be harder to continue to grow like that. So I think at this point, the good news is, because there is still a lot of interests, I think there’s still opportunities for buyers to bring on a good partner, if they if that’s the way they want to go. Or if they want to sell, I think there’s still great values being done. But Lanese, one of the other really important factors is just knowing who you’re doing business with. Before, sellers and owners, would get phone calls from a hundred groups out there. And for the most part, I would say most of the deals, if they entered into an LOI, would close. That’s not the case today. Today, having the understanding of… I don’t care what group it is, how big they are, how big you think they are, there are a lot of big groups out there that have credit challenges that may or may not be able to close the deal. I would say rely heavily on your advisors and people that have more intimate knowledge about what goes on behind the scenes with some of these chains. But we’ve definitely seen some challenges along the way of folks not getting their deals across the finish line. But I think some of it is just they’ve got to know who they’re partnering with today, because it’s not what it used to be just a year ago.

Lanese

Right. And for some car wash owners that look at, you know, maybe selling direct, there’s a lot of eggs in one basket to one group on a deal that may not close. And so the advantage of having those trusted advisors to help best position to multiple people or know what’s going on broadly in this space can really be key in not wasting your time.

Jeff

You know, Lanese, the most important thing I can tell anybody today is most of the traditional buyers have restraints and they’re going to give you a fair value of what your car wash chain is worth because at this point, they’ve got a pretty good idea of how to make those numbers work. I would say there’s some new entry points and well capitalized private equity groups and other financial buyers that would step in and pay more, but you’ve got to open up your horizon of what that world of new buyers looks like. And that’s where I think today’s owner operator may be a little bit disadvantaged. It’s not like before, where you can count on getting the best dollar from some of the top… one of the top 10 guys out there buying. It really is taking a lot more work to get to know who the complete buying network is. And there really are a lot of newer new players that are not in the space today.

Lanese

And that work that you’re talking about for the owner is making sure that their books and records are organized, and that they’ve got all of their ducks in a row so that when they do have an opportunity to present that, that they have all of the materials and everything organized, that the due diligence side of it is much stronger, as people are taking a more conservative approach to spending their money on the buy side. Right?

Jeff

Yeah, that’s correct. You know, and we have a really good idea of what buyers are looking for and what buyers look for when they’re looking to pay a premium. Everybody wants to get max value, and there is sort of a playbook today. And it’s how you tell the story. And it’s everything from a site level to a company level to a market strategy. And all of these points would really increase your odds of getting a much better, bigger valuation. But it’s not as easy before, of just saying, “Here you go; here’s what I’ve got,” and let somebody just bid on it. You know, I know us as a firm, we put a lot more effort in than what we used to do, in building out that story. But at least we’re starting to see some really good results.

Lanese

Yeah, and I think that one thing that’s really encouraging and should be a point of hope for the operator, too, on this side of kind of the iteration that buyers are looking for and that narrative of telling the story is that it doesn’t always have to check a specific box to still be of value to a buyer on what the opportunity is, and what some of the intangibles are that are maybe down the road, or the strength of their team, or whatever it may be. But there’s more of a opportunity to showcase that when you have that experienced team that knows how to tell that story.

Jeff

For sure. I mean, you know, again, we’re in the middle of working on it, and another 10 plus store transaction, and we meet with the owners, and we’ve been working at this for a year, really helping them to look at the you know, what do you need to do on a site level? What do you need to do on a corporate level? We’re really helping them check all of the boxes that they need to do today to go and really then go out and really try to get a fair value. You know, before it was just a bunch of assets. And really, it’s kind of putting the pieces together to tell the story. To have a scalable car wash company takes a lot more effort and work, but at the end of the day, the reward is a significant upside for the owners.

Lanese

Right. Absolutely. And I mean, at the end of the day, and we’ve talked about this before, but the consumer is also the one that’s winning here, too, by having more quality car washes that are available to them. It’s raising the level of the car wash industry and what customers now expect from car washes in general. And so that’s exciting. And that’s a win win on both sides.

Jeff

Oh, for sure. I mean, at the end of the day, I think the consumer is, is the biggest winner, right? They, they have a lot more options out there as car washes… The old rule was to stay three to five miles away… Three miles and five miles and whatever they can. And now you’re having car washes a mile away, and much closer. And so consumers for sure have a lot more options. And I think in the future, they’re going to have a lot more options as we double the amount of car washes that come out. That’s good news for the consumer. You know, that means for the operators, you know, if somebody’s got a wash, and they’re letting the maintenance go down, or they’re trying to short on chemistry and other things, you know, they’re going to be greatly impacted. And eventually they’re not going to have anywhere to go but down. And the other really important thing, Lanese, is we’re starting to see some really new technologies. You know, day to day, what business are we in? I said, we’re in the membership business, right? You know, the data part of that membership becomes incredibly valuable. The more we, as an industry, learn about our customers, that data becomes really important, especially when you look at the big buyers out there. They make a living at really data on the analyzing data and what they can do with it. And so with car washes, it seems like an old school business, but again, as we grow our membership base, you’re going to have a lot more data. That data becomes incredibly valuable. And so some of the new technologies that are coming out in the market are absolutely invaluable to knowing… The more you know about your customers, the better business you can manage.

Lanese

Absolutely. And with those options for carwash owners, it doesn’t mean that they have to have their own data analyst on their staff, you know, for the smaller groups. There are more plug and play options that are within reach to them that they can use and stay competitive amongst these other larger groups that may come into their market. And that’s really exciting, I think, for the individual owner, or the smaller owner that it’s not out of reach now.

Jeff

Yeah, I would say there’s a lot of innovation going on today. And even on an operator level, there’s a lot of chains that have started creating some of their own technologies, back office and dashboards, and all kinds of cool stuff. The problem is, it’s expensive, really expensive to develop, even more expensive to maintain long term and to stay cutting edge. I think you’re going to see, over the next couple of years, some really high quality technology companies come emerge, that are plug and play, that’ll be white label, for your own car wash chain, that I think can keep you cutting edge, without you sort of killing yourself trying to develop your own systems.

Lanese

Yeah, totally. You read my mind; I think what’s so neat from a branding standpoint, on my side, is that white labeled aspect of it that the customer still feels like they’re talking directly to your brand. And it is. It’s an extension of your brand, but I think that that’s really a neat part of it that’s exciting for car wash owners.

Jeff

I mean, we’ve evolved. Even as we’re preaching to our car wash operators and change to evolve, and because they’re becoming… This is big business now, right? It’s no longer Mom and Pop. We’ve added a bunch of resources on our team. And I would say the majority of that expansion is gone to Operations and Technology because we just believe the real value is going to be an on a site level. Each unit, if you can drive more volume, understand your customers better, you’re going to create a more valuable business. And so as a firm, it’s just really expanded out how we approach it. And again, before, it was easy, right? We’d go out, and take a deal out to the market, and we had a feeding frenzy. Today, it’s different world. We’ve got to basically help, you know, bake that story, and really get operators understanding everything that the outside world is going to be looking for, for that value, and helping bring some of those pieces to them so they can get max value.

Lanese

And not to sound like we’re tooting our own horn here, but that is one of the reasons why I think you and Bill Martin are so smart to assemble people who were already connected to the car wash industry very specifically, because beyond just sending something out two years ago, when there was much more… the pace was so much faster, but now that it’s a little bit slower, and it takes more work in telling those stories and understanding how people can train in their operations, that we have the expertise and the experience to help people do that. And I think that’s super important to have that to lean on.

Jeff

Well, you know, again, as we get more data, if you’re smart, you’re going to be learning from the data, and the data is telling us that there’s still a lot more opportunity in the space on a site level. We’re still seeing sites outperform… You can have two operators in the same market, and one side is outperforming by double or triple because of a better operator. So for us, it’s easy to tell somebody to go build ten more car washes. But I do think it’s probably just as important or more important to show somebody on what resources they have and what they need to do to grow their own business on a site level and building up their corporate level where they can scale a company. It’s far more valuable, but it does take experience and resources to kind of help on that.

Lanese

It does. And it takes the willingness and the motivation and the want to to put that work in because it doesn’t just happen overnight, as we know.

Jeff

That’s right. And there’s ways to sort of learn it, you know, again, we’ve got a lot of operators who have been doing this for 50 years, so they’ve learned over the long haul. And in today’s world, everything’s moving so fast. And because of the much more higher risk environment we’re in because of costs and everything else, for us, we’re just trying to help shorten that learning curve for a lot of people. Because, you know, at this point, there are a lot of good playbooks out there, so anything you can do to shorten the learning curve, you’re probably better off.

Lanese

Yeah, totally. I love the Cliff’s Notes version with still the A+ at the end. Well, Jeff, thank you for sharing your thoughts on where we are today and some outlooks over the next six months, the next couple of years, in where the car wash runway still lies ahead. You shared in the beginning that your overall thesis for the car wash industry is still favorable, so that’s great news. We’ll take it. Anything that you want to leave our listeners with before we sign off until next month.

Jeff

No, I would just say, I would start expanding your horizons on looking at all the tools and technologies that are out there now that can help you manage and grow your business better, because they’re there. They’re out there, and there’s more to come. And again, remember the business you’re in. If you’re looking at the way to maximize value, take memberships.

Lanese

I like it. All right, well, we have the car wash show through the International Car Wash Association coming up in Las Vegas in early May. So we will have a booth there if anybody wants to come by and say hello, our booth is number 811. We’d love to see you, and thank you for listening.

Jeff

Thank you.

About the Episode:

Have you considered how a customer experience platform could strengthen your car wash business? Guests Dennis Dreeszen and Adam Trien talk with your host Lanese Barnett about AMP Memberships, a powerful platform specifically designed to support car wash business owners and their customers.

In the episode, Dennis and Adam share how AMP works and how it can benefit car wash owners. AMP offers a highly customizable white label mobile solution that interacts with customers and members on and off site. AMP helps car wash owners know more about your customers, use what you know to have targeted interactions, and run creative, trackable promotions. Listen in to hear how programs like AMP can strengthen car wash operations and build greater brand loyalty with customers and members.

Sign up for Car Wash M&A, The Newsletter. | Follow us on social media @AmplifyCarWashAdvisors on LinkedIn or Facebook. | Connect with Lanese on LinkedIn.

More about Dennis Dreeszen:

Chief Executive Officer – AMP Memberships

With a thriving car wash brand, Autowash, currently operating 23 locations in Colorado with many more in development, Dennis Dreeszen brings the owner/operator perspective to the AMP Memberships team. Frustrated with the limited options and rigid structures of the contemporary car wash technology landscape Dennis set out to create a smartphone app that was as dynamic, data-oriented, and backed up with powerful marketing tools to match the demands car wash brand he is building. His collaboration with CTO Adam Trien is what gave birth to the AMP Memberships Platform; truly a solution by a car wash operator, for car wash operators.

More about Adam Trien:

Chief Technology Officer – AMP Memberships

Head of the highly skilled development team, Insiten, Adam has a reputation for creating best-in-class technology solutions. Working with CEO, Dennis Dreezsen, Adam and his team developed the AMP Memberships platform as a fully-configurable, extremely powerful, suite of tools centered on a slick and intuitive smartphone app. Through constant innovation and iteration, Adam and the development team continue to push the boundaries of what customers can expect from a car wash app experience, creating tools that drive membership growth, customer loyalty, and retention.

Check out the full transcript below:

Lanese

Welcome to Episode 13 of Car Wash M&A, the podcast today I have my guests, Adam Trien and Dennis Dreeszen from AMP. It is a customer experience platform that we can’t wait to talk more about, and hear everything that it can do to help carwash owners run their operations even better. So thank you both for being here with me today. And I will let Dennis, you kick it off with just giving just a quick background on you. And then Adam, I’ll go over you for a quick background. And then we’ll talk about what AMP is.

Dennis

I got into the college business about a decade ago, and before that was doing, I guess, kind of financial planning, running 401(k)s and doing a bunch of taxes. I wanted to do something a little different, so I got into the car wash business about 10 years ago with my wife, and we’ve built up the Autowash brand. We’ve now got about 24 locations. But a few years ago, we got kind of frustrated and sort of started looking at building an alternative way to run memberships.

Lanese

That’s the best way for coming up with innovative solutions is because you actually know what the real problem is, so this isn’t hypothetical. You’re the user.

Dennis

Yeah. A lot of what we’re going to talk about today is probably born out of our frustrations as an operator.

Lanese

Great. Can’t wait to dive in. Adam, just give a little bit of your background pre-car wash, and then what you do now.

Adam

Yeah, sure. So I’ve been in the software development space for over 20 years. Several of those years were with Ernst and Young, leading up development, building platforms for them to run big merger and acquisition deals and things like that. About six years ago, I split off from Ernst and Young and started a company called Inciten, which is a boutique development firm in Atlanta, Georgia. We really, really pride ourselves on having really kind of Silicon Valley level talent and building really slick applications, rapid development cycles. You know, really big focus on data and analytics and marketing and really cool things. And about two years ago, I met Dennis, who was looking to build a car wash app. We had never done anything in the car wash space before; I actually knew nothing about the car wash space. But yeah, I really loved working with Dennis building… At first it was an application for for Autowash to manage their memberships with a mobile app. But it’s evolved quickly. We decided, a couple months into the project, it was so powerful what we’re building, we decided to make a whole company around it. So that’s how AMP was was born, and it has been really, really exciting taking really advanced development techniques and technology capabilities and bringing that to the car wash space.

Lanese

Yeah, and the car wash industry is so ripe for this type of technology, because I know that you guys were at the Southwest Car Wash show two years ago, which is when I met you, and it was probably pretty early in your journey of launching AMP. Was it already off the ground then, or had it launched? So two years ago at that car wash show.

Dennis

Our first exposure kind of testing to see if AMP was a viable product was at SCWA a couple years ago. So we had this like makeshift booth. We printed off a couple of boards, pinned them to the wall, and were hopeful that… We were just kind of really trying to see what the response might be for it. So that was our soft launch, I guess.

Lanese

Yeah, and I definitely remember meeting you guys there and thinking, wow, this is really cool. And that show was coming out of you know, a lot of dormancy from no shows for years with COVID and then it just see seemed so cool that there were so many new technologies and new opportunities and new solutions for car wash owners. But before we go too far down that path, Dennis, you had this this car wash brand that you and your wife had started Autowash. You wanted to build a mobile app for it to handle your memberships, and do some of your marketing capabilities, and everything. So let’s talk about what you built for Autowash, and then where it’s grown to today.

Dennis

So when we first got started, we were trying to figure out a solution because we run primarily in-bay automatics, and self-service. We were trying to figure out a way to run our memberships without anybody on site. So we’re kind of a headless system where we don’t have anybody that can put a sticker on a car, or, you know, we didn’t want to put a bunch of different LPRs for six different lanes. It would have been cost prohibitive. So we wanted to find something else that made more sense. And so that’s where we kind of designed our first generation of the app. And it was functional in the very beginning, and then we kind of hit some some dead-ends necessarily on where we wanted that first version to go as far as marketing, connecting with customers, fraud prevention, and things like that. And so that’s when we reached out to Adam to build generation two of our car wash app for the membership. Where it’s at now is we’ve kind of grown. It really changed our business model, for sure. I think most people who get into the membership model of car washing — it changes their revenue line; it makes things a little bit more predictable and a little bit easier to operate. And it lets you grow and scale. And that’s what the app kind of did for us. But what we’ve been able to do now, since we’ve changed over and built AMP, is really explode our growth. Now we just have so much more capabilities to grab people. I think we were sitting at maybe… I want to say four or 5000 members when we switched over to the AMP platform. And now we’re at 16,000 and growing. It’s been pretty incredible.

Lanese

So Adam, when Dennis first approached you about this, and you were talking about coming from this more corporate background where you’re working with these Fortune 100 or Fortune 500 companies and building mobile platforms for them and things like that. What was your first reaction when you were starting to dive into the car wash side of it? What did that feel like?

Adam

Yeah, it was… Dennis has been such a great partner from the beginning. He had all these amazing ideas of what an app could do and how he could interact with his customers. So really, from the very first meeting, it was like, “Yeah, this would be really, really cool.” You know, you see mobile apps all over the place at kind of retail shops. You look at Dunkin Donuts, and Starbucks, and Chick-fil-A. It’s hard to find an industry that that doesn’t have mobile apps to help grow loyalty and grow membership programs and things like that. So it seemed immediately I could see there was this big gap in capability in the car wash space. Dennis, I think he kind of mentioned, he was on an app even before we met. I think he was one of the first car wash apps ever in existence. So he’s been doing this from from the beginning. Yeah, it seemed like just a tremendous opportunity to take, you know, a lot of where we’d been successful in other industries, take some of those techniques around marketing and data capture, and bring that that to the car wash space. We kind of always had, throughout the years, you know… If we created some really cool tech or something like that, we always had that mindset: can we productize this? Is there a way to wrap this up and create a SAS platform or product? So I always had my radar up for that kind of thing. And this was a no brainer. Once I saw… We turned it on, and within a couple of weeks, we were seeing traction at Dennis’s car washes that he hadn’t experienced before. When you have a tool and technology that is not just convenient and nice and people like it, but it actually drives revenue, that’s an equation that that always wins. It’s really exciting to get going with AMP.

Lanese

For sure. And so while there’s other providers out there for to build apps, or you can hire a developer to do this, what seems really cool about what you guys are doing is making this available to car wash chains that are looking to incorporate some other platform to manage their memberships that — correct me if I’m wrong — is not tied to a POS, it’s configurable, it’s customizable, and you don’t have to have a developer on your staff to be able to figure out how to use it. It’s like an iPhone; you can turn it on, and you can start messing with it and figure it out because it is tailored for ease of use. So talk to me about what it looks like for a car wash customer of AMP. What can this do for them, and what power is behind the ease of use, the customization that it has? What does this look like for them, and what can it do for him?

Adam

That was so important for us. You know, every car wash runs differently. Their brand is different, the look and feel their messaging is different, their pricing, their products, what they offer when you get on site, so you know, it was really important for us to build a product that was completely white labeled, that felt… You know, it is the car wash’s app. You know, when you go to the App Store, it doesn’t say AMP, and you know, we’re on some platform, you know, managing multiple car washes. So when you advertise on our app, the only advertisements your customers will see are for that car wash. So we take this very, very seriously. Every single picture, line of text, pop-up deal, everything in our app is configurable by our self service portal. Because we’ve made it so easy to configure and so flexible. We could have a new app up and running in a couple of days, where it’s launched, and it’s on the App Store. What does take some time is you start working with the marketing team and getting all the collateral and the images and figuring out the messaging and then figuring out, on the marketing side, what deals we want to show, and promotions, and what the customer notifications are going to be. It’s a really super powerful platform. So there’s a lot of ongoing work to continue to refine your brand, refine your messaging, test new things, make changes, and things like that. And we really help along that entire journey.

Lanese

Yeah, that sounds like what a great partnership for car wash owners. One, it’s giving a push to get that content solidified, and get that messaging and that goal solidified. Because I know speaking from my own experience, sometimes until something is right in front of you that you need to do, it’s kind of pushed off, but messaging and marketing is so important. And so this gives that prompt to “Okay, let’s let’s let’s get that together,” if they don’t already have it already. But then knowing that that there’s the support to launch that without having to refigure out some whole thing… that it’s customizable, and it’s easy to do. I bet that’s a real game changer for car wash owners. What are some of the results that you’ve seen with your clients as far as they’ve not only adopted the app and started using it — or the experience platform, because it’s more than just an app — what’s some of the results that they’ve seen and some of the benefits that they’ve experienced from that?

Dennis

First, I think one of the biggest things that we’ve seen — there’s a couple of huge statistics out there that we’ve been able to expose — one is 93% capture of accidental or involuntary churn. Which is really awesome! My wife was asking me earlier this morning, she goes, “what about the other seven? What are we gonna do with those? Why aren’t we capturing that?” That’s like prepaid debit cards, things like that. So we’re capturing 93%. I think some of the competitive competitors grab about 60 or 65%. So it’s almost a 50% better capture, which is like… Those are real dollars for an operator. That’s huge. And so that’s money to the bottom line right away. So we’ve seen that. We’ve also seen some really, really tremendous growth of MRR using some of our tools like our attendant mode tablet tool, as much as like 50% increase of MRR, which is monthly recurring revenue for the month for the memberships… 50% growth and about a six week period of time. It’s mind boggling how fast you can move the needle by actually using the tools and using them properly in the app.

Lanese

And so let’s look a little bit holistically at how this is a customer experience platform beyond just the app. I also want to talk about your tie in and partnership with Retention Express because we’re talking about capturing customer churn. And I know that you guys have a partnership with them, and actually part of Amplify Ventures, we’re all moving this ship forward in promoting and advocating for more solutions available for car wash owners. But how does that work with what they do?

Adam

Yeah, I think when you look at churn, there’s being proactive and then being reactive. What’s exciting is we handle both really, really well. So with Retention Express… Actually one interesting side story is they launched also, at that same conference, and they were two booths over. So we’ve been partners with them really since the beginning. And they’ve been a big part of our ongoing success. So basically, in our app, if somebody has any issues or problems at the car wash or questions about their membership, you’re able to either send them through the phone or text message to get on with someone at Retention Express to start addressing their problems. If they’re an existing customer, we’ve given tools to Retention Express in our portal to solve the issue, to offer credits, give coupons, and really quickly see all the information about that customer. You know how many times they’ve been to a carwash, what their lifetime value is, you know, really try to keep that customer, keep them happy. If they are calling to cancel, we’re then able to look at what’s their payment history? Have they been a good customer? How many times do they wash a month? And feed them promotions specific… We also collect the reasons why people are canceling. So give promotions that way. And then once they’ve left, we still have have their information; we could still contact them. So you know while they’re in the cancellation period, we could hit them up a week or a day before their cancellation date. Make sure that they don’t want to extend, or we can’t get them with with a promotion. And then even when they’re gone, we could send out emails: we want you, and we miss you, you know, that kind of thing. And so it’s like, yeah, this huge campaign we help these carwashes set up. And Retention Express? They’re awesome! You know, when they get customers on the phone, they keep satisfaction way, way up! They do a great job of getting people to continue on the journey of a membership.

Lanese

What’s so cool about both of those services is it’s advocating on behalf of the customer. So giving them a positive experience, giving them ease of use for your car wash end user, but also for your clients as the car wash owner. So this is such a win / win for both sides of that. And that’s what I really love about how the car wash industry is evolving, because this is beneficial across the board for everyone. And it’s raising the bar for what the standards of car washing in general are from a wider consumer expectation, that now they expect more from us as an industry. And I think that that’s helpful for that rising tide to lift all boats that we can provide a better product, keep people happier, have that loyalty. When we talk about car washing, and who the customer is, you know, a lot of it’s based on convenience. One of the things that I’ve heard you guys say that I think is really cool is changing that convenience loyalty to a brand loyalty. So I want to dive in a little bit about that. And Dennis, I think you guys do some really cool stuff with Autowash. And then also with your AMP hat on how to change that convenience loyalty to your brand loyalty.

Dennis

Yeah, I think obviously the convenience loyalty means that it was just on the way, and if you move, you’re going to lose that customer, whereas brand loyalty is they’re aligned with your brand, emotionally and logically. Being able to convey the unique points of difference or your USP through the app and being able to educate your customers through multi-page educational pop-ups inside the app, or deals and other things — there are just so many ways — I think building that brand loyalty, I think really comes from the connection with the customer whereas without the app, you really don’t have that tight conversation that you can have with the customers. And that’s where the platform comes in is it allows you to control that conversation and be able to have that with them, not just when they’re on site, but when they go home, and they’re watching the Superbowl or something like that, they can get a pop-up or a special deal or a special offer or “Hey, did you know mag chloride is damaging when it’s snowing outside?” when they’re not at the wash.

Lanese

So what does this look like for your user engagement outside of the car wash? What are some tangibles on that? I mean, are people watching the Superbowl and looking at pop-ups from AMP, or from their car wash that they’re connected to?

Dennis

We’ve got about 50% engagement on any kind of a notification that gets sent out. So if there’s an invite, we’re seeing reactions, if we send those out, because we know it’s good data, right? We know that they want to be part of that brand. They’ve downloaded the app; they’re in it. And some of the things that we’ve done to increase engagement are like the spin-to-win game that we can put in there, which is where they can win like $5 credits or $50 credits, or even maybe a free year.

Lanese

So time out real quick. So also on the spin to win, so they get these different incentives. But then how are you working to fulfill those incentives that they’ve won? So if they get this $5 credit credit, what does that look like? Where does it go?

Dennis

If they win something in the spin-to-win game, it automatically gets applied to their account. So then they can see in the gift card portal, they can see how much money they’ve earned, or how much they saved. And they can, if they wanted to, because they are a member, they can give it away, or they can use it to offset their current membership.

Lanese

Even just in that part of it… I’ve been in the car wash industry for about 13 years. Early on, especially, it’s, “Okay, so we’re going to do this Father’s Day promotion, and we’re going to pick winners, and then we’re going to get this gift card, put it in a sleeve, put it in the mail, and mail it to the winner, or have them come pick it up,” because there was no way to just like give it to them electronically. So it’s so cool, just to see that that’s no longer… That part of it is solved. But it’s I just am reminiscing about that; these were real things that the car industry was just so far behind, on how to figure out that, bridge that gap. And knowing that there’s a place for customers to keep their information in one place. They’re not having to go to multiple things; it’s got their loyalty tracking in there, because the worst thing for customers is be like, “Oh, I didn’t bring my…” People don’t use punch cards anymore. But I didn’t bring whatever thing, or I’m not in on the good deal. And it seems like through this engagement, they know, and they feel comfortable and confident that they’re always in on whatever’s available to them, that they’re rewarded for that.

Dennis

Right. And that’s why it’s really, really, really important to have a really good functioning, slick app that’s engaging to the customer that when they’re playing with it, it’s not buggy. It’s not crashing; it doesn’t look like it was coded in 1985. And so it’s modern, and it continues to evolve that way. But with those features like that Spin-to-Win, we’ve got from the AMP side, we can see multiple clients, and the clients that use the Spin-to-Win have a 50% higher daily engagement rate than clients who don’t, which means that people are just constantly using the app. And then what that means is that then you know that you’re able to use the pop-up engine. So after they get a wash, or after they do a certain function, we can surface different pieces of information. And it could be just a “Did you know?” type of thing; it doesn’t always have to be a savings type of situation. But it is very much an educational piece of why we’re different: our soaps do this, or pollen is acidic, and it can do that… And it’s a way to connect with the customers where they already are, which is on their phone.

Lanese

That’s awesome.

Adam

One thing to add about kind of how we achieve some of those great, great numbers of people actually opening up emails or clicking on a link that we send in a text message, and things like that. A big part of it’s using modern online marketing techniques around customer segmentation and making sure the people that you’re sending the message to, you know, that (1) they’ve opted in, (2) you have a verified phone number, so you don’t have a bunch of junk data that you’re trying to send these messages out to, but then (3), we know so much more than about person than just their phone number. We know what car they drive, we know how often they wash, where they wash, how many times they log into the app, their birthday, all sorts of things there. But we also have a survey tool, where we can start asking additional questions of customers to even further segment them. And then you could use those answers to send out really direct mail. So a tangible example… Dennis actually did this at Autowash. He was originally… They were partners with the Broncos and the Rockies, and they’d send out these blasts. And you get a bunch of people who would opt out because they don’t like the Broncos. They hate the Broncos! They don’t want to see another thing about the Broncos!

Lanese

They’re Cowboys fans, obviously.

Adam

The joke is no one really likes the Broncos right now. But so we have a survey tool: What’s your favorite team? When they launch they ask, what’s your favorite local team? We’re able to collect that information. And now when we send those messages, we send them to people who just love the Broncos, and it gets so much more engagement. So that’s just like one little example. We have people who use the survey tool to get live feedback from their customers. We’ve had people that ask, “Do you like hamburgers or hotdogs for the car event that we’re about to do?” You could you could use it for all sorts of different things. And if you’re really creative, you start building these rich profiles about your customers that you could then use to reconnect and build that conversation Dennis was talking about.

Lanese

That’s the other thing is we’re seeing this huge evolution — not just in the car wash industry, but that’s what we’ll talk about — is how to leverage data. So (1) capturing the data because you have to get this information from the customer in a way that they want to share it with you, and then (2) where do you put the data? And how do you quantify it? And how do you use it to benefit you and the customer. And that sounds like that’s a great example of just one way of reaching a customer in the language that they want, in the manner in which they want to engage, but also with the preferences that they have, so it shows that they’re tracking, and that you care about them, and that you you want to engage specifically with them to a tailored message. And that’s really, really cool. Talk to me a little bit about what else you can do with this data that you’re collecting, and how you’re pushing the envelope on benefiting both the car wash customer and then the owner for building that brand loyalty?

Dennis

I think before Adam jumps into that question, one of the reasons we really liked working with Adam in the very beginning was because of the sanctity of the data. That was their focus, obviously, coming from their background, but at EY and doing all the projects that they were doing is having good data… So just having data if it’s garbage doesn’t really help very much. And so knowing that we actually have the right answers, and we are putting that message out to the right person, was one of the big differences that we noticed when we started developing this program that that is a foundation of our platform is how strong those data relational databases are.

Adam

It was one of the first conversations Dennis and I had when he was talking about his vision, and he kind of said that this was born from frustration. And one of the frustrations was the lack of ability to pull good data out of the system. So that was, from day one, having full transparency and access, and having a really nice design data model sitting behind the system was really one of the most important important goals of AMP. So yeah, we’re collecting so much information. You know, we already kind of talked about some of the information about the customers that we know. We have operational data, you know, where they’re washing, how much they’re washing, things like that. We have financial data, so we’re able to see how long has someone been a member? We know when you have people who are having trouble with credit cards versus not, different levels of membership. We know timing, you know, when someone gets a trial wash, how long does it take them to become a member? And then when they become a member, what’s their lifetime value? How long are they a member? We have interactions within the app. So if someone clicks on a deal, we track impressions and clicks and redemptions, so you’re able to see on the marketing side how successful that is. And it’s really bringing all that data together, and making it super accessible. So we have our own reports and dashboards that where we try to derive insights from that data, we also pump our data, you could pull our data with API’s. We use this tool called Snowflake, which is an online data repository that lets customers take our data into their own data repository. But now for the sort of questions you could ask of this data, it’s hard to answer that question because it’s kind of unlimited. But certain things we do is: what promotion is most effective at driving lifetime value? Is it get the first month free? Get the first month for $5? Download the app, and get a free carwash? We have all these different promotions we could run; how can we tell? So now we have the data to really draw that out and look at your cohorts of members based on these different promotions, and you can really understand what’s working, what’s not, and make a tweak. And you know, we’re not waiting… we’re not having to dump that data out and send it to someone else to analyze it. It’s all coming in real time. And what’s what’s really exciting to think about our future roadmap is starting to bring in data scientists and machine learning algorithms to start… You know, there are some obvious things that a human can spot. But are there certain correlations that humans can’t easily derive that these algorithms could find? For example, you know, give me the list of people most likely to churn that are current members, and we could dump into that algorithm, how many times are they watching per month? What’s their payment history and failure rate? And try to start finding these groups of people that we could then market to, and try to make sure… Be more proactive rather than reactive.

Lanese

There’s a lot of rich things there that you just touched on and shared about. And exciting! I think it’s really… Again, it’s really cool just watching the evolution of the car wash industry to find how we can use this information to reach, connect, and communicate with the car wash customer in a meaningful way that builds up brand loyalty. And one of the things that you mentioned kind of early in this part of the conversation is that opt-in messaging, or that opt-in communication with the customer. So this is very transparent. It’s not like you’re spying on them. They are giving you this information because they find value in the relationship. And I love that part of it because it is a relationship that both of you are mutually bringing something to the table of value.

Adam

That’s really important. And yeah, we definitely take a lot of inspiration from the food and beverage industry looking at, you know, how generous the Starbucks points system is. Really what that is, is that they’re wanting people to download the app; they’re wanting to get information about those people; they’re wanting to understand their buying patterns. There are great statistics out there that if you have a user or customer that has an app, they’re going to spend 30% more with your brand than someone without an app. So yeah, it’s pretty exciting. And, you know, so you can be really generous. And you can do things like offer discounts and promotions in the app, but still kind of your net growth and your net profits are still going up, because now you have this huge audience as a captive audience that likes your brand that you could…

Lanese

And it’s not even just… It doesn’t have to be just a monthly membership customer. This is your retail customers, too. I think that we’ve had a lot of focus on the memberships, and rightly so. But the retail customers are important too. And this gives a way to bridge that to still engage with them, that you’re still reaching them as well, if they have the platform downloaded.

Dennis

Yeah, totally! I think from an operator’s perspective, you want to have all your customers’ information, not just your members’ customer information. And so being able to grab all of those folks, and… It’s anywhere from half to 70% of your users are not members, which means they’re using you maybe once a month, or when it’s convenient, or they’re trying you for the first time. And there’s not a really good way to capture those people if you don’t capture them on that initial visit. That might be your only shot in an old model. But now with a model of like, everybody download the app, you have an opportunity to aim for memberships in this with loyalty, and by that maybe not an explicit loyalty program, but an ability to go after and capture that person that wants…

Lanese

To come in every six weeks. Or whatever it is.

Dennis

Yeah, we can go in and say, “Hey, here’s someone who tried us. They washed once. They haven’t washed in days. Ping that person!” And we have the ability to do that in the mobile app and grab that person and bring them back to our brand because they’re going to wash somewhere, and it’s probably… If they’re not already locked in loyal, then that’s convenience loyalty, which is where it’s on the way to work or on the way home, but if you’re able to push them, and give them a nudge, just a little bit, then when that it does have that next weather event, they think, “That car wash messaged me; I should go there.”

Adam

One really cool example of this one of our customers just did last weekend was they’re launching a new location. So the app is really great, if you’re launching new locations, to really quickly bring that location into your membership program. It’s POS agnostic, but that activation event… Basically, you’re trying to grow membership as quickly as possible at that new location and get to that critical mass, so what we’re able to do is say, “Come in for our grand opening, and get a free wash!” But instead of just giving everyone a free wash and maybe taking on paper… I don’t know, without an app, how you would collect information about that customers, it’s, “You have to download the app, and then you get your free wash.” So we’re able to capture hundreds and hundreds of people the first day that a car wash launches that we know live in that area that are interested in that car wash and really quickly reached that critical mass of memberships at each location. It’s really cool to see.

Lanese

And this is so important for a lot of car washes that we interact with and have relationships with that are growing, and maybe they’re going through acquisitions, and they have multiple POSs across different regions or maybe even in the same town that… Finding that bridge to not have to rip everything out and start all over with the hard equipment at those sites that are extremely expensive and cost-prohibitive, and time-prohibitive, that this helps them speed that process along, and work with what’s there in still an advantageous way. It’s not even that they’re losing anything out on this; this is still helpful.

Dennis

You know, being agnostic of the POS, and being flexible, because… Even today, you know, tying into the different POS providers, whether it’s Sunny DRB, or ICS, or whomever, there are new technologies always coming out, and there could be a different POS tomorrow, and being able to tie in with that as well. Just being dynamic and flexible… It allows the operator to not have to worry about the sunk cost of like, “Oh, man, now I’ve got to rip out that POS.”

Adam

That pain point of… We hear that a lot from customers and potential customers looking for an app, is it’s really hard to run a big promotion that talks about membership across all your locations, and things like that, when there are certain locations where, “Well, that location, we haven’t migrated them yet to our point of sale, so that’s not covered…” And to be able to almost immediately bring a new location up and get them on the membership and get existing memberships going to that location. Yeah, it’s pretty exciting.

Lanese

Absolutely. With what you guys are doing advancement wise on the AMP technology, correct me if I’m wrong, but when you do have new features that you’ve developed, that you’ve created, well, how do your existing customers… Do they have access to that when they come out? Do they have to add that on later? Or what does that look like for your customers, as far as the things that the new things that you’re working on?

Adam

I think this is one of the most exciting things about how we architected this solution. It’s cloud based, it’s called multi-tenant, which means everybody is always on the latest and greatest version. We do something called feature flagging, so we do releases about once a month to iteratively, adding new features to the app. We have release notes that go out, so people could see all the new features, how they work, the new new settings, things, things like that. And then once once they get launched, you’ll get a notification that the features are now ready, with instructions of how to turn them on in the portal. So it’s really, really easy for people to take advantage of the latest and greatest. That allows us, that feature flagging, really allows us to march quickly, and keep on adding great new features without interrupting current customers, but still letting them opt in to all the great things that we’re building.

Lanese

Great for your customer loyalty for AMP because they’re getting all these cool things. So I think that that’s such a neat thing, because it really does… You know, it becomes frustrating when you hear that your neighbor has such a better Spectrum deal or whatever it is because there’s some promotion that came out right then. So just feeling like you have access to all of the new cool stuff that you guys are developing for down the road, and on an ongoing basis. I think that’s so cool. And how neat to grow with your car wash partners and offer them new solutions that maybe they haven’t thought of.

Dennis

One of the challenges is being able to do that intelligently, and not mess the app up, or mess the platform up. I think that’s like the hardest thing to do. And make sure we have a good architecture on the back end of it so that when we do add all these different configurations, that one doesn’t take down another, and so that they all work in concert, and can create a really cool user experience.

Lanese

And what does it look like as far as the future of what you guys see for AMP from starting as this car wash mobile app? And then where is it going in the long run? I mean, I know you don’t have a crystal ball and have it all laid out because you’re constantly developing and tweaking, and things like that, but what do you see for it just kind of in a general sense moving forward in evolution.

Adam

I do think it is interesting. We started really focused on the app. That was a key thing; get a mobile app for your car wash. You can even see in the tagline behind me, you know, we were called, “AMP: the car wash app.” And as we’ve evolved, we’ve realized it’s so much more than just an app. So you have your customer service reps, and giving them the tools they need when when customers call in, it’s the data analytics that your business and operation folks need to make better decisions, the marketing piece has turned into a huge, huge part of this, and we’re making that so much more sophisticated. You know, we have multi years of ideas of how to continue to iterate and make this thing stronger and stronger. And I think our big goal is, you know, any interaction that a car wash has with the customer prior to them entering the tunnel and them getting the actual wash, we think there’s so much room for improvement, as the things are more interconnected. And the text message that you send out is aware of the mobile app. And the kiosk also is aware that this person’s a membership, and loyalty points, and all this stuff you could do as you have kind of all these different separate communications with the customers, and have all unified in one central platform that just unlocks so much capability of what you’re able to offer, what value you’re able to offer, and how you’re able to build out that loyalty.

Lanese

Totally. Again, like we had talked about, that convenience loyalty to that brand loyalty… that there are so many sticky points with the interaction and the relationship building and the investment in getting to know your customer, especially beyond the walls of the of the car wash, that there’s a relationship there that’s deeper. And I think that’s really exciting. And I think you guys are doing some really cool things with that. And it’s fun to watch. And I’m excited to share in this journey to keep offering real solutions to car wash owners that are addressing these pain points, that are helping grow memberships and loyal customers that are retail customers, or whatever it is, but capturing and using this data in a meaningful way to grow your bottom line is I think what all carwash owners want. They want to have more loyal customers that are growing their business, but also that there’s a continued path forward to keep growing.

Dennis

Yeah, I think one of the challenges is, as the industry becomes a little bit more mature, is the commoditization of the car wash, and how are you going to differentiate. It’s now becoming the operational efficiency. And it means that you need to have a lower churn rate than your competitor. And you need to make sure that you’re doing things for additional capture and growth of your MRR. And / or your retail customer, or what we call the pay-per-wash customer, and what are you doing to grab those folks? Because you have to get to a point where you can grab all of it. If you’re not doing the most efficient things, then you’re probably going to get beat longterm competition wise.

Lanese

Right. And that’s just… It’s good business practice anyways, but the nature of where we are right now, it’s more expensive to do everything. And money costs more. So protecting those customers, and strengthening that brand loyalty makes so much sense. And also streamlining the rest of your operation. So working in tandem with multiple facets of your business, to really optimize the experience for the user, optimize the operational strategy and execution on the car wash side of it as well. And that those all work hand in hand.

Dennis

My marketing professor back in college, he used to hammer on us about how expensive was to grab a customer and how valuable it was to retain that customer. And I think that’s where really our platform is really kind of honed in on is, like we’ve kind of touched on a couple of times already, is grabbing that non-member, and keeping that person engaged. Because eventually, hopefully, they become a future member. And so I guess we probably should like classify them as maybe future members and present members.

Lanese

Yeah, exactly. I love that. Yeah, just that customer that… The car wash industry historically has been very volume based. And, you know, you talk about how many cars you wash per hour. And while all of those things still matter, it’s really shifted to how many members do you have? And how much are you growing that membership base? And again, we know we’re still talking about the retail customers, too, but that’s the important part of it is that ongoing… Because it’s the relationship, and the ongoing future business that they’ll have as well. Well, thank you guys for sharing about AMP. And just talking about this really cool evolution again of what started as a car wash mobile app two years ago at the Southwest show — which is coming up! This episode will actually release while we are at the 2023 Southwest Car Wash Association convention in Fort Worth — and it’s been such a cool journey to watch you guys. And again, just remembering being one of the people that was pulled in to, “Hey, come hear about our new car wash app!” But from the minute that I met both of you guys, and Bobby with Retention Express, you are just doing something so cool for the industry. And I really love watching how the industry is growing and evolving, and there’s new things coming in and new ways of looking at things that are taking hold. And I think that you guys are doing an awesome job. Not that you need my two cents, but I really do, and I’ve had so much fun getting to know you guys and your team and I’m excited to keep seeing where everything’s going.

Adam

Absolutely, yeah.

Dennis

So are we!

Adam

The feeling is mutual. Yeah, it’s been been a wild ride. And as someone who’s newer to the car wash industry, I speak to so many people who are just like falling in love with this space, and it’s just so amazing how collaborative people are, and hungry for new ideas, and open, and how quick they’re able to move and make decisions, and things like that. It’s just been been so much fun to be a part of this. And yeah, we’re very excited to see where this goes.

Lanese

Yeah, and especially with your pre-car wash background, you know maybe at first you hear car wash, and you’re like, “What does that look like?” And you may be excited about it, or maybe not. But then once you get into it, it sounds like like my experience as well, that it just really sticks with you. And there’s something so cool about it… The relationships, and the people, and the collaboration, and the desire to perform better. Always. There’s there’s always room to keep getting better and growing and evolving. And I think that drives all of us. So it’s really cool.

Lanese

For those of you who are listening when this episode releases, who are in Fort Worth at the SCWA, the Southwest Car Wash Association Expo, come by and see us. Dennis and Adam will be at booth 635 with AMP, and I’ll be with my team at Amplify Car Wash Advisors at booth 734. So those are conveniently located right next door to each other. Also, if you want to stop by and see Bobby Thomson with Retention Express, his booth is not far away, either, at 844. And if you’re loving this podcast, please take a minute to subscribe, rate, and review on Apple Podcasts or wherever you like to listen. Those reviews help other people in the car wash industry find us. Until next month, see ya!

About the Episode:

What can car wash owners do today to facilitate their business’s continued growth and success amid changing market conditions? How do the current headwinds impact access to capital? As Paul Sigfusson, this month’s guest on Car Wash M&A, The Podcast, shares with host Lanese Barnett, it is not all bad news for operators looking to grow. In fact, the very conditions that are causing some current market instability are also offering some unique opportunities to car wash owners looking to scale or sell.

Listen in to hear Paul’s thoughts about car wash capital growth options in 2023 and beyond. Paul shares his experience in investment banking, capital markets and private equity investing, why he chose to join Amplify, and how the industry is faring in comparison to other consumer services sectors and how car wash owners can use that edge to their benefit.

Sign up for Car Wash M&A, The Newsletter. | Follow us on social media @AmplifyCarWashAdvisors on LinkedIn or Facebook | Connect with Lanese on LinkedIn.

More about Paul Sigfusson:

Paul Sigfusson joined Amplify as Head of Capital Solutions in November 2022 after spending the past 15 years in investment banking and private equity. Paul was most recently a Director on the KKR Private Equity team as a member of the Consumer industry team. Prior to that, he was a member of the KKR Capital Markets team supporting KKR and third-party investors on capital markets solutions. He played a role in KKR’s investments in First Data, Dollar General, Academy Sports + Outdoors, The Bay Club, Fleet Farm, National Vision, and 1-800 Contacts, among others. Prior to joining KKR in 2011, he was with Deutsche Bank Securities in the industrials and transportation investment banking group, where he was involved in a number of corporate advisory, debt and equity transactions. Paul earned a Bachelor of Science from Indiana University.

Check out the full transcript below:

Lanese

Welcome, everyone, to Episode 12 of Car Wash M&A, The Podcast. Today I have with me Paul Sigfusson. He is new to our team at Amplify. And we’re really excited to have him here today because he diversifies the experience and the background that we have on the Amplify team. I’ll let him share a little bit more about what his background is, but I’m super excited to have this first official episode of the new year as we start 2023, and look forward to all of the amazing conversations that we will have. So welcome, Paul, thank you for being on the show today. If you could just give our listeners a little bit about your background and where you’re coming from.

Paul

Yeah, thanks for thanks for having me. I think I’ve been a serial consumer of podcasts over time. So this is the first real donator back to to the ecosystem that is podcasting. I’m a huge fan. So thanks for having me on, and I look forward to sharing a bit about me, and where the Amplify platform is going. So, yeah, just a bit about my background, I started my career in investment banking at Deutsche Bank, right at actually the start of the global financial crisis. So an interesting time,

Lanese

No kidding!

Paul

As banks were consolidating, liquidating, you know, it was stressful time for the industry but really a great learning platform. And I was super grateful to individuals and clients that I had a chance to work with and alongside, and I was able to capture really a great base understanding coming out of undergrad around the global financial markets, including the global capital markets, M&A advisory, debt equity structuring and placement. It was just a really great initial job coming out of school, and I’m forever grateful to the platform that it provided. After three years at Deutsche Bank, I transitioned to KKR, which is a global alternative investment firm. I spent the last really 11 plus years there in two primary roles. The first in New York was focused on capital markets and capital structure advisory. Simply put, we were really an internal team that was focused on providing highly aligned and tailored advice to our global portfolio of investments across public and private debt and equity securities. And we thought about ourselves in that role, really, as the nucleus of the firm. We saw everything that went in and was a part of most transactions that KKR was involved in globally, which was a great seat and a great, great place to, again, continue to further my understanding of the capital markets in depth in that area. But if folks aren’t familiar with a private equity transaction, it typically consists of a small portion of debt and a small portion or a big portion of equity funding that’s used to buy a controlling interest in the business. And both of those components are very interesting and very important for those transactions. As I thought about the time spent in the capital markets and advisory area, you know, we were really a very internally focused aligned group finding the best possible capital funding sources for our investment teams globally. And it was, again, a great place to learn about the capital markets and obviously a place that again… I met some great people and really furthered my career. And then in 2015 / 16 time period, I moved to the west coast and I transitioned into the consumer private equity team, which was really focused on making investments in In North America but connected globally.

Lanese

And give us an idea of like some of those businesses and industries that would be included in that.

Paul

Yeah, sure. We thought about ourselves covering three primary verticals: consumer products, consumer services, and e-commerce. So those were the three places, and I had been interested in retail and the American consumer. I mean, I think about that it’s the lifeblood of our economy. And I had amazing opportunities to invest time and resource and energy behind great investments, like National Vision, a public optical retailer, Academy Sports and Outdoors, 1-800-Contacts are a few examples of investments that I was a part of, and making and executing behind. But more importantly, I got to know and hear and see great leadership teams over time. And so this was a great opportunity to understand that advisory role, understand the investment lifecycle from making the investment through the value creation initiatives that go a part of it all the way through to ultimately exiting and monetizing these. And really in this role, over the past couple of years, I got hyper focused around the auto services landscape, which is where I was really introduced and got to know a little bit about the car wash industry.

Lanese

How did car washing become the key focus of that, as you’re, you know, exploring the automotive industry and you’re diving in deeper? And then how did you get connected with our team at Amplify to come over here and join us?

Paul

Yeah, I’m super excited. I mean, it’s a great team. I feel very fortunate in my career to have had incredible mentors who invested an enormous amount of time behind me and, of course, I’ve always thought about my career as a two way street. While I’ve feel like I’ve worked hard in various roles I’ve had, I’ve always felt like I was rewarded for that hard work by the time and folks that invested behind me, and I see that opportunity here. Really, if I can sort of outline three things that I loved about my time and enjoyed at KKR, I would say, the first is the founding principles of what we did was [the idea that] you do business with people you like and trust. This was instilled from the top from the founders, that organization, and I feel like we lived by that every day. And always doing right for the client is always going to be the right outcome. And, you know, what Jeff and Bill and the team have built is built on that principle. And so I see a lot of that. The second would be this entrepreneurial edge; if you’re not continuing to innovate, if you’re not continuing to sort of grow your career, or grow your capability set, you’re going to sit back and get left behind. And I see that entrepreneurial edge in this organization; it’s a small nimble organization. The last would be really a deep and experienced team. And while it’s not a global organization, like KKR, and it doesn’t have the depth of resources and capabilities across industries, you know, it does have something of significance in the car washing space, which is, you know, real deep understanding, a long tenure of operations multiple decades across the operations of a business, technology capabilities of the business, and, of course, the advisory aspects of these businesses. And so, you know, these are things and principles that I feel like are very strong tenants of a really healthy and strong organization. And I’m super excited to continue to grow that capability and build upon what’s already sort of existed here at Amplify.

Lanese

Well, thank you for sharing that, Paul. We met just a short time ago, but when we did, I felt very comfortable around you, and you have a lot of the same like-minded thoughts that we do value as an organization and as individuals as a part of this larger organization. And two things that you just said that I found really interesting: one is talking about the consumer services being, you know, kind of the lifeblood, and there’s something that really strikes me about that because how people behave and how they consume products and services really gives an insight into people and their daily habits and what they value and how they prioritize their day and their money. So one, I find that super interesting. And two, looking at the the work aspect of it, and why you joined amplify, in particular, is the relationship value. And that, you know, we do… doing business with people that you respect and that you want to do business with, like you said was a guiding practice at KKR, totally is something that we identify with is, you know, we want to have these long term relationships where we’re bringing value to them, and we’re… it’s that two way street, even amongst our clients as well, that they can trust us and that we also trust the relationship back. I just love those two things that you said, so thanks for sharing.

Paul

Yeah, absolutely.

Lanese

As we’ve kind of talked about your transition into the car wash space in particular, what are some things that you’re you’re excited about learning more about in the car wash industry or that is just fueling that interest further about kind of what’s going on and how it’s evolving as we head into 2023 and beyond?

Paul

Yeah, maybe I’ll just start by saying, you know, similar to the reasons why I joined Amplify, it’s all about the people. I continue to be impressed by the individuals that I’ve met over time in this space. And as the industry grows, that network will only get better. I, in my approach to this space, am largely driven by an investor’s perspective. And so I will be a bit biased in that. I’ve never really been an operator in my career; I’ve been a banker, a capital markets advisory specialist, and an investor. And those are different aspects of the value creation model behind car washing, but they’re different than the core operations. And so I look forward to sort of learning more about that. But given the perspective and the pattern recognition that you see in evaluation of investment opportunities, not only in the car wash space, but across the consumer services landscape, it kind of forms a point of view. And from that perspective, the world continues to rapidly evolve and change. And of course, that’s also the case in the car wash business. And so as a consumer first business, consumers are winning through choice and new services. And that’s an exciting aspect of where the car wash business is going. In addition, with technology, I feel, from my perspective, it is still in the early innings of its evolution in this space. And so this digital first experience, a consumer touches and feels the operational improvement through digital implementation tools that support decision making in the business… There’s always a balance with technology, of course, but there are some exciting tools that are being used in and outside the industry that will continue to drive consumer behavior, retention, in the way that the ultimate decision maker, that consumer, sort of behaves in this segment.

Lanese

Right. And, of course, as operators, which is who our show is geared towards especially, knowing what tools and resources they have available to them to strengthen their businesses and make sure that if they are looking to fund growth, if they are looking to make an exit at some point, that they’re really protecting the value of their business, and also protecting and increasing their cash flow now, so that they’re they’re making money today, but they’re also protecting that value in the long run. Let’s talk a little bit about that. And then what your perspective, from an investment banker, what does the economic uncertainty that we currently have, and that we have for the foreseeable future, what does that mean for operators? And what can they be thinking about to protect their businesses or to strengthen them even?

Paul

I think it’s probably helpful, Lanese, to just kind of level set a little bit in terms of, you know, what’s happened over the last couple of years. And I viewed that time as more of an aberration, and we’re now entering a period of normalization. We were living in a very distorted time period over the past couple of years. And I can probably just share two examples in terms of how I think about some of the macro environment and what’s been happening, and then how that can shape some of the future thinking around it. I’m not a macro economist; I can’t predict the future. And I don’t think any of us should try, but we can control what we can control. The first real change over the past 12 months is cost of capital. You know, I, as an investor, was very focused on one singular primary metric when we evaluated investment opportunities, and that was return on invested capital. A simple way to just kind of frame what’s happened in the industry is the payback period of making a capital investment in this space. And so, you know, we can put some dummy numbers around this just to paint the illustration, but it’s really going to sort of change behavior longer term, which is as the Federal Reserve increased interest rates, and the cost of debt financing sort of materially increased over the past 12 months, and we’ve seen some inflation and building costs, you know, you went from 2020-2021, or even before that, building costs may have been slightly lower, and your interest costs were nearly zero as a base rate cost of capital on top of some credit spread that a bank would issue. As you think about the translation into cost of capital and the impact of making a return, you used to get paid back for making an investment in the car wash space in two to three years, under some normalized scenarios, and they can vary greatly. But if you include a 50 to 100% increase in cost of interest rates of financing that car wash, as well as continuing to sort of double down the operations, that cost of capital and that return on investment is getting close to double where it was prior to the past 12 months and what we’ve seen. And so, what that’s going to force in this industry — and I think it’s a healthy thing, again, back to this period of normalization — that’s going to force investors as well as sort of operators to just make sure they’re thinking twice about capital deployment. Is this a productive form of capital deployment in the space? These are capital intensive units. And I think that’s a very healthy part about the industry. It won’t be growth for the sake of growth. We talked about cash flow, and that’s an important piece. The other is valuation. And obviously, there’s various different ways to think about valuation. But, you know, let’s just take, for example, the one public comp in the space that’s out there, pure play public comp… If you take the valuation from the first half to the second half, for each 100 basis points of Federal Reserve increase, and we went from zero to four and a half today, and probably going up even more, that’s really reflected a pretty material decline in valuation to the tune of high single digits per 100 basis points. So that’s been a material impact on both capital, capital availability, return on investment, and valuation. And that’s distorted. So that’s just a level set, as we’ve seen the economic conditions change over the past few years. But then as we think about forward looking, you know, how can an operator think about preparing? I love the way that Jeff at Amplify thinks about this and talks about Car Wash 2.0: focus on what you can control in the operations of the business, and start to scenario plan. I can’t be the one to predict the environment going; I can’t tell you, we’re going to have a prolonged consumer uncertainty or contracting spending behavior environment. Or maybe it’s the opposite: how do you plan for an alternative in a more resilient consumer? But what you can do is plan for multiple different scenarios. Understand how your business is going to behave from an analytics perspective in any of those different scenarios, and then focus on the data you have access to. There are all sorts of different quotes that I love to sort of delve down into. But, you know, “what gets measured gets managed” is a great one. In these environments, it’s really important to double down into the data that you have access to and in how you can sort of manage your business better. And then, you know, lastly, just in terms of scenario planning, and starting to think about the future, it’s always been difficult in a rising tide environment. So the environment where everybody’s being lifted by low interest rates, the conditions are pretty benign, it’s very difficult to differentiate your brand in that environment. And I think about the conditions in a more uncertain conditions setting as an opportunity in this is to double down on yourself, your operations, your people, in how to go out-execute for the consumer, and at the expense of your competition. All those things will add up into helping, you know, prepare operators for the uncertainty that is in front of us, which no one can really sort of paint out in a clear picture.

Lanese

So Paul, you talked a little bit about some of the growth options for car wash operators. And I think it would be beneficial for them, too, to hear about how the change in valuations and things like that have have opened up doors for new entrants to come into this space. And, in particular, we’ve had some recent announcements that we’ve seen about acquisitions and new companies coming in. So what does that look like? And what does that mean for for the car wash owner themselves about these additional parties that are interested in the car wash space?

Paul

Yeah, it’s a great question, Lanese. I think capital is forming in different ways. And there continues to be plenty of capital looking and evaluating the space, so that’s a very positive thing for car wash owners. But I think it’s been evolving and will continue to evolve. And I’d characterize it really in three buckets. One, you have the small and medium size operators that, you know, are the vast majority of the space and will continue for quite some time to be that way. And they have existing and new growth that they’ll continue to fund, so that that’s a big source of growth in the space and big opportunity that continues to exist. The second bucket would be private equity, which has been a material contributor to capital growth over the past decade and continues to have large sums of dry powder of committed capital available to them. I think I read a statistic in December that their dry powder, which is committed, unfunded capital, to private equity as a whole is approaching $2 trillion. So still a large sum of money out there and that goes across multiple different sectors. And then a new entrant which I would call the corporate segment… And a good example, as you mentioned, would be the Couche-Tard acquisition of the True Blue portfolio, where you have a very well capitalized investment grade public company making in a small wave into the segment, and I think that is a very unique case study, and one that I don’t think will be the first or the last in the space. And these investment grade operators have access to very cheap capital; this is the highest grade of credit exposure, so the highest quality of credit exposure is how they would deem that, and these are well capitalized, well funded and strategic entrants into the space. And so there’s a new entrant coming in. And I think that’s very interesting to note.

Lanese

Right. And as you said, this is probably the beginning of additional groups that maybe had been kind of on the sidelines prior, that had been eyeing the space, are making an entry point, because the winds have shifted a little bit. And so that actually makes it more attractive for them and gives a greater opportunity to go ahead and make a meaningful investment.

Paul

Yeah, and as you think about the sources of capital each one of these pools have access to, I think that small and medium size on the left side and the corporates, the deepest pocket investment grade operators on the right side, and the private equity in the middle… that whole middle section, which goes back to this predictability and stability of the markets, has really been sort of sidelined. It’s been very difficult for them to raise capital, debt-financing capital, over the past six or nine months as those markets have been frozen. Although there’s deals getting done; it’s not completely frozen out. It’s just more challenging, and they have to get more creative. And so that small or medium size operator that has access to commercial lending at the local level at very attractive rates and the corporates at the investment grade are very well positioned right now.

Lanese

Right. And you talked about the stability. So do you see that, even though we’ve entered this period where there’s some economic instability, but really, because of this normalization of valuations, that this is creating a more stable environment going forward? Because things have calmed down, and they’re more realistic or more normalized then than they were previously?

Paul

Yeah, I think as you look at the normalization of valuations, that’s a healthy thing for transaction volume. You know, I think we can also, it’s probably fair to say, we’re at the later stages of the Fed hiking cycle than at the earlier side. And that all contributes into that predictability and stability and ability to underwrite a deal and understand that variables. Investors do a very good job understanding and controlling the controllable. And when these macro shocks, or external events that create a lot of uncertainty creep in, that’s where you get these periods of volatility, which is what we’ve been experiencing over the past six or nine months. And as the environment normalizes and transaction volume continues to pick up, of course, it’s a great time to continue to sort of invest behind a really stable industry with very sound unit economics in an excellent growth trajectory. And I think you’re going to continue to see those that were interested, continue to be interested in this space.

Lanese

And the operations that they’re going to be interested in are still going to go back to that foundation that we were talking about the very beginning, the ones that have strong cash flow, that have strong foundational… their leadership team they have, they provide excellent service, they’re protecting their memberships, they’re focusing on the infrastructure of the organization and the health of the organization operationally. Those are the ones that command the most value, because they have what is needed to keep growing that business.

Paul

Absolutely. All operators are not created equal. Those that can go and create a very sustainable well-functioning operational capability in their organization are going to be well-suited longer term for that.

Lanese

You were talking about some of the different scenarios that they can prepare for. Can you give us an example of what types of scenarios those might be?

Paul

Yeah, it’s sort of thinking through your existing p&l, understanding what a smaller growth rate than maybe what you experienced last year might do to your p&l. How do you more aggressively manage some of the costs in your profit and loss statement? How do you understand the different variables that that can assess. What happens if you have 100 basis points of attrition versus 100 basis points of increase in your membership retention? What do these variables do in your business? And how do you offset those to continue to sort of manage your cash flow through these time periods? Cash is king, and the fundamentals of this business allow for a very profitable unit economic to sort of come through, and if you can manage those variables and prepare for the different variables that can come through, then you can effectively manage through the downturn and get to the other side on a better and stronger footing.

Lanese

Yeah, absolutely. All the work that the operators are putting in and pouring back into their business to make it stronger today, to be leaner to be more efficient, that it is helpful today, but it also drastically pays off in the future by protecting that value and by having that already established as they move forward, especially as we enter different periods where maybe it’s easier to fund growth, or you can start growing again at a faster rate that you have the foundation in place. For car wash operators and owners that are still interested in taking a maybe a conservative growth strategy, what are some of their opportunities to fund that growth today? Or in the foreseeable future? And what options do they have?

Paul

Yeah, I think it’s still a really interesting time and space. And I think as things have normalized, I think it could be even more interesting, I think about capital deployment in ’23 as being potentially one of the better times to deploy capital as a capital allocator going forward. So I think it’s still a very interesting time.

Lanese

Let’s pause there. Why do you think that?

Paul

Yeah, look, I mean, I think you’ve seen a big reset in valuations. If you deployed capital over the last couple of years, it was at a different valuation than potentially what it is today. You know, despite the macro uncertainty, this is a very strong… it has very strong under pins to its business model, which are economically resilient over time and have proven that. I think, if you think about going back to the global financial crisis, this industry, based on various different sources, has declined maybe low single digits. And, you know, the creation and implementation of a membership base today is certainly more helpful than what the structure was during that time. And as well as consumer adoption… There’s more awareness from the consumers’ perspective around what a car wash can really offer. And I think those things make their earnings certainly more resilient, and their earnings base more resilient than it has been in the past.

Lanese

Yeah, absolutely. I totally agree. And back to our question that I interrupted you from, what are some of the capital options that car wash operators have? What can help them fuel and fund their growth?

Paul

Yeah, I think it’s helpful, again, to start maybe at the macro level, which is to say, there are portions of the capital markets that are very unhealthy today. And that’s really driven by the incredible dislocation that’s been caused over the last 12 months with interest rates rising. And the changes… These markets tend to thrive on predictability and some degree of stability. And that hasn’t been the case over the past 12 months or so. And so that all being said, there are pockets, and there is broader support, and there is growth in this industry that is continuing. If you took, on a relative value, a debt… Let’s just take a private debt lending pool of capital that has a diversified allocation to industries — healthcare, consumer, industrial — you know, car washes, on a relative value basis would be a strong performer in that portfolio today, driven by the continued resilience of these business models. And that’s a very healthy thing for the broader capital markets in attracting additional capital. So you still have access, and there is still a well functioning bank lending market at the commercial bank, at the hyperlocal level. There is plenty of direct lending debt capital. There are creative minority equity partners; there is still a functioning real estate market. All of these still exist today, and are continuing to sort of build support and continuing to have more and more interest in them. I think in this market, and in a more challenging, sort of more uncertain time, it takes more creativity between the operator and the financing partner to come up with the appropriate solution that’s right for that operator. But there is plenty of capital out there for people to find solutions for growth. And I think people should be excited about that the growing interest in this space.

Lanese

It is amazing how… I don’t know the exact timeline on it, but the interest and the interest level, even from like an operator level that when you would say, “I work at a car wash,” you know people would be kind of scoffing or asking, “What do you do there?” And now it’s more, you know, “how do I get in?” So that’s been a really interesting part of my car wash journey is just the perception outwardly in general. And then also, of course, on the institutional investment level that this has garnered so much attention because of the various attributes that you mentioned about its resiliency and all the different things that make it attractive. But that’s that’s been a neat part of the last probably 10 years especially.

Paul

Yeah, I don’t think you can say anything to the contrary that the support system around pools of capital in the car wash space are growing and will continue to grow.

Lanese

Well, that’s good news. So we’ll take it. Let’s talk about that a little bit as compared to other consumer industries in particular that maybe you have some experience with of why that is so.

Paul

Yeah, again, maybe I would… And this is obviously a space in terms of other services sectors that I’ve evaluated as an investor, and so I would again come at it from the investors perspective. And I start, when I think about the different consumer services options… And just to name a few sectors, so people can have a good understanding of other services sectors, there’s healthcare services, I would include optical, veterinarian, pet in that category, there’s home services as an example, so HVAC, plumbing, electrical, lawn, pest. And then, of course, auto services. And that’s a whole ecosystem in itself outside of just car washes, like tires, oil, collision, maintenance, all those type of different sectors. And so, you know, I come at it from the perspective of various different ways in which services touch the consumer. And from an investor’s perspective, I start by thinking about the disruptive trends in those spaces. And there are plenty of disruptive trends across these consumer services verticals. It’s been a perpetual topic of discussion around “how Amazon-able is your business model?” for the last 20 years. I mean, just think about the bookstore and the classic example of how dislocated and disruptive Amazon was for that business. And when you do that, the long-term position in the car wash space is very attractive. And it’s not the cheapest in terms of capital investment or build versus buy. But it has a durable long-term earnings profile that’s very interesting across those consumer services sectors that I think is where I zeroed in on. And when you zero in on specifically into the auto services space, and you think about some of the electrification trends and the electronic implementation in cars, and the future mobility, I mean, these are mega trends that exist in the space. And we don’t need to dive into having an opinion one way or the other. But those trends have varying different impacts on the ecosystem in the services world, and in particular the auto world, and car wash has a lot of defensabilities against some of these characteristics, as I think about disruptive themes here. And so, it continues to be a place where consumers enjoy; it’s a consumer service that puts a smile on somebody’s face. I think you hear a lot of operators talk about that. I love hearing that. And ultimately, it provides a consumer convenience and value proposition that is really interesting and really, really valuable to somebody over time.

Lanese

Right. And something that comes up a lot, maybe a little less so now, but it’s still relevant is the idea of saturation in this market or in various regions. It’s something that I had a great conversation with Jeff about a while back, using Phoenix as a case study. Phoenix has more large car wash chains per capita — I don’t know the exact statistics there, but let’s just argue that there’s plenty there — but that they’re successful, and that the broader consumer trend of adoption of professional car wash services, particularly Express car wash services, doesn’t show any signs, even in a weaker consumer environment — that it’s still something that they find value in. And hopefully, as an industry, we can lean into that and and that spurs us to provide better services and make that a stronger connection and relationship with consumers that this is the last thing that they’re going to cut, or one of the last things that they’re going to cut when they’re tightening their spending; maybe they don’t go to Starbucks that day, but they do still get their car washed or keep their membership because it is such a great value. And it has the feel good component of it. So I think that that’s a really interesting part of the car wash industry that that continues to be really important on how we relate to the consumer directly as the car wash industry — that you have these interaction points, that you have these habits and these relationships that form that make it really sticky.

Paul

Absolutely.

Lanese

Bonus question: what has surprised you most about the car wash industry not just joining here, but through your keeping eyes on it over the last several years and getting exposed to it? And so what has surprised you most?

Paul

Probably the biggest surprise, to the upside, I think, which I commented on earlier, would be the people. I’ve so much enjoyed spending time and getting to know people in this sector. And again, it goes back to the principles of why I joined Amplify and what I enjoyed so much about my time at KKR. And it’s really about the people. The people are the lifeblood of this business, all the way to the labor pool, and when I ever visit a car wash, or evaluate a car wash, I love spending time with the operators at the field level… not the senior management sitting in their ivory tower. I wanted to go see the people that were on the ground operating the car wash, and then touch the consumer. Seeing the smile on the consumer’s face; that provides a smile to my face. When you’re winning that consumer, and giving that consumer what they want across their experience, convenience and importantly, that value threshold. That’s a really important aspect of winning that consumer every day.

Lanese

The consumer is so varied because you could have a store that has just the most wide range of socioeconomic backgrounds, of so many different factors. But they’re all coming to this place because they find the same value created by the service. And that was always something on the operation side of being at some of our stores, in my my past role, that you could see literally like a guy with a Bentley or a lady with a Bentley that’s you know, up for a little joy ride, and then a car that it seems so pointless to wash because the clear coat is gone. But it’s still the same amount of pride and value that that’s valuable to them. And I think that’s very endearing. And it is something to that I love about the car wash industry.

Paul

There’s something about picking your kids up from soccer practice or school or baseball practice with a clean car.

Lanese

Yes, everything is better. If I have a dirty car, which is pretty rare, I want to roll down the window at a stoplight and say I usually have a clean car.

Paul

That’s a miracle with young kids. It’s usually crusted Cheerios.

Lanese

So this is how we solve that problem in my household is that whoever does not have the kids takes one car; whoever has the kids takes the other. So they’re dedicated… It’s like a family car, and a non-family car. So that’s how… One car is clean, and the other car is trashed.

Paul

We’re a free for all.

Lanese

I used to fight it. But now it’s kind of nice. Well, anyway, Paul, thank you so much for sharing your perspective from your investment banking experience, and from what you are looking to continue exploring through the car wash industry and the value that you bring to us as a team. And we’re really excited to have you and excited to to get you more exposed to drying off cars. And maybe we can even arrange for you to go clean a tunnel pit somewhere, you know, if you really want to get your hands dirty, I’m sure I can make that happen for you.

Paul

That’s one thing I haven’t done yet.

Lanese

There’s a first for all. Thank you again, and we look forward to just this year ahead and embracing the new opportunities. Even though they may be different than last year, it doesn’t mean that it’s all bad. We just have to look at things, on every level, both of the car wash industry and any business, being smart and efficient about how you build your infrastructure and how you build out your team and your operations. And then what that looks like going forward. So thank you, and for our listeners, you can catch our episodes the last Thursday of every month. If you have not signed up for our newsletter, I would encourage you to check that out. You can find it at amplifywash.com Be on the lookout for that; we send it out in tandem with the release of the podcast each month, and then throw in a little bit other information in there. Thanks so much. Bye.

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About the Episode:

With so many changes in the car wash M&A space this past year, getting advice from industry experts is more important than ever. As we wrap up 2022 and prepare for 2023, we’re taking a look back at some of the vital insights we heard on Car Wash M&A, The Podcast this past year.

In this episode, your host Lanese Barnett looks back at her conversations with Bill Martin, Chris Jenks, and Derrick Merchant and Michael Murry. Be sure to tune in the last Thursday of each month to hear the latest from Lanese and her guests.

Sign up for Car Wash M&A, The Newsletter. | Follow us on social media @AmplifyCarWashAdvisors on LinkedIn or Facebook | Connect with Lanese on LinkedIn.

Check out the full transcript below:

Lanese

Hi, I’m Lanese Barnett, your host of Car Wash M&A, the podcast. For episode 11, we’re taking a look back at some of the great conversations that we’ve had on the podcast this year. While things have certainly changed over the course of 2022, our guests gave some great advice that is very relevant to today’s market. We want to share some highlights with you today. To stay up to date with the latest car wash M&A news, be sure to subscribe to our podcast, and check out our news page on the Amplify site to see our monthly podcast news articles as well as other important M&A news. Go to amplifywash.com/news to check it out. Be sure to check back in with us in January when we will have a brand new episode. We look forward to talking with you in 2023.

In March, we had financial markets expert Chris Jenks on the podcast, and he talked with me about the strong headwinds that we were just beginning to face at that point in the year. At that time, the war in Ukraine was just beginning to impact the econony, and inflation was rising but interest rates had not yet risen significantly. Chris shared his thoughts about what could be done to combat inflation, and he talked about what car wash owners specifically can do to be proactive in an inflationary environment. Although many things have changed in the car wash M&A space since I spoke with Chris back then, the advice he gives in this episode continues to be prudent in today’s climate.

Excerpts from Episode 3 with Chris Jenks

Yes. So, inflation: what can be done to control inflation? Or what can we do strategy wise, as far as… It’s going to happen. It is happening, but what are some measures that can be done to have an impact on that?

Chris

Yeah, so the most effective tool to combat inflation is through monetary policy. So specifically, the Federal Reserve adjusting interest rates to cool down the economy and essentially combat inflation. You have to think about, you know, what causes inflation at the end of the day? And it’s usually access to the money supply. So, what do you do to control that? You reduce the money supply, the supply of money that’s out in the system. The Federal Reserve, by adjusting the Fed target rate and bringing interest rates higher, that’s certainly an effective way. And if you were to think about today’s environment, what’s causing inflation? You know, it’s really a mosaic of different things, right? You have a global supply chain issue, which is putting a bottleneck on the actual supply of goods, you have surging demand following a recovering economy from COVID-19. And you really have the effects of about $2 trillion in stimulus money really coming into play here. And I know, a stimulus from COVID… We’re a couple of years removed from that, but you have to think, you know, there’s a little bit of a lag there between when that stimulus money is put to work. And by the time it actually trickles down throughout the economy. And we’re starting to see the effects of this. So here we are today, in an inflationary environment. As mentioned, you know, the one tool that can be used to combat this would be changes in monetary policy, specifically rising interest rates. And as of yesterday, the Federal Reserve actually increased their target rate by .25% for the first time since 2018.

Lanese 10:57

And that increase is projected to be a steady continual increase for the foreseeable future, or at least throughout the rest of the year.

Chris 11:06

Absolutely. The CME Group actually has a really interesting tool, that’s available on the website, that’s called the FedWatch tool. And essentially, what they do is they look at the futures market to figure out okay, what’s being priced in here? And what they could do is they could put implied probabilities on the future of rate hikes. As of right now, as of yesterday’s hike, what the markets are telling us is that there’s about a 90% probability that interest rates will go up by at least other 1.5% throughout the calendar year of 2022. So you hit it right on the head! I think, you know, this is just the start. I think if we were to look going forward, and what markets are telling us today, there’s a high probability that rate hikes will continue with each of the Federal Reserve meetings to come. In fact, if you’re looking all the way through July of next year, in 2023, there’s a 100% probability of an increase in every meeting from here on out to the end of July of 2023. So I certainly think that’s in the cards for the future.

Lanese

We’ve talked a little bit or about what inflation looks like and what rising interest rates look like for the US economy. But what does that mean for carwash owners specifically? And what can they expect? And then what kind of tools do we have specifically related to them?

Chris

The most direct impact here obviously is with consumer behavior, right? How much is inflation going to spook the consumer? And, you know, if we’re to look at the University of Michigan Consumer Sentiment Survey… At the University of Michigan, they survey over 500 participants from different geographical regions in the United States and they ask them the questions along the lines of their personal finances, as well as their outlook for the economy over the short and long term periods. And what the most recent survey showed us is that consumer sentiment is at its lowest level since November of 2011. So shortly after the S&P downgrade of US Treasuries. So, all of the macro concerns we’ve talked about between inflation and rising gas prices, the war in Ukraine… This is definitely weighing on the consumer. So the question now is how discretionary is car washing, right? Over the last decade, we have seen consumers embrace the car wash model, specifically the Express car wash model. By and large, consumers are using professional car washing services more now than ever, and the Express model has become, you know, a convenient solution for consumers where it’s now ingrained in their daily activities. As you mentioned, Lanese, we have car wash operations here in Chicago, and we have some customers that are membership customers. I mean, they’re on our site daily. The question is now, are they going to stop the car washing? Or will they maybe stop buying a $3 coffee at Starbucks? You know, the last litmus test was COVID, and car washing was resilient during the COVID. So I think, you know, we’re learning in real time how discretionary is car washing? I think, you know, a good indication is what’s Wall Street telling us? We now have some publicly traded companies out there — MIster Carwash, notably — and we’ve actually seen some positive revisions from sell side analysts on Wall Street, stating that the concerns over inflation and fuel prices may be overdone, and they’ve actually changed their ratings from the hold to a buy. So a lot of considerations to be thinking around here. But generally speaking, it’s definitely impacting the consumer. It’s time now to get strategic if you’re an operator.

I think the knee jerk reaction in a rising cost environment is just passing it back to the consumer and increasing your prices. But as mentioned, the consumer is certainly feeling the pain here a little bit as well through inflation, and everything being more expensive. So one thing we’ve heard or we’ve seen a lot of here lately is car wash chains and operators increasing their prices to accommodate for their change in cost structures. You have to be a little more strategic than that, right? I think strategic price changes may make sense. But you have to really understand your local market if you’re going to do that. Specifically, know your level of competition. If you are in a highly competitive market with other alternatives for car wash tunnels, you know, you might find yourself in a game of chicken with a local competition. Also, you have to consider your local demographic, right? If you are operating in areas where there’s less discretionary income, a price chain may not be prudent in the current environment, because again, the consumer is feeling the pain as well as inflation at about 8%.

Lanese

And it’s not saying that you shouldn’t consider price changes. But what we’re suggesting is that you should really consider all of these factors before making a knee jerk decision or reaction based on rising input costs and rising costs on the operator side. Because, as you mentioned, you know, consumers, while we’re seeing that car washing is less discretionary than other things, say going to buy a cup of coffee at Starbucks, it’s still discretionary, like it still falls into that category. And we have to be sensitive that these price increases in such a sensitive time in their world, in their pocketbook, as well that we don’t want to drive them away for that. But there are other things that car wash operators could consider changing or re-evaluating within their own operations that could offset some of those rising costs. And that’s one of the things that I wanted to talk about with you: what are some options for them to offset this?

Chris

Great question. Yeah, there’s a lot more than just increasing revenues by passing back price changes to your consumer, This is a good time, in an inflationary environment, as I mentioned, one thing that usually accompanies inflation is rising interest rates. Now’s a really good time to be looking at your debt for your company. And specifically using this as an opportunity to potentially refinance some of your shorter-term variable rate debt and lock in longer term debt at a lower interest rate.

Lanese

Especially if we know that the interest rates are going to continue to rise! We see there is a 100% probability of rates increasing over the next year, continually, so we know it’s happening.

Chris

Absolutely. So again, now’s a good time to understand kind of what is your debt look like? Was your cost of capital look like? Intentionally restructuring short term variable rate debt to longer term fixed rate at the current lower rates. And that definitely be one thing you could do here. You know, other things to consider: you know, locking in long term arrangements with your vendors. You know, that’s certainly something you could take advantage of today, if you expect costs in general to continue to rise. Lock in long term contracts with your vendors that could potentially keep you at a lower rate today for a longer period of time. And remove that exposure to what could be variable pricing in the future.

Lanese

For more from Chris Jenks, listen in to episode 2. Back in April, we shared an episode with Amplify Car Wash Advisors partner Bill Martin, one of my favorite human beings. Bill is also a successful car wash veteran who also operates Metro Express Car Wash. In this episode, Bill shares some industry insights that have helped his company find success and maintain a strong footing amid the current headwinds. The tighter the market gets, the more attention car wash owners need to pay to procedures, customer experience, and team members.

Excerpt from Episode 3

Bill

So, like everybody, we’re trying to find ways to make car washing more user friendly for the customer, and more manageable and scalable for the operator. Technology… We want to see technology as our friend, not as something we’re afraid of. And I think technology can be… You can become overly dependent on it, and expect too much out of it. So you’ve got to manage it. But that’s some of the things we’ve done. We’re working on some other initiatives right now, actually three or four different things in technology, that we think will be pretty exciting going forward for operators of all sizes to manage the business and, again, make it more user-friendly experience for the customer, and more manageable for the owner/ operator.

Lanese

So with those different technologies and processes that you were working on, and then later developed and are now widely used throughout the car wash industry, it just really points to something that’s so important to the success and the scalability of a carwash, which is the processing of the cars. So sometimes I feel like we can kind of get lost in how a car wash looks and what the menu pricing is. And some of these more visual parts of it, which are all important. But at the end of the day, the ability to process the cars efficiently and process them well and have a standard for how that goes, and using that assembly process to where you can maximize how many and how much volume you’re able to produce with the quality that you’re looking for is so important. And that’s something that you do really well. And each one of those ideas and later technologies that came into fruition, address that. So, getting the cars in quicker and processing them, and that’s pretty amazing. And so I’d kind of like to talk about the importance of processing cars and what that means to the success of your business and how you can train your staff and how you can implement ways that focus on the process part of it.

Bill

In our company, we call it the Metro Way. The Metro Way is People, Process, Product, and Place. The time that a customer spends on your site is critical, in my opinion. You want to try to turn them around as quickly as possible. We measure that from the time the front tire hits the threshold of the driveway until the back tire departs the threshold of the driveway. So, we set standards and goals for how many minutes each process should take, or how many seconds. I used to, back into full-service days, I was always frustrated by the notion that we should try to sell the customer as much extra service items as we possibly could sell them so that we can maximize that revenue per customer. And my observation was that while we were doing that, we had these big gaps of empty space on our conveyor. And my argument was, we can never make up in extra services what we lose in throughput. If a customer is going to pay you $5 or $7 for a car wash, or $10 today, let’s say, but you lose a whole space because you’re trying to talk him into spending $12, as opposed to $10. That’s a losing proposition for the owner operator. That throughput management is so critical. Not only is it critical to maximize your opportunity that day, but it’s also very important to the customer. Because that person that’s number four, five, six or seven in line is frustrated while he or she is waiting for that customer at the point of sale to make a decision about well do I want to spend an extra $2 here. I mean, to me, that was just never what we were about in our business. We were always about the processing of the customer, and to try to get them back on the street as quickly as we possibly can.

Lanese

There’s something there that… With the person that’s getting the more attention at the point of sale. And maybe there’s an idea that the salespeople should be really friendly and chat with the customer, because it makes that customer feel good. But the downside of that and the other side of the coin is that the all the people behind them are really annoyed that that person is taking up so much time and attention, that really you’re over… And, at the end of the day, they’re probably not even going to get the upgrade, so you’ve wasted your time anyways. But you’re right that you can’t look at one part of the process or of the equation without taking a holistic view of what the other customers are seeing, too, because again, that one person feels special, but the other people feel slighted.

Bill

Right. And our model for the associate that we want out there talking to the customer is somebody that can be friendly, they can engage the customer, but they know how to keep it short, concise, and move them along without feeling like they’re being pushed. But they have an interaction with a customer, they tell them about our services, we always start with, you know, our unlimited plan, then make sure that once the decision has been made by the customer, we keep that queue moving. So, throughput management, it’s really… There’s a lot of things that happen in that process. But that’s something at Metro that we pay a lot of attention to. Some people say, well, it’s just that you want to watch as many cars as you can watch. Yeah, of course we do. We want to process as many customers in a given day or hour as we can. But that’s a two-way street, it works for the customer as well as for us that’s a win/win we think. So, we don’t pay any commissions to our associates for selling extra services. It’s just not something we do. We let the customer make the choice. The associate, they’re paid to be there and manage the quality of the courtesy, not to try to sell a customer something that they may not want or need. So anyway, that’s how we function in that realm. And it’s worked out pretty well. It’s a constant training and retraining process. Our general managers, their major role at the site is to train. We don’t want them in the office. We want them out monitoring. We call it management by wandering around, watching what’s going on at the site, giving feedback. We don’t really want them plugged into a position, although sometimes they are just by nature of how busy we might be. But we want them to be moving around, and overseeing what’s happening, of course, handling any kind of customer issues that may come up in the course of a day. So…

Lanese

Let’s talk a little bit about the training aspect of it. So the general managers they are on site and they are overseeing their associates, their sales associates and their staff to make sure that they are using the scripts that you have or using the processes that you have for speaking with the customers. But what is some of your higher-level part of that of how that person is trained, how that General Manager receives that information, and some of the infrastructure that you have built in to disseminate that across your locations?

Bill

We have tier training so that when someone comes on board, we obviously show them… I mean, there’s video training, there’s written training, there’s apprentice training, where they work side by side with someone. You know, we’ll give them feedback. For the first 30 days, they’re on a trial basis to see, you know, if they like us and we like them. Constant feedback. I’d say by and large art Employee Profile, they’re younger folks, not always, not all, but most. And so, a lot of them, in some cases, it may be their first job, or they’re early in the work world. And so they’re sponges; they want to learn generally. And so, we have to give them a lot of good feedback. We have regular employee staff and safety meetings to give feedback to our team. We mystery shop our sites. We reward people for the right behavior, and we give them feedback for the wrong behavior. So it’s just a constant process. And what I see happening a lot of operations — not just car wash, a lot of businesses — they put a manager into a position of managing the business, but they really become a fireman. And they’re trying to put out fires and fix problems. So rather than really train the staff every single day — we think that’s the highest and best use of that general manager at our sites. The area managers then are observing the results and giving that feedback to the General Manager. So it’s a process. It’s never ending. I mean, there’s plenty of job security there. Because we’re constantly trying to raise the bar, and elevate the level of service and the commitment. By the way, we find that when we do correct, give the proper feedback and the proper way to our staff, our associates, they welcome the feedback to be able to do better! Today, the cost to hire and retain employees, it’s pretty high. We’re starting people in the $17 or $18 an hour range in our markets; some people have could even be higher than that, depending on where you’re at. So, we don’t want to turn those people over. And we really, really work to keep that turnover down. We want to select the right people, we want to onboard them in the right fashion. But then we also we don’t want to turn them. We don’t want to churn them.

Lanese

And something that is across industries, but I’ve seen in the car wash industry as well… There’s kind of this idea that, or this hope, unrightfully so, that you train someone and you give them the information one time, and magically, they’re going to not only commit it to memory, but to replicate it successfully every time. And it’s just not the case. I mean, we are humans at the end of the day. And you’re right! A lot of times, there are people who are new to that role, or maybe this is their first job. And so that ongoing commitment to training and retraining. And if it’s built in to the expectation from the beginning, it’s so much less confrontational than if suddenly six months in, they’re getting reviews or quizzes or things like that, that they didn’t have from the get go to where it feels like it’s more of a negative thing than a constructive criticism or helping them get better and helping the whole team get better. So, I think you’re onto something there.

Bill

So we do an employee survey, I don’t know if you can see that. We do an employee survey regularly which to get feedback from our team or associates. It’s anonymous; they can say anything they want. And I’m always struck by how many really positive comments we get. A lot of times, in years past, it’s like, “well, this job sucks,” or, you know, “I hate being outside” or whatever. I’m blown away by the positive comments we get. And I think it’s because when they join our team, they join a culture that operates at a fairly high level. And they either understand early on that they’ve got to adopt that culture or they’re not a fit. And we see it. You know, we have grooming standards. We have uniform standards. And they’re not onerous, but there are expectations we want them to follow. Actually just this year, we have gone away from… Up until this year, everyone wore ties every day at work year round.

Lanese

Wow!

Bill

Ties and a white shirt or a blue shirt depending on their position. We have made the decision this year to go to polos.

Lanese

Kind of a golf look.

Bill

Yeah, maybe it’s a sign of the changing times. But we supply very nice uniforms. We make sure that we have uniform standards. And I think a lot of folks do this. But we’re in the retail business where we have retail customers, and we like to say “retail is detail,” and so you’ve got to pay attention to those details all the time. And you’ve got to remind folks. And pretty soon, again, they start to bring that into the culture, and you’ll see it becomes almost automatic.

Lanese

For more from Bill Martin, be sure to listen to all of Episode 3. In October, we shared our episode with guests Derrick Merchant and Michael Murry from Champion Xpress Car Wash. Derrick and Michael both share some systems and procedures that have helped them find success as they scale their business. Derrick talks about the importance of building a strong executive team, and Michael shares about the choices he made once being brought on board to help bring to life Derrick’s vison and the vision the Merchant family had to scale their car wash business Champion Xpress to a whole new level. Take a listen.

Excerpt from Episode 9

Michael

One thing I learned about the Merchants very early on whenever I got here was that they, when he said they like a challenge earlier, they do make some big challenges, you know, and these big goals of building. And so I learned very quickly when they would throw out the numbers of washes that they said that they weren’t joking, I knew these weren’t hypothetical washes that they were going to build, you know, that I had to be prepared for them and be ready for them. So yeah, back when I first started, I think the goal was 20 or so by the end of this year, which we’ll be at 27 by the end of this year, and then 50 to 60 by the end of next year. And so as I started thinking through that and started strategizing… Really, coming in and taking over eight washes, in all honesty, is no joke. And so that’s where I was when we started, and I immediately wanted to get a foundation, right? And so it’s truly about that foundation because I knew, if we were going to get that big that fast, that nothing matters unless you have the foundation set and ready to go. So I immediately tried to get to work on an executive team and finding the right people. I am adamant about finding… You know, there’s a quote from the movie Miracle: “I’m not looking for the best ones. I’m looking for the right ones.” And that’s really what I tried to do, and we were able to accomplish here… An executive team that could help build this thing out and build the culture and everything we were looking for. So we did that. We got to work on building the executive team, and then built our field ops team, and then our training department as well. And so I wanted to let the washes come to us not, not us go to the washes, meaning that knowing that these things were coming, whenever we took over these washes and opened them up, that we had the staff ready. We weren’t doing as much training just there on day one, you know, we already structured this thing out even from a regional standpoint.

Lanese

When you’re looking at opening new sites, do you have the team ready to go to where you guys do practicing, or you do the on-site training where you have kind of a team that comes in and they start giving them the process and the manual and the scripts and things like that?

Michael

Sure. So what we do is we have two counterparts. So we have a field ops team. And then we have a field training team. And the training team doubles as store openers. So when they’re not opening stores, they circle around to all of our washes doing continual training. And then whenever they’re opening up washes… We have it fully planned out. I could tell you how many weeks beforehand that we start each wash training the site leader, getting everything in place before, and then throughout opening day, we have at least two trainers on site, a regional operations person on site. And so we’re very intentional about how we open up these washes and how we prep for them.

Lanese

And was it through your background with your previous role that some of these things made sense to you? Or is this just new store openings in general or growth in general? So what kind of guided that?

Michael

So yeah, so for the most part, maybe a little bit from there, but for the most part, learning as we go, listening to my different team members that have had experience in that.

Lanese

“Hey, we would really like to have this when we open a store! We really need this.”

Michael

Yeah, I mean, that’s really what managing is, right? It’s giving the people that are working for you the right tools to do their job. And so I just listened, you know? What tools do you need? Here’s the standard; here’s the expectation. What do you need to do that? And then it’s really just about putting that in place.

Lanese

It sounds like you two specifically work really well together. From my own experience as well, yes, you need somebody a counterpart or someone that you work that closely on an executive level, or even if it’s on a store level, where you have a manager and an assistant manager or two co-managers or your teammates… It’s important to have that relationship personally as well; it doesn’t mean you have to be best friends. But if you have something that you can build off of that makes that trust, and it makes that ability to listen to each other and to hear, actually hear, what their needs are, what they’re saying. And it seems like that, between the two of you, that you have that. And sometimes I think that that’s overlooked in the professional world. It still matters that your personalities click. You don’t have to have the same thoughts. It’s better to have the balance, but you still have to have a working personal relationship as well as the working professional relationship.

Derrick

Yeah, that’s 100%. And that’s what we’ve been building on in this culture here is we can be friends. But we can also… we can also challenge each other. And I think Mike does that to me, and I do that to him. But work, as you come in today, is fun. And it’s because Mike believes the same things we believe, culturally. And it just makes me smile. When I walk in the halls and I hear the laughter. One minute, there’ll be rap songs on because construction had a team win, so they play “All I Do is Win.” The next minute development will be playing Queen or Champion will be playing Queen’s “We are the Champions” because they hit a goal. It’s just fun. When you make it fun… And it’s the same for Mike… I know I don’t feel like I work every day because it’s fun. I get up every day, and I look forward to what is going to be different in the office every day and the challenges that come with it. When you have a trust with your executive teams, then it’s fun.

Michael

Yeah, I think that’s a big part of it. You know, when he talks about trust, I think that’s the first. There’s trust, and there’s buy in, and once you have that, it creates an opportunity to have healthy conflict. Of course there’s a lot… We listen to Patrick Lencioni, you know, a lot on his book, Five Dysfunctions of a Team, that talks a lot about it. But it’s so true to be able to sit in a room and speak passionately, you know, about your stance on something, and then to hear someone else out. And the goal is to truly be about what’s better for the organization. You know, it’s not about each individual, but I want to hear all of the different discussions and then to be 100% okay, if it’s not your idea, you know, that was gone after. And really it doesn’t matter whose idea it is. It’s about what’s going to make the organization better. And I think Derrick and I have that, and that’s what we try to create down to our teams.

Derrick

Mike’s better at it than me. I’m trying to learn from him still.

Lanese

Speaking from… Again, taking my own experience, this industry has changed a lot over the years. I started in 2010. Obviously, I was still like, you know, 10 years old then… Just kidding. I already had a career in marketing and communications working at a public relations agency. And so I did that for about five years. And then I joined the car wash industry. Over time, I’ve seen more and more women join into this industry. But one thing that really makes a huge difference when you’re coming into a room where maybe you are different than the rest of the people that are there is if you have a room that is open to listening to your thoughts or your ideas, and there is a sense of collaboration that everybody feels empowered to share. And I feel very fortunate that that’s been my journey. But it also takes building a culture that encourages people to share their ideas and to maybe you don’t adopt them. And maybe it’s not the right path for the organization. But if you have that culture where it’s okay to say something, and it’s okay to even have conflict, conflict isn’t the end of the world; that’s a healthy part of growth and a team. But if you have the safe space of everyone here is respected and everyone has their place, then that opens that dialogue. And I think that that’s the most successful teams are the ones that can have those conversations, and grow from them, and learn from each other and listen. And listening is the hardest part. Even I struggle with that. And that’s part of this whole process is just me listening to someone else talk, but it’s harder than it seems. It just seems very fundamental. But we’re all human. And it’s a learning process as well for me.

Derrick

I agree 100%. I’ve had the ability to learn under some very good listeners; my dad is a very good listener. I very much undervalued that and didn’t even understand at the time to appreciate that. Mike is a very good listener. He is methodical, and in everything he does he hears everybody out. I really believe to be a good leader, you have to be a good listener.

Lanese

Totally. I totally agree. Back to the car wash side of it what are your goals for 2023? We talked about some growth plans on numbers that you want to extend your store count, but what will you end next year feeling most proud about if it goes kind of according to what you foresee and what you’re what you’re planning out now?

Derrick

In 2019, we told PC&D magazine that we had a goal of getting to 50 locations in five years. And so that will be an awesome accomplishment for us when we get there by the end of next year. I didn’t think we would have to have the number of sales that we’ve had to get there, but we’ve very much always wanted to continue owning our own company. And that’s just because we believe in our mission, our vision statement and our values. And a lot of times when you bring in a partner that can change things. And so that’s been our heart behind it. It’s not been about the Merchants making money. If that was the case, we would have retired after last year. But it was very much about, hey, we’re building something cool here, we want to continue building that; we want to see what this thing looks like operating 50 car washes. That’s been the goal from the beginning.

Lanese

What a year we’ve had! While the market has changed drastically over the course of 2022, our car wash industry continues to thrive as we head into 2023. Be sure to join us the last Thursday of each month as we keep you up to date on mergers and acquisitions activity in the car wash space.

If you’re loving Car Wash M&A, The Podcast, which I’m sure you are, be sure to subscribe wherever you like to listen, share with your colleagues, and please take time to leave us a rating and a review on Apple Podcasts. Reviews are a great way for more car wash owners to find us.

A listener shared this review, which I’m particularly proud of: “If you’re in the car wash world industry, you need to tune into this podcast! Lanese is a fantastic host who leads really engaging and informative interviews with her guests. Value-packed conversations abound in these episodes – highly recommend checking it out!” Thanks, OliviaBaker13! I really appreciate that. It’s a nice way to wrap up the year and feel great about this time that we’ve shared together. I really look forward to joining you all in 2023 as we head straight into the new year, and I hope you have a wonderful holiday. Thanks!

About the Episode:

What does the car wash M&A space look like as we head toward the end of 2022? In this episode, we share Amplify Car Wash Advisors Partner Jeff Pavone’s recent interview with Matt DeWolf on CAR WASH The Podcast. Jeff and Matt discuss how the market has changed, what remains the same, and what predictions Jeff has for the future in the car wash industry. Be sure to listen in to hear Jeff’s tips about what car wash owners can do today to succeed in the current industry landscape.

For more from Matt DeWolf and CAR WASH The Podcast, you can subscribe wherever you like to listen, or you can download the CAR WASH Magazine app to keep up with industry news.

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More about Matt DeWolf:

Matt is the Chief Marketing Officer for the International Carwash Association and Editor-in-Chief of CAR WASH Magazine. With a passion for helping people tell better stories, he’s spent the last 15 years visiting car washes across the globe and telling the stories of the professional car wash industry. When he’s not visiting a wash or asking people more questions than they want to answer, he’s spending time with his three children and his wife Kacie. He also loves to play baseball, drink wine, and consume as much content as humanly possible. He currently serves as the Alumni Association Board President for Simpson College.

More about Jeff Pavone:

Jeff Pavone is a leading advisor to the car wash industry, successfully completing more than $5 billion in car wash-related transactions. A lifelong entrepreneur, Jeff is the owner of Commercial Plus, a real estate and business brokerage firm, and a partner at Amplify Car Wash Advisors, a mergers and acquisitions and capital advisory firm specializing exclusively in the car wash industry. Leveraging his longstanding relationships in both the car wash and investment banking industries, Jeff partnered with car wash veteran Bill Martin in early 2020 and launched Amplify Car Wash Advisors to address the evolving needs of car wash owners. Together, Jeff and Bill recognized the need for providing guidance tailored specifically to car wash owners when it comes to selling or scaling their business. Today, Amplify has completed complex transactions for some of the most well-known and widely respected car wash chains in the country and is the only group that bridges the gap between investment banking and car wash operations.

Check out the full transcript below:

Lanese

Hi, this is Lanese. Thank you guys so much for tuning in today for episode 10. We are sharing a rebroadcasting of Amplify Car Wash Advisors’ partner Jeff Pavone’s interview on CAR WASH, the Podcast brought to you by the International Car Wash Association. Jeff talked with Matt DeWolf, who’s the host of that show and also the editor in chief of Car Wash magazine. This is a great show that was so good. We wanted to include it on our show as well, because it just really hit home on a lot of the things that we’re talking about as far as the current state of the market, where the future is going for the car wash industry and addressing some specifics like what’s the future for private equity in this space? What’s the build versus buy debate for growth? It’s just a great conversation; I really think that you guys will like it. And again, we wanted to share it here with our listeners, because it was a good one. If you like more episodes of Car Wash the Podcast with Matt DeWolf, you can subscribe to his channel as well wherever you’d like to listen.

Lanese

And I also wanted to let you know that every month in addition to the episodes that we bring to you on our podcast channel to listen to, we also create an article that accompanies each episode. So about two weeks after the episode airs on our show, we create an article that’s posted to our news site. So it’s at amplifywash.com/news. And there you can see new information or expanded information from the show from the previous guest. And so that’s just something that you can be on the lookout for. Also on that news page of ours on our website, we share other articles that we have participated in on various car wash trade magazines and things like that, and other relevant M&A news in general. So it’s a good place to have a resource to find other news. Kudos to Matt! He’s such a great host, and just an awesome person to know in general. Hope you enjoy this episode. It’s actually one of my personal favorites from the year.

Intro

Welcome to CAR WASH The Podcast your source for real stories and real business insights from the experts both in and out of the car wash industry. So put it in neutral, feet off the brakes, and take your hands off the steering wheel. Here is your guide on this journey, CAR WASH magazine editor in chief, Matt DeWolf.

Matt

Hey everybody, welcome to this episode of CAR WASH The Podcast. This is the podcast that makes you a better car washer, and a slightly better human being. Friends, I am Matt DeWolf. I am editor in chief of CAR WASH magazine. And as always, I am your host on this adventure. Today, we’ve got a fun episode for you. We’re bringing back a guest who has been with us before. We don’t often do that, so this is a special day. We’re going to be talking a lot about what’s going on in the current M&A landscape here in the industry. Things have been changing; things have been moving, so to join me to talk about that and give us a little insight, we’ve got Jeff Pavone, partner at Amplify Car Wash Advisors and owner of Commercial Plus Group. Jeff, welcome.

Jeff

Welcome, Matt. Thank you for having me. I think timing is good. I mean, I appreciate you having us on a second time. And I think the current state of the car wash market probably needs an update.

Matt

Yeah, you know, I think the last time we spoke… So, if you all want more background on Jeff and how he got into this industry, it’s a fun story, but we’re not going to tell it today. That’s in Episode 193 of the podcast. It’s one of our most listened to episodes, fun fact for you. If you’re on the upside, it’s going to be under season two, episode 68 about growing or not growing. And we were talking a lot then about this concept of… Are car wash operators in the point then where they needed to be growing, or getting out of the business, right? We were kind of trying to see if… are there only two options? And I think then we were talking like, I don’t know, maybe we’re in the second inning or the third inning of this thing, and we think we’ve got a lot of runway left. But since then, things have changed. What do you what are you seeing now, Jeff?

Jeff

You know, first off, and I think Matt, we can call this Car Wash M&A 2.0. And it really comes down to looking at the… maybe some basic facts still. First off, the car wash as an industry is still one that is… that has got a lot of consumer demand. I think there’s still a lot of whitespace. You know, I think there’s… You know, we still keep building more car washes, and people get more car washes. Now, you know, so I think the future for building out car washes in general is going to be still a healthy place for the next few years. But I will tell you from the car wash M&A, there’s definitely a resetting of valuations happening in the marketplace. And it’s not mild; it’s aggressive.

Matt

That’s really interesting. You know, I think we’ve all kind of been watching and waiting and thinking this had to happen eventually. So it was really only a matter of time. I wonder, do you think it… Did it come a little faster than we maybe thought?

Jeff

You know… maybe I’m a little older than you. And I’ve watched every cycle that we’ve seen go up. And they don’t go down a little. Right? They tend… when we have market meltdowns, they happen fast. And they happen… they’re faster and bigger. And I mean, everybody would think it’s going down a little, little, little. And the fact of that matter is that interest rates have been going up for the last year. And I actually think the car wash M&A market was slower to adjust some of the valuations. They were still paying healthy multiples up until recently, right? So, you know, I actually think the market reacted a little slower than then maybe they could have. And we’re really, you know… The question really becomes, you know, you’ve got to ask yourself, were the last few years the norm? Or an anomaly? That everybody was… We had so much stimulus cash; we had a lot of money and dry powder in the marketplace. And I think maybe we’re getting back to what normal is in valuations. And before I think we just had this short period of time where everything was exceptional. And pricing was exceptional, too. But I think on a go forward basis, we’re just going to be normalizing where I think valuation should be.

Matt

Well, yeah, I want to come back to that because I think that’s super important. And there’s a lot of things to unpack around that, especially when it comes to what does that mean for some of these groups that have been growing so fast? And what do they need to do now? And what’s that all going to look like? But I want to get into… you were talking about how there’s still some really high deals going on, really great valuations. But maybe not since the last one you all brokered, which, in some ways, I’ve got to tell you, it breaks my heart a little bit, because I was wearing the sweatshirt, literally wearing the sweatshirt from that wash, when I saw the press release come out, and it’s like, Zips Enters Chicago Market with Jet Brite Acquisition. And for those who are listening and maybe don’t know Jet Brite, Jet Brite is Dave Dalesandro, a longtime industry veteran, one of the one of the most well known guys around… does a great job, runs an exceptional facility, gets a great car has a lot of really smart tips. And he sold. And so he was one of those guys I never thought it was going to sell, but he did. Can Can we talk about that deal a little bit, and just kind of how that maybe came about?

Jeff

So I’ve known Dave for a long time; I consider him a close friend. And I have the utmost respect for him, like you do. I mean, I think if you’re going to have an analogy, they’re like the Costco of car washing. They wash a lot of cars; they probably wash the best car in the country for the price of anybody. And they were doing a phenomenal job. You know, I think part it… the writing on the wall was that the market was going to be changing. You’ve got competitors. You know, they had a… they were the big dog in Chicago. You’ve got some private equity groups that are going to be entering the market. And I think they just felt, you know… One is maybe, you know, the timing is pretty good from a valuation standpoint. But they also… It was also… it took some convincing. They had to have the right partner and the right structure of a deal. And they’re in the car wash equipment manufacturing business. And so they’re going to put a lot of focus on development of car washes for their current partner, their new partner, and they’re also going to be expanding their car wash equipment company. So I think they’re, you know, part of it was obviously money. It’s got to be the right deal to feel good about it. But I also feel that they found the right partner that was going to to help them continue on with their car wash equipment company which is now becoming one of their real loves here.

Matt

Well, and yeah… their equipment super, super cool. I mean, it was kind of like a boutique, private label almost thing for a while, and you’d go, and you’d look at it, and it was really high end stuff, which sort of makes sense. That’s why he was able to produce such a great car. But, you know, I think it’s kind of interesting, because all of these things that Dave was doing, throughout the years, he was never doing it because he planned to sell. He was doing it because he was building a great business. He was being smart about how he was kind of protecting territory. He was… I tell you what, nobody was going to come in and build on top of a Jet Brite. Because before they did, Dave was going to do it himself. Right? He’s like, “No, you’re not coming in here. I want to make sure that I…”

Jeff

And it’s also, you know, Dave’s one of those sellers that, at the end of the day, if this deal happened or not happened, he’s okay. Right? And it was a very, very emotional deal for Dave and Sam, his partner, because this is, you know, for them, this is their life’s work. And even after the deal closed, there’s no celebration, there’s no like congratulate… Congratulations for what? It was a very emotional, difficult decision for them. I think ultimately they’re going to be pleased because they’ve got still a great… they’re still in the industry; they’re still going to do great things in the industry. So I think they’ll be just fine. But this wasn’t one of those really easy decisions, take the money and run. These are these are guys that love what they do. And so they’re doing it for the right reasons. And there’s still a lot of guys out there that are still stellar in this business today.

Matt

Okay, I’ve got to tell you, I’m still going to wear my Jet Brite hooded sweatshirt because it’s my favorite one, which leads me to… So, this is a completely unrelated question, but it’s something I’ve got to know because I’ve been thinking about it ever since this acquisition happened, and how I’m not going to be able to get any more great Jet Brite swag from them. So, Jeff, what’s your favorite piece of clothing? Like what’s your go to brand? I’ve got to know.

Jeff

Prada.

Matt

Prada? What? Really?

Jeff

I don’t know. Swag? I mean, I do have some on my own car washes, so Driven, I’d have to say, is our brand and, you know, I’d say Driven brand swag is probably something I would wear.

Matt

All right, like the quarter… You like a good quarter zip, or are you a hat kind of guy?

Jeff

Hoodie.

Matt

Hoodie? You got it.

Jeff

Hoodie. Yeah. Especially with my head. You know, I’m the first one to know if it rains and the first one when it snows. So a good hoodie comes in handy.

Matt

Yeah, for the for those listening, and maybe not watching, Jeff is what some might call follically challenged. So it just happens. We are all headed that way. Look, you can’t keep a head of hair forever. All right. So I want to kind of stay down this path talking about kind of how can operators set themselves up for success, especially in this new kind of landscape? Right. So we were talking about Jet Brite. Obviously, they did great things for a number of years, they were able to get a really good deal. In today’s market, if we’re saying that those kinds of really high multiples and those really big deals are maybe slowing down. What am I doing today, if I’m an operator, to kind of set myself up to still be able to maximize on what’s available?

Jeff

Here’s the great news about this, right? They’re still buying, right? There is a multiple of EBITDA, or your profit, call it. Focus on your operations. Generate more profit. I mean, so you know, what’s getting lost in all this is let’s say the multiples are going on from 15 to 12 or 10. Don’t buy in that Wall Street Journal 18 times because those deals aren’t happening anymore. But I would say generate more profit, you know? And so I find this question a great question because we know operators around the country. I’ve got operators that you can give me an operator A over here, and he can generate a million, a million and a half dollars of profit at a location. And then I’ve got operator B over here, and he can have the same site getting $500,000. And part of it is, you know, what’s getting lost in all this is you got a lot of guys that just were building and building and developing. And they really didn’t put together the infrastructure to operate and drive volume. And, you know, when you look at the great car wash companies, you know, my partner, Bill Martin with Metro, or you look at the Cobblestones, and Superstars and some of these other great companies, you know, they’ve all got the same thing in common. They’ve got an operating infrastructure that drives volume on their sites. And so if you can… if you really put your head down, operations could fix a lot of problems. But no longer, Matt, could you go in and think you can… You’ve got this situation today where it’s costing significantly more to build a car wash. So let’s say, you know, it went from 4 million to 5 million, now it’s probably closer to 6 million. You’ve got interest rates that used to be in the threes, now closer to six. That’s maybe $150,000 a year just more in debt. So all of a sudden, the marginal guy is never going to make it in this business anymore. The guys that got by, are going to be sitting here; they’re done. And so what I want to tell you is the single best way to maximize the value of your company is going to be drive more volume, you know, and your sites. And it’s so overlooked by so many groups out there.

Matt

Jeff, so something interesting that I’ve been kind of thinking about a lot is obviously you want to be profitable, and there’s lots of ways to go about that, but I think that what you’re talking about in terms of driving volume really gets to what I think people should focus on, which is, at the end of the day, you need to drive more revenue, right? You can cut corners, and you can become profitable by cutting expenses and kind of really trying to get as lean as possible. But at the end of the day, if you’re not really driving revenue, that profitably is not going to matter because eventually you’re going to get so lean that your product doesn’t really produce.

Jeff

That’s great. Yeah, absolutely, Matt. At the end of the day, what you’ve got to be looking at… We’ve seen other operators operate incredibly lean businesses, and they look at their margins and say, “We’re operating at a 60% profit margin.” But they’re generating I don’t know, 400,000 or 500,000 of EBITDA. That’s because at the end of the day, if you really are looking to drive memberships, what do you need? You need marketing; you need training. And so the smart guys will spend more money on operating costs, but they’ll generate more sales, and ultimately have a bigger bottom line. But it may not be a bigger margin than the next guy. But it will be a bigger net profit because they’re driving more sales. But to do that, you’ve got to make investment in your operating team and you know, all the all the great companies, Jet Brite included, I’ve got to tell you, they have one thing in common, every one of them. They care deeply about their team; they invest heavily in those people, and they do care about them. And so on an exit, they care about the culture and where their company is going.

Matt

So, okay, there’s a couple of things I want to talk about following that. One of the things I still want to come back to is this pace of reset, because as we’re talking about infrastructure and doing things, right, I think there’s a question there that I want to ask. But before I get into that I want to talk about… I want to kind of know… you’ve been in this industry for a very long time. And you’ve got great relationships. We were talking about how Dave is a very good friend of yours, and you respect him a ton. What’s it been like for you personally, to be able to kind of play the role that you’ve been playing as we kind of get into this space and to help people kind of do some of these deals and to see some of these opportunities that weren’t here 15, 20 years ago, even five years ago?

Jeff

Yeah. Great question. I mean, you know, we’ve represented… You know, I think just it’s a fact that we’ve done more car wash M&A this year than probably most guys combined in the space, and a lot of it is relationships. And I would say a good chunk of the deals we’ve done have come from folks that have been in this business from, you know, 20 to 50 years. I mean, we’ve sold some legacy companies in this business, and the emotional side of holding the hand of these owners has been at least one of our strengths. When Bill Martin and I first got into Amplify, you know, one of our missions was really is to protect the interests of the operator. You know, there’s nothing we want to force on them. It’s not one size fits all. We really try hard to match the right buyer or partner with the operator, because at the end of the day, you know, price is important to these guys, but I’ve got to tell you, culture is an awfully big part of it. And because we sort of have a little better feel today than most on what the end result is going to look like, you know, we really do want to at least advise and help these guys really understand what are they getting into; what’s it going to look like on the other side of a transaction. And that’s been a big part of what we do. Now, some people are building and just selling, and they don’t really care; they walk away and sail into the sunset. But I would say generally speaking, at least the clients that we’re dealing with, have a deep love of this business. They love what they do; they love their people, and they care deeply about their legacy, and what happens to it. So we’re pretty careful about at least guiding them through that process.

Jeff

Yeah, that’s got to be a tremendously rewarding thing. For you, knowing that these folks that you’ve built relationships with, you’re helping them both build and leave a legacy all at the same time.

Jeff

You know, for us, it’s really gratifying. You know, our business’s model is built around relationships. And I can tell you that we’ve done several billion dollars in transactions just in the last couple of years. And, you know, a lot of our business is generated from the clients we’ve already served. And what’s interesting is, in the majority of the people that we’ve done deals with, whoever the acquirer is, or the partner is, they end up hiring us to keep working for them. So for us, it’s really gratifying. You know, we never wanted to be the guys that are sort of a commodity kind of deal where we take a deal, we sell, and we’re gone. And like a typical investment bank is going to do a transaction and they’re gone. We really want it to stick with the client all the way through, even post exit, which makes our model a little bit different than most, and it is gratifying. But again, if you look at Bill Martin and his legacy, I don’t know of anybody that loves this space more than him. And you know, we, as a company, we take that in. It’s part of our culture that we care deeply about the outcome of of what happens.

Matt

I love that. I love that. I mean, that is really like tried and true core car wash industry, if we’re being honest. That’s what it’s always been all about, right?

Jeff

You know, it’s one of the… It’s funny, when you talk to a lot of people that come into this industry, even the private equity guys, a lot of other industries… they’re very protective of their, whatever they do, right? Whatever they do is their secret sauce. And this and that. The carwash industry as a whole is one of the most cooperative, friendly groups you’ll ever meet at all. And again, my friends are all car wash guys. Now, I mean, I go, I work with these guys, I travel with them. I go to games with these guys. They are very sharing, they’re very caring. This is a very, very unique industry of people that really do love each other, care about each other, hang out with each other way more than… It’s crazy. They’ve got… You know, they’re hunting turkeys. And they’re doing this and that. I mean, I don’t know too many industries that I’ve ever been associated with, that have that close comradery the way this space does. And so… But you have to you have to really embrace it and respect it. And, you know, unfortunately, over the last few years, because money has been so big and easy, you’ve got a lot of people that have come into space and don’t necessarily respect it. They look at this as fast money and fees and all this kind of stuff. And at least we feel, you know, we’re here to at least… we do want to protect the interests of those people that we do care about.

Matt

Yeah, absolutely. Absolutely. I want to come back to the question that I promised I would come back to. Alright, so we were talking about the great reset, right? We’re talking about whether that’s going to be what’s normal, and we’re just going to kind of get back into it that way. I’m curious to hear what you’ve kind of been saying because you all are very close to this right in terms of the number of groups that you’ve worked with and the number of transactions you’re seeing. I feel like I’ve been hearing from a lot of folks that have been growing gangbusters. They’re saying, “I cannot wait for it to slow down a little bit, for lots of reasons, but not the least of which is, I will finally be able to focus on my infrastructure and be able to make sure that I can run that really profitable and highly efficient process-driven business that I need to.” Does that resonate with you? Is that what you’re seeing, too?

Jeff

Well, I mean, yeah, by necessity now. I mean, so, you know, maybe we’ll just talk about all these headwinds and what’s going on.

Matt

Let’s do that.

Jeff

And so let’s start with what’s happening here. You know, first off, you’ve got high inflation, which has driven cost up between labor and chemistry and utilities and everything else. It’s just it’s definitely put some stress on operating margins. So they’ve got to operate smarter, right? So that’s a necessity. You’ve got 60% cost of debt up. So when you look at the guys, the consolidators, that have bought into the space, that have hundreds of millions of dollars of debt, their credit facility was done based on certain covenants, and all of a sudden, when you start adding in these increased interest rates, they’re under a tremendous amount of pressure from the credit markets to tighten up. And so, one of the the biggest concerns that’s going to drive all this is the credit markets are getting incredibly difficult and tighter. Before it was easy money. There was a lot of forgiveness, or looking the other way, and just lending with a blank check kind of mentality. Today, I’ve got to tell you, it’s gone. And so that’s going to drive a lot of how these guys make decisions. Today, it’s going to be that they’ve got covenants. These banks are going to be much more conservative on what they do. And so the news for some of the platforms that got out early and borrowed a lot of money, they’re going to have to focus, and quickly, on getting their numbers in line. And they may… You know, we’re hearing from most groups today, they’re all about greenfield. They’re all about building new car washes. Why? Because they’ve got to drive that multiple down. If they started up at call it at a 15 multiple. And now you look at Mister trading at below nine. So Mister’s in the 10 range of EBITDA. And all of a sudden, that rosy kind of exit strategy that everybody was looking at is gone. So these guys have got to now drive that… they’ve got to drive that multiple down. The platform has got to drive their multiple down, and they’re going to do it through building car washes. They can build at a six, instead of buying at a 12 or 15… you’re going to see a major shift in that environment. So, I think you’re going to see focus on operations, you’re going to see focus on greenfields from a lot of groups. Now, the groups that got in recently… here’s the really good news, Matt. There’s a lot of dry powder still out there. And the appetite for car washes is still big. And so I think you’re going to find that the buyers are still going to be looking at buying into this market, but they’re going to be buying in this probably at a much more, call it call it a normal pricing market instead of these kind of inflated valuations. And and they’re going to come in and buy, right. And so we’re going to see deals still happening. But I think it’s going to be at at a number… I think it’s going to be could be 25% or less or more lower than it might have been a year ago or six months ago. Because it just has to be. The other piece of it is you’ve got retail sales with looming recession coming, and so you’re already seeing evidence of retail sales on a car wash being hit. Is that 5%, 10%? But as credit has got an underwrite this stuff, you know, again, before that everything was bullish; they looked up. Today, they’re going to go in the other direction. They’re going to look at the costs going up; they’re going to look at retail sales potentially being hurt a little bit, and a little softer. And so you’ve got to make the numbers work.

Matt

Well, yeah. And some people might argue that that kind of normalization and then kind of reset in terms of what people should expect when they enter the carwash industry may give us back some of that essence of the folks who sort of started in this industry, right? Because people are getting into it for the right reasons. Not necessarily chasing a quick turn and a quick buck. Now, let’s be honest, people who started with car washes back in the day, they were still running a pretty high margin business. They were making money. It’s not like this was not ever profitable investment. But there was, you know… Obviously, there were things like variability of weather; there was a lot more labor back in the day. Now, a lot of that has been solved for with unlimited and the whole Express model explosion. But I want to shift gears into what you’re talking about with the recession. So we’re talking about greenfield. And folks, some of these platforms deciding that maybe I shouldn’t buy the washes because they’re way too expensive to do that; I’ve got to build more my own washers because it’s cheaper, and it makes more sense. At what point… What do you think? What do you think can slow that down? At what point did they maybe pause on that? Because, as you said, we’re seeing the headwinds, right? Inflation is has been an issue for a while; we’re starting to see the signs of maybe a recession looming. When do you think people say, okay, hold on, let’s put the brakes on. And then what do you do? What do you do then? Right? I feel like we kind of spread everything out all over the place. And it’s kind of going to feel a little bit like the housing bubble when it burst, and you had these places where you just had houses that just didn’t get finished. And I hope that’s not the case.

Jeff

Yeah, I don’t see that being the case at all. You know, we’re still seeing… It’s interesting. I met with a group today that has a fairly large portfolio of car washes. And their numbers were down fairly significantly. And I said to them, I go, “Drive your competition.” Here’s the reality is you’ve got a lot of guys building car washes, so you’ve got a lot more car washes, right? So all of a sudden, you’ve got more competition. And I go, “Drive your competition and tell me: You’re a customer, where would you go?” And the answer was not their own car washes! Because out of, let’s say, three competitors, they would be at the bottom. And I go, “You better start with your customer experience!” At the end of the day, number one reason where does somebody wash your car? It’s convenience, right? So the second thing is, if you’ve got two guys that are convenient, they’re going to go to the better car wash. And so I look at this as being one of those really great opportunities for great operators with great locations. They’re going to thrive. At the end of the day, the recession is not going to kill… I mean, washing a car for 20 bucks or 30 bucks a month Unlimited is still a bargain. We’re not going to see… We’ll see a dent; we are not going to see this business like getting battered like a lot of other ones. On the other hand, what’s going to start being a material effect on operators is going to be… By the way, everybody’s building car washes, right? So every major player if you go to down the line from Mister to Go, you name it, Mammoth, you know… Everybody’s talking about greenfields and building. Well, at some point, you’re going to have a lot of competition with new car washes. The guys that are going to survive are going to be the ones that give the best customer experience. And I would tell you so that’s where when you look at the — forget the platforms and the private equity-backed platforms — but you look at the owner operator, I don’t think Crew Car Wash needs to worry anytime soon. I don’t think Metro has to worry anytime soon. You know, we’re watching that the great operators in a market… I don’t care who it is, they can come into it. As long as they treat their… as long as they continue to serve their customers well, they’re going to be just fine to weather the storm, and they’ll actually prosper because they’ll be able to grow and expand. And so I don’t think that’s a problem. On the other hand, the marginal operators are going to have a real problem unless they figure out how they need to keep their customers from moving on.

Matt

Yeah, it’s a little bit of a shift from our conversation from last time where we were talking about, you should either be growing or you should be exiting. And maybe the tagline here is that you should either be exiting, if you’re not doing very well and you’re not willing to put in the work, or you should be really hyper focused on making your wash operations the best they can possibly be with a renewed focus on customers.

Jeff

You know, driving memberships… If you’ve got, at the end of the day, some of these businesses never focused on memberships. They’re going to have problems! The groups that have, you know, 5, 6, 7,000 members at a location, maybe they churn a little bit more, but that goes down to, you know, execution on handling… how do you handle the churn of your memberships. We’ve got some great data from Retention Express, and watching what their ROI is, because you’ve got to pay attention. You can no longer let that customer go into a phone box and not deal with them. Because when you’ve got difficult times, customers do have a choice where to spend their money. And unless you’re stepping up, and really, this is a time that you’ve got to make sure that everything you do is your A game. And so paying attention to those people is critical today, way more critical than it was when money was just flowing.

Matt

Yeah, I really… I mean, I think that this is all really good news for the professional car wash industry. The level of wash operations that I’ve seen in just the last handful of years as I’ve visited washes, is so much greater, so much better, and so much more focused on the end user than it was when I first started doing this in 2007 / 2008. Right? It is a different ballgame out there. And I love that. Because what like washes today are beautiful, and they’re customer centric. And they really make people feel good about getting their car washed, and I think we’re finally figuring that out. I’m really excited about that.

Jeff

Yeah, I think that’s right. I mean, I think competition will drive a better customer experience. At the end of the day, that’s what you need. If you have no competition, you can continue to serve the client in any way you want. And they don’t know any better. Today they know better. And so, you know, I agree with you. I actually think a little bit of a reset isn’t all bad. It does slow down the fury of the pace of “I’ve got to do something now” anxiety. But I do think that everybody out there should just… they’re going to have to realize that if they’re in this business today, they’re going to be in for the long haul. If they do decide they want to exit. The good news is there are still good valuations being paid for good companies. So there are still buyers out there. So the buyers haven’t gone away here; I’m getting calls on a weekly basis from groups that want to get in and buy car washes. So we’re still finding a lot of buyers. They’re just being more selective. They’re making sure that their diligence is a lot tighter. But they’re still buying, and I think good operators will have good exits, but the guys that want to stay in? It all goes back to just doing all the all the things you need to do, making sure you protect your markets by having a good product.

Matt

Yeah, absolutely. Well, Jeff, I’m going to ask you two more questions here. And then I’m going to let you get back to your day. But first things first, I want you to put on your Prada hoodie here, and look into your crystal ball, and tell me what do you think the future is like? What are we looking at here in the next maybe 12 to 18 months in the industry?

Jeff

So from everything I’m hearing from most of the big groups out there, we’re going to see a lot of car washes being built. I mean, with the slowing down of the economy, the path to getting retail sites might be a little easier. So I think there’s still… There’s still so much bullish on the industry as a whole. I think we’re going to see a lot more car washes being built. The emphasis is going to be on greenfields and development. I think that happens. You know, I do think you’re going to see more technologies and improvements on operations. And I still think there’s a long way to go to really driving efficiencies and knowing who your customers are. You’ll see some AI and some other technologies coming into the car washes so we get to know our customers better. And I think labor is going to get easier. Labor has been a really painful, tough piece of this business over the last couple of years. I think the softening up for the economy is going to lend itself to us being able to maybe bring in some better employees and keeping them because they need to work. So like you said, Matt, I think there’s some things to look really forward to in the industry. Do I think it’s different? Sure. I think before it was fool’s gold almost, right? Everything was pretty and shiny. And it was great. I think today, it’s down to we’ve got to go back to what we normally have to do all the time. We have to work for it! And if you’re willing to work for it, it’s a great business to be in, and if you’re not, I would say: get out. Or if somebody’s… The other thought is that if somebody’s thinking that at some point, they’re getting up there in age, and they need to get out of this business, I wouldn’t wait another year or two. Because the reality is… A couple people have said to me, “Well, we’ll wait until interest rates to come down.” It’s not going to happen anytime soon! The bottom line is what we were living in before was not normal; what we’re living in today might be more normal, more the norm. And so I think with more increases in interest rates projected, that’s going to drive multiples down. So I do think the people that are looking at in the near future of saying, “I want an exit,” I would say the sooner, the better, because I don’t think it gets better next year. You know, because… You look at it, and it may be a few years before things change. I think they’ve got to learn to live with what they’re given, and focus on the operations going forward if they’re going to stay in this business.

Matt

How long do you think it’s going to be before we start seeing… I’m going to call these like Mega deals, right? How long before you think some of these big platforms start purchasing other big platforms?

Jeff

So a lot of has been in play behind the scenes. And the reason you haven’t seen a lot of them is because a lot of them have fallen apart? So it has been… It’s not been a lack of effort. It’s…. As a lot of these groups have built these chains based on a certain multiple. And now you look at what Mister is trading, and these other exits, the pricing of these things, the math doesn’t work anymore. Now, with that said, I do think we’ll see, over the next year, we’ll see it two or three mega deals, because you just have to. At the end of the day, there’s going to be the need of economies of scale. And some of these groups will have no choice because some of the credit for some of these groups may not be there, and they’ll have to do something. The good news is that there’s plenty of dry powder out there to make things happen. But it’s but it is making the math work. But it has not been lack of effort recently. I do think there’s going to have to be some… a little bit of a period in between here. But I think over the next year, we’ll see at least a couple of these deals get done.

Matt

Interesting. That’s when we’re going to really see things start to, you know… it’s the proverbial snowball rolling down the hill, right? Once you start to see some of that stuff happened, it’ll be really fascinating to see how everything starts to move and shift and momentum build on that. Last question for you, Jeff. And this one is maybe easy, maybe difficult, but I like to ask everybody this one. What’s the one thing that I can do today to be better tomorrow? And you can take this any way you want it. It can be car wash related, it can be personal, go buy yourself a great sweatshirt, anything you want.

Jeff

So at least me personally… It’s been a phenomenal few years made a lot of money. I can tell you, buying material possessions has probably given me less reward than I thought. And we’ve, as a company, as a firm, Amplify, and I’m helping to drive it. We’ve seen a lot of people that need our help. And I would say is an industry, we’ve got a lot of lot of folks that made a lot of money. I’d say, at least for me personally, it’s focusing on the giving side, and I’ve committed 20% of my personal time starting next year. We’ve gotten behind Boys and Girls Club recently a lot because of their needs… the needs of the community are going up dramatically. We look at the food kitchens now; the demand they’ve got us is under a lot of pressure. St. Jude is another famous, great organization we got behind. So I can only tell you that we’ve been blessed as an industry. I’d love to see… I think giving back as best as we can. Because at the end of the day, you can’t take it with you. So I would say look in the mirror, but I do think it brings great rewards and satisfaction well beyond anything you can buy for yourself.

Matt

Yeah, I love that. I love that idea. Because guess what? If you have not given back to an organization and if you have not made any kind of considerable investment in something that is just for the greater good, you have no idea how rewarding it actually is for you. So there are selfish reasons to do it to beyond the fact that it’s the right thing to do, to give back and to help humanity, right? But it is super rewarding and super gratifying. Jeff, we’re going to have to have you on… It’s almost like I feel like I should mark your predictions like on the calendar and say, okay, Jeff’s coming back in 12 months, and we’re going to see what was right and what was wrong. But I’m looking forward to seeing what’s going on in the industry here the next six to 12 to 18 months, and we’ll be sure to make sure that this was not your last appearance on the show.

Jeff

Matt, I appreciate it. And I look forward to it. I do think it’s going to be an interesting ride. Again, I actually just think everybody’s got to look in the mirror and say, what we’ve gone through has been just exceptional. We’ve been blessed. We’ve had a good run of just really just fun times. I just think this is… what we’re going to head into is probably more normal. We’ve just got to do what we always done as car washers, and we’ve got to put our head down and go to work, and do the right thing for our customers. And it’s still a great business.

Matt

Excellent, excellent. Well, if you guys listening wants to hear more great stories about how phenomenal this industry really is, make sure you’re subscribed to get this podcast wherever you’re listening to your podcast content. The easiest way for you to never miss an episode and never miss any of our great content is download the CAR WASH magazine app in your app store of choice. Friends, until next time, there’s just one thing that you have to do when you’re out there, focusing on that customer experience, or maybe wearing your favorite hooded sweatshirt, and that is keep it clean.

Lanese

Thank you so much for listening to Episode 10 where we shared this rebroadcast of Jeff’s interview with Matt DeWolf. I also wanted to let our listeners know that episode 11 will look back over 2022 and the car wash M&A market, and we’ll feature some highlighted clips from our guests. And yikes, a lot has changed since the bright and shiny golden beginning of ’22. So it should be interesting to look back and kind of see how the year has progressed on and some of the consistencies and some of the things have changed from the feedback and the messaging from both our side and also from our guests. Be sure to look out for that. Thanks so much for joining us, and we look forward to seeing you next time. Bye.

About the Episode:

For business owners, recognizing that you can’t – and shouldn’t – do it all can be a humbling process. Bringing in other talented people to lead departments within your organization and intentionally developing your team from the executive level down, positions your company for meaningful growth.

In this episode Lanese talks with Derrick Merchant and Michael Murry of Champion Xpress Car Wash about why they prioritize developing their team as an integral part of their path to scalability and long-term success. Michael and Derrick share about how being humble, hungry, and smart all while having fun at work is important to their company culture.

Though building and maintaining a great team isn’t easy, knowing you are investing today in the future success of your company may put some of that hard work into perspective. Listen to this episode for insights on how laying the foundation of your company with a strong team, focus on operations, processes, and company culture positions you for growth and success.

Sign up for Car Wash M&A, The Newsletter | Follow us on social media @AmplifyCarWashAdvisors on LinkedIn or Facebook | Connect with Lanese on LinkedIn

More about Derrick Merchant:

Derrick oversees all divisions of 7B Building & Development as well as the other Merchant Family Companies, including Champion Xpress Car Wash, serving as principal and CEO. With a business degree from Lubbock Christian University, Derrick gives credit to his father Chad for teaching him everything he knows about business and leadership over the last two decades.

When not in the office, Derrick spends his time with his wife and two sons, playing golf, hunting, and watching Texas Tech athletics. With a heart for service, you can often find Derrick at his church or serving on the board of various faith-based organizations in his community.

More about Michael Murry:

Michael is the CEO of Champion Xpress Carwash and oversees all business aspects of the company. He is passionate about building teams and enriching company culture. He achieved his MBA in 2016 from Park University and spent 14 years as a supplier in oil and gas where he eventually worked his way to General Manager of Klinger GPI.

When not in the office Michael loves spending time with his wife and daughter, and also enjoys golfing, traveling, and being involved in his local church.

Check out the full transcript below:

Lanese

Welcome to Car Wash M&A Episode Nine. Today we have guests on; we have Derrick Merchant. He is the principal and CEO of 7B Development out of Lubbock, Texas. And then we also have his co-worker, counterpart, Michael Murry. And Michael is the CEO of growing Champion Express Car Wash. So we’re really excited to have both of you gentlemen on today so we can talk about your entrance into the car wash industry and your path to where you are today, and then what you see for the future. Derrick, I’ll start with you. Can you give me a little bit of your background as far as what your role is, and what you were doing prior to being introduced to the car wash industry?

Derrick

Thanks, Lanese. Thanks for having us. This is my 12th year with 7B. My dad started the company in 2008. And if you know what 2008 was like, there weren’t a lot of jobs out there.

Lanese

Yes, it was right around the time I graduated college.

Derrick

Yeah, exactly. So 3000 bucks a month sounded awesome. From not making more than 500 bucks a month to 3000, I was ecstatic. And so I jumped in the family business. We went through a couple sales during that time period, one in 2019 to Zips. And it was at that point, when I was about nine years in, my dad wanted to go into more of a senior advisor role and asked me to take over and run the place. And so it was a huge honor for me at that time to do that. It gave me some vision that I needed. I was introduced, actually about that time, maybe a year before, we hired Michael’s wife, Heather Murry, as our CFO. And she really helped me understand what good culture and bad culture look like. She introduced me to a book called The Ideal Team Player, which is what I say this company is now built off of; that and the Bible. It really helped me start… We had, back when my dad was running the place, we just went to work. That was the mindset of all people. You just went to work, did your job, and you went home.

Lanese

Your job could include any and everything when you have that mindset, too. You’re the person that’s responsible.

Derrick

Exactly. And so my main focus coming in was building culture. And we had a very poor culture at that time, a very toxic work culture, and so we kind of had to shrink to grow. I’m very proud walking down the halls today. You’ll hear laughter. Our HR department is called TED, which is the Team Experience Department. And right now, the whole office looks like a haunted house. On Friday, it looked like Michael Murry’s scrapbook because it was his 40th birthday. And there were like 120 photos of Mike all over the office.

Lanese

Well, Happy belated birthday, also!

Michael

Thank you.

Derrick

We’re doing cool stuff. Very early on, I was introduced to a couple of companies that really helped me learn about leadership and growing. We paid those companies to come in and teach us, teach me really. And we’ve kind of just built off that we now have a full-time leadership coach that does weekly masterminds. We believe that the Bible is the best place to learn leadership skills from; nobody was better at leading people and getting more people to follow than Jesus. And so we get that privilege every Monday to have Ray lead that mastermind session.

Lanese

It’s so refreshing to be able to hear successful business owners and successful business leaders talk about having a company culture that wasn’t what they wanted, and then taking the steps to change that and to make something different, but it’s often times where… I mean, it’s hard to turn that mirror on yourself and see like, “Okay, we need help. And we need professional help that something that’s outside of the realm or the scope of my capabilities,” or time or whatever it is. I think that that’s a very wise and admirable quality to have as a leader is to say, like, “Okay, I need help over here. I need someone to show me what I need to be doing.” So I recognize that it was a casual part of how you’re talking about your journey. But that’s a really huge thing because as we grow, especially the car wash industry, the team aspect of it is so important for the growth.

Derrick

Yeah, so we cut our teeth, you know, in dollar stores and auto parts stores. And so I learned the construction side first, and I learned the development side after that. We were the largest general contractor for Dollar General; then we were the largest developer for Family Dollar. And in 2014, that’s when Trey wanted us to get into the car wash space. And it was Trey’s vision that that was going to be a successful venture.

Lanese

And is Trey your brother?

Derrick

Trey is my middle brother. He also had the foresight, and the humbleness, about a year and a half ago, he came to us all and said, “Look, I think I’m being pulled to many directions. I think we need to get an executive team.” And it was, I believe, God’s timing. That was right there in 2020. Mike and I had just started getting to know each other. That’s really what I just felt like where God was leading us. Mike had taken over a bad culture at his company. He was a family run company, and took it through a merger and an acquisition of a PE company from, I believe, the UK?

Michael

Austria.

Derrick

Austria. And so everything seemed to have happened at the right time. Right when we needed it. And Mike has come in, and he embodies humble, hungry, smart. And that’s what you have to be as a leader. We’re not… We’re both… Well, we used to both be in our 30s. Mike has crossed that bridge! But humbleness is a trait we valued probably more than most, because we believe we’re still learning as leaders, and we’re still growing. And anybody that is prideful enough to not does not belong in our organization. So that’s when we brought Mike on. And Mike brought on the whole new exec team. I’ll let him talk about that.

Lanese

Michael, tell us a little bit about where you came from… Oil and gas. Am I right?

Michael

Yeah, so I had been a supplier in the oil and gas field for 14 years before I came to Champion Express. And really, that’s… I was perfectly content there and thought that’s where I would be for the remainder of my career. And as Derrick said my wife works for him and has worked for him for a while. That’s kind of how we became acquainted, and like Derrick said, he was really taken the reins at 7B about the time that I was taking the reins at the company I was at, but COVID hit. And everybody was searching for answers. And so, he and I really fed off of each other. I learned a lot from Derrick through that and tried to share our experiences… how we were dealing with different situations, how we should deal with it. And really like Derrick said, it’s always unfortunate on a culture that’s that’s toxic, but it was a learning curve, too. And I’ll say it was a… it may be weird to say that it was a great experience. Because once you’ve been there in that type of culture, you know you’ll do anything possible to not go back. And so whenever I saw what Merchant family companies, Derrick and Trey at Champion were doing here, and they invited me to come be a part of this, it was a pretty simple yes, just because I saw the direction they were going. We have very similar stances, obviously, on culture, and it was really just adopting what they already were putting in place.

Lanese

Well, and you had the added benefit of your wife already working for Champion Express so that when you told the rest of your family that you’re going to leave your job that you thought that you’re going to spend your career at and go pursue car washing that at least they weren’t quite as shocked as they could have been had your wife not already exposed them that this is a very professional environment… Just sometimes when you say car wash, people get a little deer in the headlights.

Michael

You’re spot on on that! In fact, I was a little bit surprised to talking to different family members about it. I really expected most of my family to say, “Are you sure you really want to do that?” But they were all very excited and supportive. And yeah, a lot of it had to do with my wife already explaining you know what type of family the Merchants are.

Lanese

Right? Derrick, there’s one part of the story though that I wanted to kind of go back through on your journey, so starting out… Correct me if I’m wrong, but so your first kind of professional job with your family was through 7B on the development side, so those retail businesses. And then did you start developing car washes in that journey through 7B, and that’s how you got exposed to one day starting Champion Express?

Derrick

Yeah. So in 2014, Trey came to us in the middle of… We had 89 Family Dollars under construction, 68 unit apartment complex under construction, and he said, “Look, I think we need to diversify and get into the car wash business.” We like a challenge. And so we knew a state that was very underserved at the time. It was a really easy transition for us, you know, all these retailers and QSRs that we work for, today even, they’re looking for the same things that car washes are looking for. Traffic is the gold standard.

Lanese

Right! You can’t fix your location.

Derrick

Yeah, exactly. You pay for your location once, or you pay for it every day in marketing if you choose a bad site. And so that’s the way we were trained. And I think it gave us a competitive advantage out of the gate. We haven’t had any misses on locations. That continues to fuel our growth. It gives confidence, and we’re still 100% family owned. We use local banks on all our transactions. And so you have to have a track history to borrow that kind of money.

Lanese

Absolutely.

Derrick

And that development history and success… It was a banker in Lubbock that took a chance on us with that first location. And then when we sold to Zips in 2019, it showed people that the industry was real. And then when we sold to 25 locations to Go this last year, it showed them we had a business model and we knew what we were doing.

Lanese

The demand is there. And the car wash industry is not immune to market effects like any other industry, but at the same time, it has proven more resilient than others through the last several years. I think that’s a real eye opener to a lot of the outside community that is like, “Wow, how have we been missing this whole car wash thing!” And I think that’s really neat that your brother, Trey, had an interest in it in 2014. Because in the kind of scheme of the cycle of where we are now that was early for someone outside of the industry to look at this as a very viable business model to pursue. So we’ve got a little bit about your history, let’s talk about Champion Express and some of the things that you guys do having that outside experience. So while you do have a family business, it’s not that you grew up in car washing, which a lot of family owners of car washes typically do… It’s kind of a of this journey; they have their granddad or their dad. And then, you know, maybe the children follow in their footsteps. As you’re building this company… One of the things that made me so excited to talk to you guys today, Derrick, is when we were in San Antonio at the Southwest Car Wash Association, we were having dinner, and you said as part of your strategic goals or initiatives that you’re willing to overstaff, even in your leadership team and preparation for the future. And that really, really struck me because, in my mind, that’s the important part is having those people in place so that when you’re ready to keep growing, and as you keep growing, you’re not also trying to find these really, really key people to your organization to help that. So I want to talk about the focus on your team and how you build a great team and how you find these people.

Derrick

So I’ll let Mike answer that. But for me, that was finding Mike, and Mike’s vision really took over from that point.

Michael

One thing I learned about the Merchants very early on whenever I got here was that they, when he when he said they like a challenge earlier, they do make some big challenges, you know, and these big goals of building. And so I learned very quickly when when they would throw out the numbers of washers that they said that they weren’t joking, I knew these weren’t hypothetical washes that they were going to build, you know, that I had to be prepared for them and be ready for them. So yeah, back when I first started, I think the goal was was 20 or so by the end of this year, which we’ll be at 27 by the end of this year, and then 50 to 60 by the end of next year. And so as I started thinking through that and started strategizing… Really, coming in and taking over eight washes, in all honesty, is no joke. And so that’s where I was when we started, and I immediately wanted to get a foundation, right? And so it’s truly about that foundation because I knew, if we were going to get that big that fast, that nothing matters unless you have the foundation set and ready to go. So I immediately tried to get to work on an executive team and finding the right people. I am adamant about finding… You know, there’s a quote from the movie Miracle: “I’m not looking for the best ones. I’m looking for the right ones.” And that’s really what I tried to do, and we were able to accomplish here… An executive team that could help build this thing out and build the culture and everything we were looking for. So we did that. We got to work on building the executive team, and then built our field ops team, and then our training department as well. And so I wanted to let the washes come to us not, not us go to the washes, meaning that knowing that these things were coming, whenever we took over these washes and opened them up, that we had the staff ready. We weren’t doing as much training just there on day one, you know, we already structured this thing out even from a regional standpoint.

Lanese

When you’re looking at opening new sites, do you have the team ready to go to where you guys do practicing, or you do the on-site training where you have kind of a team that comes in and they start giving them the process and the manual and the scripts and things like that?

Michael

Sure. So what we do is we have two counterparts. So we have a we have a field ops team. And then we have a field training team. And the training team doubles as store openers. So when they’re not opening stores, they circle around to all of our washes doing continual training. And then whenever they’re opening up washes… We have it fully planned out. I could tell you how many weeks beforehand that we start each wash training the site leader, getting everything in place before, and then throughout opening day, we have at least two trainers on site, a regional operations person on site. And so we’re very intentional about how we open up these washes and how we prep for them.

Lanese

And was it through your background with your previous role that some of these things made sense to you? Or is this just new store openings in general or growth in general? So what kind of guided that?

Michael

So yeah, so for the most part, maybe a little bit from there, but for the most part, learning as we go, listening to my different team members that have had experience in that.

Lanese

“Hey, we would really like to have this when we open a store! We really need this.”

Michael

Yeah, I mean, that’s really what managing is, right? It’s giving the people that are working for you the right tools to do their job. And so I just listened, you know? What tools do you need? Here’s the standard; here’s the expectation. What do you need to do that? And then it’s really just about putting that in place.

Lanese

It sounds like you two specifically work really well together. From my own experience as well, yes, you need somebody a counterpart or someone that you work that closely on an executive level, or even if it’s on a store level, where you have a manager and an assistant manager or two co-managers or your teammates… It’s important to have that relationship personally as well; it doesn’t mean you have to be best friends. But if you have something that you can build off of that makes that trust, and it makes that ability to listen to each other and to hear, actually hear, what their needs are, what they’re saying. And it seems like that, between the two of you, that you have that. And sometimes I think that that’s overlooked in the professional world. It still matters that your personalities click. You don’t have to have the same thoughts. It’s better to have the balance, but you still have to have a working personal relationship as well as the working professional relationship.

Derrick

Yeah, that’s 100%. And that’s what we’ve been building on in this culture here is we can be friends. But we can also… we can also challenge each other. And I think Mike does that to me, and I do that to him. But work, as you come in today, is fun. And it’s because Mike believes the same things we believe, culturally. And it just makes me smile. When I walk in the halls and I hear the laughter. One minute, there’ll be rap songs on because construction had a team win, so they play “All I Do is Win.” The next minute development will be playing Queen or Champion will be playing Queen’s “We are the Champions” because they hit a goal. It’s just fun. When you make it fun… And it’s the same for Mike… I know I don’t feel like I work every day because it’s fun. I get up every day, and I look forward to what is going to be different in the office every day and the challenges that come with it. When you have a trust with your executive teams, then it’s fun.

Michael

Yeah, I think that’s a big part of it. You know, when he talks about trust, I think that’s the first. There’s trust, and there’s buy in, and once you have that, it creates an opportunity to have healthy conflict. Of course there’s a lot… We listen to Patrick Lencioni, you know, a lot on his book, The Five Dysfunctions of a Team, that talks a lot about it. But it’s so true to be able to sit in a room and speak passionately, you know, about your stance on something, and then to hear someone else out. And the goal is to truly be about what’s better for the organization. You know, it’s not about each individual, but I want to hear all of the different discussions and then to be 100% okay, if it’s not your idea, you know, that was gone after. And really it doesn’t matter whose idea it is. It’s about what’s going to make the organization better. And I think Derrick and I have that, and that’s what we try to create down to our teams.

Derrick

Mike’s better at it than me. I’m trying to learn from him still

Lanese

Speaking from… Again, taking from my own experience, this industry has changed a lot over the years. I started in 2010. Obviously, I was still like, you know, 10 years old then… Just kidding. I already had a career in marketing and communications working at a public relations agency. And so I did that for about five years. And then I joined the car wash industry. Over time, I’ve seen more and more women join into this industry. But one thing that really makes a huge difference when you’re coming into a room where maybe you are different than the rest of the people that are there is if you have a room that is open to listening to your thoughts or your ideas, and there is a sense of collaboration that everybody feels empowered to share. And I feel very fortunate that that’s been my journey. But it also takes building a culture that encourages people to share their ideas and to maybe you don’t adopt them. And maybe it’s not the right path for the organization. But if you have that culture where it’s okay to say something, and it’s okay to even have conflict, conflict isn’t the end of the world; that’s a healthy part of growth and a team. But if you have the safe space of everyone here is respected and everyone has their place, then that opens that dialogue. And I think that that’s the most successful teams are the ones that can have those conversations, and grow from them, and learn from each other and listen. And listening is the hardest part. Even I struggle with that. And that’s part of this whole process is just me listening to someone else talk, but it’s harder than it seems. It just seems very fundamental. But we’re all human. And it’s a learning process as well for me.

Derrick

I agree 100%. I’ve had the ability to learn under some very good listeners; my dad is a very good listener. I very much undervalued that and didn’t even understand at the time to appreciate that. Mike is a very good listener. He is methodical, and in everything he does he hears everybody out. I really believe to be a good leader, you have to be a good listener.

Lanese

Totally. I totally agree. Back to the car wash side of it what are your goals for 2023? We talked about some growth plans on numbers that you want to extend your store count, but what will you end next year feeling most proud about if it goes kind of according to what you foresee and what you’re what you’re planning out now?

Derrick

In 2019, we told PC&D magazine that we had a goal of getting to 50 locations in five years. And so that will be an awesome accomplishment for us when we get there by the end of next year. I didn’t think we would have to have the number of sales that we’ve had to get there, but we’ve very much always wanted to continue owning our own company. And that’s just because we believe in our mission, our vision statement and our values. And a lot of times when you bring in a partner that can change things. And so that’s been our heart behind it. It’s not been about the Merchants making money. If that was the case, we would have retired after last year. But it was very much about, hey, we’re building something cool here, we want to continue building that; we want to see what this thing looks like operating 50 car washes. That’s been the goal from the beginning,

Lanese

As we’ve seen the rise of different regional players, and just the scale of car washing changing so much over the last several years. a lot of people say that they want to get to, you know, 50 car washes or 100 car washes or 200 car washes. But I think in reality when people get started, sometimes it’s harder than it seems. And having all the things that we talked about on the leadership side and the infrastructure. And I think it goes without saying that, obviously, when you have all of those people on your team, they each have an important role with their HR, with their marketing, with their maintenance, with their store openings, and all of those things. But that’s really the hard part. Opening locations, just acquiring them or building them, you know, can be part of it. But it’s how do you run them after they’re open? How do you keep these stores successful? And so that is a really cool marker to have that magazine article and have that kind of goal that was publicly put out there. You’re like, yeah, we can do that. And we are doing that. Derrick, one of the things you just said right now is that part of that journey, not seeing that some of these locations would be sold or have a disposition of them… Was it hard to let go of those? Or did you just see that, for the bigger picture of the company, it makes sense to kind of let some go and then pursue your own path forward after that?

Derrick

Yeah, I would say it was hard. I think Mike and our marketing team probably breathed a sigh of relief when we said we’re just going operate one brand, instead of two separate brands. We didn’t realize what we were putting them through that time. It was always a vision to be at 50. Car washes, as everybody knows, have gotten extremely expensive over the last few years. And so yeah, it was kind of, we tried to be good stewards of the talents God gives us, and so part of that was having to sell a couple times to be able to really afford, not just to stretch ourselves thin, but to really afford being able to operate at that type of level.

Lanese

Michael, I hear you on multiple brands. It’s very difficult to switch gears; that’s hard. I’m sure that that was a sigh of relief to think, Okay, this is the one place that we’re focusing!

Michael

We very much like the idea of running one thing, one brand, one operational model, and so even when we do acquisitions now, that’s really the first thing we do is we convert it to our brand, our model, and we run one thing. We do the basics well.

Lanese

You know, I hate to be a cliché with the Chick fil A model, but they’re not serving hamburgers for a reason. They do their one thing, and they do it well. And that’s it, and they’ve got a line out the door every day. Michael, what has surprised you most about the car wash industry since you have transitioned your career to here?

Michael

Oh my goodness. Okay. So, honestly, coming from oil and gas to the car wash industry, the most noticeable change and a refreshing one has honestly been the people. So in oil and gas, it’s very cutthroat; you keep everything internal, and it’s very strategic, and you don’t want anybody to know your business. Whenever I got here, honestly, there are so many open doors from car wash industry people about just letting me ask all the questions that I want to ask. And I’m like, you know, are you sure this is okay? And so that has been tremendous. It’s something I try to be conscious of paying that back, you know, in different forms just because it’s such a friendly business, so that’s been the biggest change.

Lanese

You know, what’s so amazing is that I ask this question a lot. And nine out of ten people who came from a different industry say that exact same thing. And I think that that says something really amazing about this larger community of people that is… I don’t know that it’s exclusive to the car wash industry, but it is special about it. While we have a shift from kind of a more small business owner to a larger, more scalable idea of what car washing looks like, it doesn’t mean that we have to lose that really special aspect of it. And it’s something that I feel passionate about is that the car wash industry is a neat place. And once people get in here, they’re hooked forever. They don’t leave. So it’s not like people went from car wash to oil and gas because you just kind of get it in you, and you’re you want to be better. And there is no top of the mountain. As well as you do at any one area, it just shows you Pandora’s box, that there’s all these other things that you can tweak and improve on. A good case in point of that is Bill Martin, who’s on my team. He has a very successful car wash operator; he has been doing it for over 50 years. And when I talk to him, he is so humble about the improvements that he wants to make, and that they’re always tweaking things and coming up with new technology. And I love that about our industry that everybody’s like, ooh, but I could be better about this, or what are you doing about that, and sharing those best practices. And I think that’s really neat. Derrick, you’ve been in a longer, but I’ll ask you the same question. So coming from a development side on retail and these other still retail businesses like Dollar General or things like that, but what has surprised you especially about operating car washes, not just building them?

Lanese

That’s a good question. Yeah, the community. You know, the first people that kind of took us under their wing was Andrew Zamora with Racer Classic.

Lanese

That ould have been my guess.

Derrick

Yeah, his ability to just open up and share things. Most people don’t do that. And even in the development world, people don’t tell you what kind of rent they’re getting. Those are things you don’t ask. And so, for Andrew to do that for lots of other people along the way, that’s been fun. When it comes to operating car washes, I laugh and joke with my team because I’m on the board. I know the least amount in the building about operations. I’ll defer to Mike on all operational questions.

Lanese

I think one of the things that’s so interesting about the carwash industry is that yes, you have the development side, you have the team aspect of it, but when you are working with your team, you’re somehow a quasi-therapist, you are a chemist, you are a mechanic all of these… an accountant. Now that you guys have a larger team, you have someone that’s fulfilling the specific roles, but as an industry, I don’t think that people maybe don’t understand or don’t really think about all the things that go into having a successful car wash, whether it’s one location, or it’s 50. Or if it’s 300, that they all involve so many areas of school where maybe you weren’t paying attention. I know that I had to have a rough lesson in chemistry and all of those things that I just thought… I never thought. You know, just the soaps come on, and your car is clean. But it’s so much more than that.

Derrick

For sure. Yeah, for me, that was… When Mike said, “I want to bring on an HR team,” I thought that was the silliest thing in the world at the time. And I didn’t understand it.

Michael

Now, I can’t get him to stop using my HR team.

Derrick

I use them all the time! I love them!

Lanese

Totally. You are as good as your team. And it sounds like you guys have a very intentional focus on that. And that’s what really drew me to wanting to speak with you today is because I think it’s a great example of making team building a true part of your scalability and your operational plan as well. You have to have the people that can perform these jobs, and you have to have a culture behind that, to attract them, to retain them, to give them the skills and the tools that they need. We have talked a lot about culture kind of in general, like, you know, you get to pick the cool music, and people feel happy. But what are the guiding… Kind of at the core, when you break everything down, what do you think it is about your company culture that makes people feel part of the team and make them buy into what you’re doing?

Michael

I mean, I think it’s… There’s a Henry Ford quote, and I’m sure I’ll butcher it, but he basically says, a company that solely makes money as a poor business, however he says that, but there’s more… It can’t just be about money. You know, money is not in our mission, vision, and values.

Lanese

And do you want to share what your values are and what your mission statement is since we’ve referenced it?

Michael

They’re a little different. They’re similar on ours, but Campion’s mission is to be God’s Church serving as a car wash. And then our values our stewardship, hard work, excellence, difference and community, and we prioritize people over profit. And so I think executing just that is what we’re trying to accomplish. So it is about getting involved in your teammates’ lives, and so it really becomes less about… Car washing is what we do. But we like to say that we’re really in the people business. And hiring people on, and like I said, just being involved in their personal life, helping to grow them, them growing us, you know, I had to come to the realization a long time ago in life, that if I have to come to a job in order to make bills, then it’s just not within me to just go and do monotonous work. There has to be a reason that I’m showing up to work. And it’s not the money part of it.

Derrick

Like Mike said, at 7B, our mission statement is pretty similar. It’s to be the church serving as a construction and development company. Our vision statement is to build the kingdom of God by building people, projects, and our communities. We lead with people there. To build a culture, you have to focus on the people. When you have a team of achievers like we have… Kind of a cool story real quick. We had a lady come in and poll all our all our people on their different strengths…

Lanese

Like a Myers Briggs type of thing or something?

Derrick

Yeah, something similar. And she said that she had polled companies have 1000s of employees and companies smaller than we were, but that per capita, we had the highest percentage of achievers in their top 10. I thought that was kind of a cool statement. Because at the time, you know, it goes back into one of our core values, which is grind. We say we love the grind. And we love to work hard. And that comes from Ecclesiastes, where the Bible says the gift is the day; that’s the gift the Lord gives us. If you come into the day thinking this is the gift and you love the people you work with. Because we are intentional… With having a bunch of achievers, we often have to pull them out of the office for our monthly team building events. So we’ll drag the older ones… the younger ones kind of tend to buy in quicker to that. But we drag the older ones out and make them have fun type of deal.

Lanese

Yeah, absolutely. And you’re right. It is nice to wake up every day and think it’s a gift that I get to start this day. I’m a mom of two small kids, four and a half and two. Especially when they were younger — we’re still in the thick of it — but when they were younger, sometimes it’s like oh my gosh, I’m so beat down because you’ve got all these things, and you have work, and you’ve got your home, and everything. But for me I just had to really be intentional about not getting too caught up in missing everything that was good happening in the day, even though you’ve got lots of laundry and spit up, and you’ve got projects due, and all those kinds of things, but the fact that they’re there, and you have these amazing moments. And every single day that if you are especially looking for them, it’s so much easier to see them, and to be appreciative of them. And gratefulness is another trait that makes you feel better. It’s a good thing to be happy about your work, and about both your home or elsewhere, or at your day job. I appreciate you sharing that. And I think that you can’t go wrong if you’re starting the day and trying to do the best you can and provide those opportunities for those around you as well. And when you have between 50 stores, when you get to that, that’s a lot of people. And that’s not just on the leadership team. You have all of those stores, and you’re making a path for growth for each one of those. That’s an amazing thing to offer.

Lanese

Yes, we’re blessed.

Lanese

We have had a really nice talk today. I feel very passionate about the car wash community, and exploring this side of it that’s a little bit different from just talking about what it means on a very tangible level to make a successful car wash chain. You know, if you have this ratio of your chemical costs, or you have this equipment or you have this… fill in the blank on those sites. They’re all important. But the relationships that you develop within your team also shows outwardly to your customer; your customer feels all of those things. If you have people who are happy to be at work, who are high achievers, you have the recipe for success to provide that outwardly to your customers. And without your customers what do we have? Nothing. We need them. But you have to provide that to them. And if you’re not doing it internally, it makes it very, very unlikely that they will be able to give that outwardly to your customers.

Derrick

Yeah, that reminds me of the Sam Walton quote: “We have one shareholder, and that’s the customer. They can choose to fire us any day.”

Lanese

Right. And we talked just very high level about the economy. And it goes through kind of the cycles and everything. And as interest rates keep ticking up, and as we’re experiencing an inflationary environment, it also means that consumers, they might be changing some of their patterns of how they spend their money, and especially their discretionary money. And so I think that the car wash industry, while it’s discretionary, we do still provide a service. And I think the more that people feel connected to us as people and to the businesses that they frequent as people as well, that this is an uplift and an experience, that it goes beyond just a commodity of a car wash that’s interchangeable, and I can just find the cheapest one, or I can do it at home, or not do it, that when you feel that connection, like I like going there, because they always remember that my favorite fragrance is cherry, whatever it may be, but that connection is what brings people back and makes them loyal to your brand beyond anything else.

Michael

Yeah, we try to do that. I guess Champion’s way of doing that is, like you said, it’s always about the people. We have our Champion wave, so we actually want four to six interactions with a customer on our site, every every single customer that comes on. Four to six, and it doesn’t always mean speaking to them, you know, but a wave, eye contact. We like to say, “Have a Champion’s day!” at the end, and we really… That’s the experience that they should be getting when they leave the car wash, you know, like you feel after a haircut. You know, you feel great about it. We want them to leave with that experience.

Lanese

Oh, you noticed that I got my hair cut yesterday? Because I did!

Michael

I did. Yeah, it looks great.

Lanese

Yes, I love that. And you’re right, it’s not always verbal. The car wash, especially as an express exterior model, you may not have a long time to chat. And if you are, then the people behind them are mad. But you do have every opportunity as a staff member, and on the training side of it, to smile, to wave, to make some sort of connection with them. Maybe at the prep area, they’re guiding them on, but they have a smile, and they are there waving them forward. And they give them a thumbs up or whatever it may be. But I think that those touch points… And I love that you have the metrics on okay, this is how many we want to have from tire on to tire off.

Michael

Yep. And that’s part of our KPIs from our training team and our ops team, too, when we’re evaluating our sites, and we go on. Something I look for whenever I go to our washes is how many times do they engage me through this? So yeah, it’s fun to watch.

Lanese

I’m sure part of this is how they spoke to you about monthly plans and the services and things like that.

Michael

Absolutely. Yep.

Lanese

I have to admit that I go to car washes as a consumer, and I am asking all of those questions because I want to see what other people are doing.

Michael

Oh, yeah. My wife on vacation now — so, I got a dash cam, and I’m sure it’s become annoying for her — but when we go to different places, I go through washes with a dash cam, and I’ll evaluate and bore her to death.

Lanese

I actually hadn’t thought about that. That’s smart. That’s great. And I would be remiss if I did not also bring up that you guys have a hot air balloon, too. Can you tell me about the genesis of purchasing a hot air balloon for your carwash?

Michael

Yeah, so you hear about the Albuquerque Balloon Fiesta? And I’ll say this was my first year to go to it. You really don’t understand the magnitude and kind of the beauty of it until you’re there, so I just would encourage anybody listening: this is something that you have to do! Honestly, the Balloon Fiesta gave us the perfect opportunity for community. Like you said a while ago, Lanese, it’s hard to talk to a customer on site because you’re an Express wash, right? And so this Fiesta gave us an opportunity to engage our community and you’ve got a booth there. The topic is already car washes, you know, so what a better chance to hear them and really to teach them from a whole industry standpoint, not just about Champion, but as an industry, we are still trying to educate the customer, right, on what is an express car wash? And why should they use it? And so we could teach them that it is safe, you know, it’s safe for your car, and all these things. Yeah, it gave us gave us a chance to be a part of the community, have fun games, and then the balloon. I think you’re going to see Champion continue to be a bigger part of that Balloon Fiesta in years to come.

Lanese

And what were the giveaways at the balloon fest?

Michael

Oh, so we had a game where you’re using a water gun to spray off bugs, and then dirt off of cars, and the winner gets to go spin a wheel. The big prize is getting entered into a chance to win a car wash unlimited for a free year, and so we had a drawing for that. And then single free car washes is another, so one free car wash, you know, text in a code. And then we had stickers. So we launched a sticker day, so that’s something that we’re excited about doing once a month in our region.

Lanese

So what’s sticker day?

Michael

Sticker day is just, we design out a sticker, you know, and so just trying to create some some buy in to come get our sticker. And so we launched that at the Balloon Fiesta, so our very first one was was a balloon. That was a lot of fun, too.

Lanese

So did you guys get to ride in the balloon?

Michael

We got two individuals; we were allowed to individuals to ride in a balloon. And so…

Lanese

Were you one of them?

Michael

I was not. I kind of wanted to be. But we really wanted to treat some of our individuals, our site leaders, you know, that have done a good job, so we offered that out to a couple of different site leaders and field team.

Lanese

Well, I would be happy to come to the balloon fest next year, because it has been on my bucket list that I have always wanted to go. And I will definitely come by and see. And if you’re giving away more rides, I’ll raise my hand that I can come up and give my two cents from the air.

Michael

For sure!

Derrick

We can make that happen.

Lanese

It’s about who you know, right? Who you have relationships with. This is just a case in point. Well, we’ll kind of wrap up here today. But thank you guys so much for sharing about you individually, and you collectively, and your team. And I really am interested to see your continued journey in the car wash industry and the car wash space. Because I think that there are things that… The intentionality that you guys have, and the focus that you have on excellence and excellence in team building and culture, and then how that spreads out to everything else that’s important was something, again, that I was really drawn to. And I appreciate you guys sharing about that. And I look forward to watching your continued growth and your continued success as you move along through your journey.

Michael

Very good. Yep!

Derrick

Yeah, thanks. I’m a follower of the podcast.

Lanese

Yay! So I’ve got you and my mom. I’ve got two people!

Derrick

I’ll say you do an excellent job and a big service to our car wash community. I appreciate that.

Lanese

Thank you. I very much appreciate that. This has been an interesting journey for me as well and a little out of my comfort zone. But it’s been fun. And I get to have these meaningful conversations with folks. And it’s fun for me even to go back and re-listen to them because I think that there’s a lot that we all have to share, and we can share with each other, and it’s just nice to have a forum to just talk about the great things that make our industry unique and what it is. Thank you guys so much.

Derrick

Thanks, Lanese!

About the Episode:

“It began as a mistake.” This is the quote on Andrew Goldberger’s iPhone background screen taken from the opening line of a Bukowski novel. In this episode, Lanese and Andrew talk about his journey into the car wash industry where he reveals that, like many entrepreneurs, what started as a well-laid business plan on paper turned out to be incongruent in practice. And, how that’s okay. Recognizing the need to adjust the original plan, pivoting, staying humble, and developing key relationships can turn an endeavor that began with a rocky start into a success story.

The episode also highlights the continued opportunities for car wash owners contemplating selling or scaling their business in today’s market. And how for Andrew, partnering with a private equity group made sense for him to transition his business into the next chapter.

Sign up for Car Wash M&A, The Newsletter | Follow us on social media @AmplifyCarWashAdvisors on LinkedIn or Facebook | Connect with Lanese on LinkedIn

More about Andrew Goldberger:

Andrew Goldberger is the founder and director of mergers and acquisitions for Trademark Car Wash, an expanding car wash platform recently receiving a growth stage investment from Princeton Equity Group whose affiliated businesses also include Strickland Brothers 10-Minute Oil Change. Prior to joining the car wash industry in 2018, Andrew spent 20 years in the software and tech space developing transformative payment technologies for churches and childcare centers. He is also the proud co-parent of two adorable Pomeranians.

Check out the full transcript below:

Lanese

Welcome to Episode Eight of Car Wash M&A, The Podcast. Today we have on our show Andrew Goldberger. He is the founder of Trademark Car Wash. And Andrew has a really interesting background where he entered the car wash space in the last couple of years and has had a very, really quick ride so far from looking to get into the space and take hold and then to really growing this to a much larger platform and a scalable brand. Andrew, would you mind sharing a little bit about what your career path has been up to this point when you got involved with Trademark Car Wash?

Andrew

Thanks, Lanese. And I’m really happy that I get to talk to you today. Always happy to talk to you.

Lanese

Aww, thank you.

Andrew

I come into the car wash business through just about the most random way. I started my career with the focus on technology, and specifically building technologies for organizations that weren’t able to take advantage of kind of large scale enterprise software. So we built software for very small organizations. The first one was actually churches. We saw a need for churches and religious organizations to collect money in the same way that large scale nonprofits were collecting electronically. And so my partner and I built the very first electronic giving program called Parish Pay. We started that in the year 2000, way back when. You know, most giving was done electronically, but churches were 100% cash and check. And it’s really hard to motivate church leaders to move from something that they’ve used since biblical times. You know, before cash, people were bringing lamb and fruit and literally first fruits to the church. And we were convincing them that, you know, this is the paradigm shift that’s happening right now, through our little tiny Long Island City New York company. We managed to get enough press, you know, New York Times, Wall Street Journal, Time Magazine, and Fortune Small Business, and we got enough TV coverage that we gained some credibility and we slowly convinced church leaders to move to this program. I think now it’s collecting something like $40 million a month in donations for every type of denomination you can imagine, but it’s since been sold twice. So that was our first platform. The second one was focused on school tuition and helping people pay their tuition for K through 12 private and faith-based schools using electronic means, but also phoning into payment, a web payment, mobile app payment… Professionalizing the billing experience for both business offices at private and faith-based schools and also the parents and kind of what they expected. We built that company from 2003 and sold it in 2015. A company was started out of my apartment, and we got to 4,000 schools by 2015.

Andrew

Wow, that’s incredible.

Andrew

Yeah, it was a great ride. Definitely quite an adventure. And also, it’s really nice to bring a bunch of excellent people along with you for the ride. We started with just a handful of people again in my apartment, which was definitely a lot of privacy invasion early on, during my early bachelor days. Eight o’clock in the morning, the phone would start ringing with parents calling making payments. And it was full on even on the weekends. So that was a that was difficult, but challenging and rewarding at the end. And I was able to kind of change the trajectory and lives of many people, some of whom now work for Google. It was a great launchpad for many careers, and I was really super happy to have experienced that. And then right after that, we started a company called Smart Care. Smart Care was really focused on the childcare industry, which has its own set of challenges. And yeah, there was a billing challenge, just like we helped with the churches and schools, but also there was signing in and signing out of children, there was managing teachers, there was payroll, there was pretty much everything.

Lanese

But you brought up a great point when we were chatting earlier that, while similar to the car wash industry — which we’ll get into in a minute, how you got into that space — but here we have monthly recurring billing, we have clocking in and out, but instead of just the employees, we’re also talking about the children that are involved here. So there’s a whole other layer of significance and importance to getting this right and making sure that it works. And it’s accurate. And it’s easy to use. Because these are absolutely their most important valued things in their lives, their kids.

Andrew

If the car wash owners out there think that people really care when you scratch up the car. They really care when you lose their children.

Lanese

I can imagine!

Andrew

We all love our cars. But children rank slightly higher, depending on the car, depending on the child.

Lanese

Yeah, at least for most, right?

Andrew

Right. Right. You know, the opportunity was to build this childcare platform. One consistent theme across my career was finding a market that I thought had a challenge, and trying to solve that challenge, and then quickly realizing that it was a mistake. And then adapting, adjusting the plan that I had in my head that was so crystal clear. I visualized that, here we go. And it was always a wrong turn. And I think pivoting in each one of those businesses and figuring out the right path has covered for my own challenges, you know, you kind of bet on someone who can make the proper adjustments. And I think I made that those adjustments in the software world. And I made those adjustments in the car wash world, too.

Lanese

Oh my gosh. So I have to just stop you for a second because what you just said about being able to be a visionary and an entrepreneur, those are wonderful qualities and having the research and the analytics to map it out, and to have this plan, and then to go to execute the plan… But so many times, we’ve all experienced this, where we get to the execution part. And we’re like, “Well, Dang, this doesn’t work!” You’re like, “This just doesn’t work.” Like no matter how much it makes sense on paper, it doesn’t work. But the real quality and strength of a good leader is someone who can identify that an adjustment needs to be made and just kind of set your pride aside. That it is like, “Okay, good plan. It didn’t work. We need to make some adjustments.” And and being able to then go full force on wherever that turn is.

Andrew

Absolutely! I couldn’t have said it better. Pride and entrepreneurship or pride and business ownership are… You might get into it for that, but certainly they’re not correlated at all. There’s pretty much nothing more humbling than starting a business and recognizing all of your warts. You definitely need to pivot and to adjust the plan. Every time you make your first business model, or you kind of show yeah, this is where we’re going, then you hit a rainy month or the cars just reroute a different way or you get a new competitor moving three quarters of a mile down the road or COVID hits.

Lanese

Right! Yeah, left turn for everyone!

Andrew

Left turn for everyone.

Lanese

But let’s go back just a little bit. So you did the software companies? How did these churches and payment plans for schools and nonprofits and like that… how did that get you to car washing?

Andrew

Yeah, through a roundabout way. The background screen of my phone is that Charles Bukowski quote, he started a book with the line, “It began as a mistake.” And I’ve always found comfort in that because each of my businesses and each of the turns that I’ve made, started as an Oops! I made a wrong turn here. And now I have to adjust the plan to go this way. After selling smart tuition, my second company and the largest one, I had a pretty good exit. And I was working on smart care but also just a little bit distracted. So I took five years off. I took five years to explore the world. I visited 61 countries. I had a yearning to figure out what links people from around the world, but also what kind of separates them? So what are these little cultural nuances, but what fundamentally are the things that link someone in the Middle East to Europe to America to South America to Asia? And and I spent five years going everywhere.

Lanese

What’s the answer? This is the million dollar question!

Andrew

It’s for a different podcast. But I think that that was a great experience to get out of the rat race. You know, sometimes in America, we get too bogged down with just financial outcomes. And just, you know, I’ve got to turn $1 into $2 and a $2 into $8 and $8 to $30.

Lanese

Don’t take your vacation days because you got to do the grind… You go in early; you stay late.

Andrew

I have this unpopular opinion that 1031 exchanges are the leading cause of heart attacks. Because people just need to keep flipping and flipping and flipping. And okay, now I’ve got to buy 80 apartments. And now I’ve got to build three hotels, and now… And it just keeps mounting the pressure. I don’t want to live like that. So it was a great pause. When I looked at how I was going to have my money, make some more money to fund this travel, you know, bohemian lifestyle that I was going for, I looked at a couple different businesses that were outside of the typical public equities in the stock market. My first year investing there was Brexit. And then there were just, you know, a couple of bumps in the road where I said, I need to find something else. So in 2018, my partner Franz and I started looking at where we were going to invest our money. One area was liquor stores; we looked at liquor stores. One was pharmacies, one was storage; we looked at about seven or eight different industries. And we came across car washes. This was through a business broker in the New York area. I thought New York was the absolute ideal market for car washes, of course, ignoring the fact that 80% of New Yorkers don’t have cars, and ignoring the fact that from a regulation perspective, it’s, you know, worse than California. And ignoring the fact that…

Lanese

There’s not a lot of available land,

Andrew

Not a lot of available land.

Lanese

It’s pretty expensive.

Andrew

Nobody owns their own property. I didn’t know how to finance these things. And there’s more people looking to rip you off in New York with how they present their car washes, so I had to adjust from that initial mistake, kind of a myopic focus on New York and a bias that I had, a confirmation bias that “look at all this traffic,” that doesn’t really translate to cars getting washed. We bought a car wash in Brooklyn, that was so rundown that it looked like it was kind of falling apart. And it was a real challenge. But it happened to have a lot of opportunity. It was only about a quarter mile from the Barclays Center, which is where the Brooklyn Nets play. And the area seemed to have a lot of growth potential. So we bought it for, you know, a little over a million dollars, very humble early beginnings. We were in the wrong market. We were in the wrong state. We had the wrong type of wash; we were heavy, full service. There were no wraps, there was no top brush, there was almost nothing in this tunnel. We had to gut it and put in new equipment. But it started showing me the opportunity that express washes might be later one day. We increased the volume; we increased the quality our reviews. They went from a 1.9 to a 4.3.

Lanese

Wow!

Andrew

We really pulled together this community and said, “We’re not going to let this thing fall apart. We’re actually going to lift it up.” And within six months, we turned it around so much that we said “Let’s buy a second one.” And we said, “Let’s buy one with a gas station and an oil change.

Lanese

It can’t be that hard, right?

Andrew

Exactly. So we learned those businesses. We said, let’s try this again. And we bought a third a couple of months later, and that one was right next to JFK Airport. It’s one of the busiest car washes in New York City. We risked a lot to buy that car wash. Eight days later, the governor shut down all non-essential businesses of which car washes were considered to be non-essential. Four months of inactivity happened in 2020. And we had to deal with a monumental task of rebuilding a business in some of the toughest scenarios with droves of people leaving New York. It was very, very challenging to rebuild the business, to take care of our employees. It was strange. We had loyalty to these employees, but we were only eight days in. We hadn’t even gone through a payroll cycle with them. And we had this connection of staying in touch with these people who we had to get to know literally over the phone, not connecting. So it was a terrible time to be a New York business owner. So once again, it began as a mistake with those three washes.

Lanese

So you grew to three washes in New York. And then how did you set your sights on North Texas after that?

Andrew

During COVID, it was pretty obvious to me and just about everyone with a pulse who was running a business, that New York is not the be all end all.

Lanese

Some of the shine wears off when there’s a closures and all the things that were going on.

Andrew

Yeah, it was a terrible time to be a proud New Yorker. It really was. I focused on where we can go to get out of the New York market. I looked at opportunities in New Jersey…

Lanese

I’ll leave New York; I’ll go to New Jersey, I’ll show you!

Andrew

Yeah, I’ll cross one bridge, that’ll take me about 45 minutes in traffic. And I’ll prove different. But New Jersey was mostly similar. Ex-New Yorkers who had moved down there. That wasn’t going to work. We looked at how we could expand the business and we came across a private equity firm named Upper 90, and Upper 90 helped us. The founder of Upper 90 is a guy named Jason Finger. He is the founder of Seamless, which bought GrubHub, so a big food delivery company. He started it in his college dorm room when he was studying in law school at NYU.

Lanese

You’re like, “I get you. You work out of your apartment.

Lanese

Exactly.

Lanese

We’re going to be friends!

Andrew

We are friends to this day. He really liked our approach. But he only invested in technology like Blue Apron. And I think he invested in ZocDoc. And he was a really early investor in multibillion dollar amazing startups that I knew about through our industry connections. And so I met him… Now this is 2020. You have to understand that I met him in his backyard with you know, 20 feet separating us. We couldn’t shake hands. Because he’s in LA, I’m in New York. And we just wanted to get to know each other. But it was a little bit of a challenging meeting.

Lanese

Sure, an awkward first date!

Andrew

Both New Yorkers and Los Angelesans have… In 2020, we’re taking every warning very seriously. Let’s say it that way. So we hit it off. And he knew that car washes are not technology companies. But he said, I like what you’re doing. And I like your mentality, I think we should expand this out of New York to go to a different market. So when I looked through the National listings as to where car washes were for sale, and I just said, Hey, there’s a ton of activity in Dallas. And these express washes. So I flew down to Dallas, and I flew Franz over and I said, “Let’s check these out.” And of course, in late 2020, they’re washing tons of cars.

Lanese

And it’s a very different economic climate from where he were coming from. And, of course, because as our listeners may know, I live in the Dallas area, they’re the best people. So clearly, you are attracted to want to associate with us!

Andrew

Lanese is smiling, which is something that New Yorkers don’t see very often at all, unless they get outside of New York. So I looked at Dallas, and I said this was it. It only took one push pin on the map to say, this is where we have to be. We looked for kind of monster washes that had great volume. And we used some of Jason and Upper 90’s money to expand our operation and double the size of the company within two months. And we did. We were now flying back and forth between New York and Dallas. It was much more serious undertaking because it wasn’t just a project with my money and Franz’s money, but it was now…

Lanese

Somebody else’s money, too. I mean, you’ve got the accountability to somebody else as well. So yeah, you’re right. It’s not just a pet project. You’re now committed.

Andrew

I was committed before, but now I was on a regimented schedule. Sometimes pre-private equity, you might say, “Oh, it’s Thursday. It’s a nice day. Let’s go to the beach.” I want to take a trip next week. And you don’t have to tell anyone. Once you now have a partner, even a minority partner, it’s still someone that you have to report to and prove results to. So a lot of other things that we had to do to kind of professionalize the organization which we had done just to get them up to my standards and Franz’s standards. But now we had another level to get to with Upper 90. And upper 90 put their first funds in… I think we signed with them in February of 2021. And we put that money to work in the summer of ’21 buying a few washes in Dallas, and then looking to then grow again. And at that point, Upper 90 said, “Hey, Jason really loves you and loves the company. But this car wash thing is very different than our traditional business.”

Lanese

What’s the outlier here? We have all these businesses, and then here’s yours.

Andrew

And they were doing so well with their other companies. It wasn’t like we were we were failing. We were growing and beating our numbers, but they couldn’t put the right resources on it. So together, we brought in a lender that would help us put a little money in, and that was Brightwood. We had them in for just a few months. But even before we signed with them, we were approached through Jeff at Amplify and Commercial Plus. Jeff Pavone brought an opportunity to us to look at possibly selling the whole business. And at that point, we were at eight washes, and very early on in what we thought we wanted to become. But again, maybe it’s the right time for a pivot. We looked at a lot of different opportunities that we wanted to. But with the pressure and everything that happened in 2020, and the opportunity to grow Trademark in a way that we could never dream of with our two partners, we thought that this was the perfect time to exit. We were also at 51% equity ownership. And if we raised any more equity, we’d be the minority partners ourselves. So we thought that this was the right time. And the group was Princeton Private Equity, which has a incredible focus on just retail businesses. And the partners there grew companies like Massage Envy from just a handful of stores and European Wax Center and Med Spas all over the country. And so they speak the language. It was very different than when we were talking to our Upper 90 friends, and our friends at Brightwood.

Lanese

It’s not brick and mortar. It’s not it’s not the same.

Andrew

Exactly. We needed this type of partner. And they they put us together with a group called Strickland Brothers Oil Change, which is the fastest growing oil change company in the United States. It was a perfect marriage; we both are kind of separate organizations within an umbrella. But they have an amazing expertise in building new sites.

Lanese

Right. And there’s a lot of synergy there. Because you’re looking at a lot of the same types of land. You’ve got a similar customer base, you’re in the same automotive care industry, there does seem to be more synergy than a food delivery service. Not that that’s not a wonderful service, which we all need food. And it’s even better when someone just brings it to you. But there does seem to be a lot of mutual growth opportunities, too, where you can now take this other group and learn from each other because you have very similar pathways that you’re going down. And Strickland Brothers has been in the news for their rapid growth, going from a couple of stores in… What state did they start in? Georgia or…?

Andrew

North Carolina.

Lanese

North Carolina. And so they’re on the rise, and it seems like just from my reading about them that they have some of the similar goals on a service level that you speak about of wanting to elevate the experience for the employee as well as the customer, that it doesn’t have to be kind of this bottom tier service that it seemed the car wash industry and oil changes kind of used to fall into: “Ugh, I’ve got to go get my oil change. I got to get my car washed. They’re gonna try to upsell me.” It can be better.

Andrew

Culture is absolutely key at Strickland, and it’s absolutely key at Trademark. We welcome people who are all stars, we welcome people who can elevate the experience for our customers and the staff at our stores. We share a lot of the same values. Justin Strickland, the founder of Strickland Brothers, and I, we talk on a daily basis. And he’s built a great team on the car wash side; people who came to us from some of the larger platforms in the US. We really have built an all star team and it keeps growing because thanks to some of our relationships such as Amplify, we’ve been increasing our business and growing the number of locations. We’re probably going to grow from about 22 locations now to close to 40 by year end, and we should be hopefully at 60 to 80 by you know a year later, trying to grow at that pace. And I couldn’t have done that without the right financial partner, without the right teammate provided. Justin Strickland is outstanding. He’s an Entrepreneur of the Year winner from Ernst and Young which is like an impossible to win award.

Lanese

No small feat!

Andrew

Yep! I tried, and I was just a finalist. He made it to the final. He won! An Inc 500 fast rising company. It’s really easy to see how that culture has spread into our culture and how it’s helped us really focus on this kind of rocket ship growth that the industry is facing right now. But also, there are some tumultuous times with a very turbulent financial environment, but the market is still red hot, so we have to find the right opportunities and where we want to kind of go deep and go strong.

Lanese

Right. It’s neat, so just kind of thinking back… A year ago, you and I met in Atlantic City at the NRCC Car Wash Trade Show. And at that time, I believe you had the washes in New York, and you had just moved to Plano, which is a suburb of Dallas. It was just really interesting, and it has been really interesting to watch everything that has happened in that time, even from the sidelines from my point of view, but also the odd and coincidental weave-ins that have come just even specifically from you and I, from that meeting to you purchasing Trademark Car Wash, which, you know, I have an intimate relationship with the brand as it was prior, having been affiliated with that for almost 10 years. And so, I definitely see that you have good taste because that is a great location. But also you referenced that conversation that you had with Jeff about this introduction to Princeton like, okay, great. I’ve got this group, maybe you guys should meet. I was in the car with Jeff when you guys had that conversation. And this was a very short conversation that was just so cool to watch how the matchmaking and how the relationships are really the most important thing because it’s connecting people to who they may not otherwise be naturally connected to or connected as quickly. And just seeing how you can move forward the path of a business or a relationship or plan if you just sometimes have some of those things click in the right place from the people that you know along the way.

Andrew

I would add to what you said, and I agree with everything. In fact, I’d emphasize one thing. The location that you helped build, Trademark, was so impossibly perfect for me that I changed the whole company’s name from Magic Car Wash to Trademark Car Wash, specifically because of that brand and how important it was. So forget Jeff and others introducing me to money and introducing me to all this stuff and selling me 14 washes. But you, Lanese, built the brand that created our brand. So thank you for that! The logo on my shirt.

Lanese

I like it. Yes, I like the 2.0!

Andrew

I want to add one thing about Amplify / Commercial Plus. I think back to there’s this famous line about doctors or surgeons, right, that they get paid $10,000 just to make one cut. But they don’t get paid $10,000 to make one cut; they get paid $10,000 to know where to cut. And that takes a decade at school and it takes a lot of experience. And so when you’re paying for value in this industry, yeah, there’s definitely some high fees that you guys have collected, everyone has collected, but it’s really knowing where to cut. The fact that Jeff in that phone call spent maybe 30 minutes or less… As you said, it was a quick phone call, just matchmaking like this,. That analogy kind of comes to mind because it was the easiest check to write because it was such a valuable connection. We’ve been so happy with the Princeton and Strickland relationship that whatever we paid wasn’t that important. Another way that I would look at it is almost like Tetris. So when I think about Tetris, I think about like your team and seeing the industry, and they see where things fit. The best of the brokers are the ones who really know, we don’t need to make this a huge process with 50 companies, we think this is perfect for Trademark. They’re really big in the southeast, or they’re really big in Dallas. So let’s kind of make sure that we’re matchmaking between these two because there’s a perfect fit culturally. Sometimes car wash owners want to turn their equity into more equity. And that doesn’t really work for our company, but it works for others. So you guys will recommend those sellers go. But it’s just knowing all of that. So it’s kind of a combination of that doctor knowing where to cut metaphor and the Tetris metaphor that makes this experience so, so easy when you’re working with competent professionals such as yourself and the team that you’re in the trenches with every day.

Lanese

First, thank you for that. And it’s really important for us that we can have a relationship with our clients that goes beyond a transaction. It is not about one deal that we do with somebody, and then it’s over. We want to grow, you know, be a part of that growth with you or be there if it’s the right fit, whether that’s on capital advisory, raising funds, or if it’s on acquisitions, however that looks, but we don’t ever want our clients to outgrow us. And that’s one of the really beautiful things about kind of the two arms of a related company with the brokerage side with Commercial Plus. And then on the Amplify Car Wash Advisors side, we have the capital advisories in the mergers and acquisitions, experience and expertise with investment banking. On the specific relation to car wash owners in the industry, as you know, we’re very passionate specifically about the car wash industry. And so all of us have a personal stake in this as well that we… If you succeed, it’s a good reflection on us as well. And we care and we want to continue raising the industry. But because we do work with so many car wash owners around the country, we’re able to have that larger macro view of what’s going on outside of just one pocket and have that better Tetris plan or that better surgical one cut plan, ideally, so that we can guide people efficiently and get them in the right spot as quickly as possible so that it’s helpful on both ends. But it’s a really exciting time to be in the car wash industry. And I think that most people have one or two journeys here. It’s either they have a family business that they’re a part of, and maybe they grew up in it, or some weird thing happened and they kind of got into it and they never left. I hope that you’re one of those that got into it and and stays with us for a long time. And we can continue having these conversations as Trademark continues to grow and see what all these next chapters are. But you have such a great entrepreneurial mindset to see that there’s a lot of different ways that companies can scale and that they can continue growing. And then you can pivot and do something else. But you can make these great businesses along the way for employees that can be really fruitful and helpful to them and their livelihoods.

Andrew

Absolutely, you nailed it. There is absolutely so much upward mobility. In the car wash business you and I have a mutual friend who over the course of 15 years has risen from minimum wage to hundreds of 1000s of dollars in annual salary and equity. And there’s so many people like that. But there’s also so many car wash owners who just had a dollar and a dream. They just had an SBA loan, and someone gave them a chance, and I think that’s… As we move into the more maybe the fifth or sixth inning of the private equity versus small business owner battle, which has been… They have a flawless track record in every industry; private equity wins these games. But as we go through this game, we’re seeing so many individual car wash owners or small founder-run mini chains of five or six locations. There’s something so great about this American Dream that is getting to kind of… Again, we’re not in the ninth inning, but we’re certainly not in the first inning. It’s really interesting to see some of these people, some of whom they’ve only had this as their job, and now they’re reaching this incredible height. People I worked with and technology never reached that level. They’re in Silicon Valley busting their ass for 20 years and they’ve never had a pay day like a car wash owner who found the right street corner for three years. That’s amazing. Like it really is incredible. I love getting to know car wash owners because now my role is director of mergers and acquisitions for Trademark. I no longer have any operational requirements in my job, but I am really focused on meeting car wash owners. So every week, between LinkedIn, between brokers, between… I probably visit 40 car washes a week, but I meet lots of car wash owners, most of whom we don’t do deals with, but I’ve met so many great ones. I think it’d be great to lay out to a potential seller, or someone who’s contemplating maybe taking a peek at what a valuation might look like, what is important and what isn’t important. You know, I don’t want to give away any secret sauce, but I wanted to actually talk about how we score those opportunities and how we look at them and different things that are important to different people. You know, let’s talk about if someone has a single car wash or they have 10 car washes, the multiple that we pay on EBITA, on profitability of the car wash, is different, right? So a single car wash is interesting to us. We’re definitely excited to meet someone who has built a great car wash, but there’s obviously a different amount of enthusiasm for the opportunity to grow by the giant leap of buying a real platform.

Lanese

Right, and making a meaningful entrance especially into a new market. Because buying one car wash and then maybe if you’re looking at acquiring a couple of different ones, it’s going to take time, if they’re not all connected in the same package. Or if they’re looking at maybe adding in some greenfield development, that takes time, too. So really, we find the same. The chains that sell on the most value are those that have a presence in a community, obviously, operationally they need to be well run. But when there’s a pathway to continued growth especially, that’s a big factor.

Andrew

Absolutely. I also look at how many cars they’re washing and their washed count, so sometimes, someone is trying to sell us a package of five or six washes, but many of them are doing like only 50,000 or 60,000 cars. And that’s perfect for someone who is trying to look for that, but a lot of car wash buyers are looking for kind of like the 100,000 and up or 120,000 and up express washes.

Lanese

Just a bit higher performing or higher volume in general.

Andrew

Higher volume, right? Because if you already have to manage a site manager, and you already have to bring on a new site, it’s important to think about is this worth the time and the money to oversee this? It’s also about like sometimes car wash sellers are just looking to recoup the money that they put in. Their expectation is I put this in, I deserve this. And I think it’s important to kind of level set with them and make sure they understand that unfortunately, your wash is producing $300,000 of EBITDA. It’s going to be hard to sell this for anything more than a few million dollars. It gets very disappointing for some of those people, but it’s important that everyone kind of understands that it’s not a reflection of how much money you’ve put in, but actually how it’s producing. And so sometimes those two are disconnected. I find that brokers have a hard time telling people, it’s not worth that.

Lanese

I think it’s the expectation setting so that you can start out with having some realistic goals. And I know for us, we get asked all the time. So what are the what are the multiples right now? What’s what’s it going for, and we’re very, very wary to give any type of numbers because it depends on a lot of things. So there are changed that have sold for very, very attractive multiples, but they had all the right ticks in all the right places; they checked all the boxes. And it’s very rare that you have somebody that’s checking all these boxes on the scale that they have. So most of the time, we want to just look at their their operations, see where they’re performing well, or maybe there’s things that they can easily do to kind of enhance what they already have. But it’s about your team. It’s about your curb appeal; it’s about your cleanliness; it’s about your staff, and your training, and your quality of output; your customer base. It’s an amalgam of all of those things, as well as how many sites do you have in a region that could play a factor? Or are there other sites that are in the development pipeline? That’s another one! Because that jumpstarts your job. You know, that’s a value to you.

Andrew

And how many members do you have? I’ve heard this two different ways. And neither way is wrong. But you have to know who you’re talking to as a buyer, because some people say, “Oh, this is amazing. They only have 10% membership penetration on their washers. There’s so much upside. Once we come in, we can get that up to 60 or 70%.” And then we’ve heard “Wow, this is incredible. This platform already has 60 or 70% coming from members. Our work here is done. It’s going to be really easy to manage.” It depends on what people are looking for. How close are competitors? Are there any new permits coming out for a new car wash? And all of that adds up. It really does. Sometimes businesses like ours want to add a team and say we’d love to acquire this whole team and have you guys come and work for us. And sometimes it’s like, you know what? We’ve got enough team members. You guys can go on and do whatever you’d like. And that’s where the Tetris comes in, right? That’s where they’re looking to exit and not think about car wash is again or they’re focused on building other things or they want to develop other car washes in a different area that might be a perfect fit for one type. It might not be a perfect fit for what we’re looking for or someone else is.

Lanese

Absolutely!

Andrew

I think there’s like a whole matrix of what the buyers are looking for and what the sellers are looking for. And that’s where it comes together really well when you have top quality people who can who can figure out what we need. My very first meeting at Amplify’s offices, I came there and I met with Alex Pavone and I met with Jeff. Alex introduced me to what the REITs are doing and how we could do some sale lease backs, and I had never heard the term sale leaseback before because of course I came from technology.

Lanese

Yeah, nothing to sell.

Andrew

Yeah, I thought curb appeal was something that was just focused on how you know… selling your home. And it was incredible. It was this flight I took from New York to Arizona that pretty much changed everything about how we were doing it. It kind of sparked the rocket ship that led to selling most of the equity in our business eight months later.

Lanese

Right. By doing that you opened up this whole other avenue to continue growing this platform on a much larger scale through those series of events, which I think is really cool.

Andrew

Absolutely. It certainly, like the phone background says it, it began as a mistake. It really wrapped up very well to what it is now. And that’s kind of unfolding into being something really special. The Strickland Trademark Princeton combination has led to amazing opportunities on the acquisition side. And so that’s… You know, my role is literally just talking to car wash owners every day. The call I have next and the call I had before this is just talking to car wash owners. And I’ve learned what each one of them sometimes the misconceptions they have and sometimes the needs that they have, and trying to like homogenize all of them into this one bucket, you know, to help them on their path, too.

Lanese

Right. And because we’ve been friends through this process, as well as had these other professional relationships and deals and things going on… Entering the car wash business is not an easy one, when you are the guy or the lady that’s getting the calls about things are broken, or somebody didn’t show up. And I feel like what amazing street cred that you have gained over the time, even though this is a relatively short period. But working… you now can identify with these car wash owners that you’re speaking to on a much different level, because you have experience with some of the same pain points that they have. And some of the same struggles on an operator level that it’s so broad when you actually get into it of what goes into running a successful car wash business. And so it’s nice to be able to identify that with them. Because you’re like, “I hear you, I see you. I know that this is not, you just run the car through and everything happens on its own.” And there’s so much behind the scenes, even magic, you know with it sometimes, but it takes a lot of work to orchestrate all of that magic. That makes such a big difference with such a communal industry that if you have someone that’s on your same team, and it’s an insider, it’s easier to be speaking the same language. And that’s… from our side, you know, with my Amplify hat as well, we understand because we’ve been there. And that makes a big difference.

Andrew

It absolutely does. I would say that I don’t recommend the path that I took to anyone else. But I certainly did a lot of faking it before I made it.

Lanese

Sometimes you gotta!

Andrew

And I remember the first time someone mentioned that there was a DRB report. And I said who is Dr. B? And why does he have a report for me? There’s so many things I learned in three years to just get caught up to where some of these owners had. But one of the best ways — and I recommend this to everyone; I recommend this to brokers and car wash owners, people who are interested in selling and people who are not interested in selling — go through the experience of visiting 10 or 15 car washes in a day. No one’s going to care that your car is clean. I do this with rental cars, pretty much eight washes a day, 10 washes a day. You’ll always learning something. Why does this group prep my car with two people? And this one preps it with one person? And this one doesn’t prep it at all? Why is price unrelated to those three aspects? What are they doing better in their tunnel versus this tunnel? What equipment are they using? How does my car look? Curiosity is the core of any growing car wash platform. It’s where should we build? Or why should we make this choice versus this choice? And anyone who I’ve met who has all the answers, who isn’t curious because they’ve been doing this for so long that they don’t care what this experience down the street is, they’re missing some valuable information. They’re not gathering the right background to help their business grow. I think it’s really critical to just constantly be going through car washes. Plus it pumps up the industry’s numbers.

Lanese

Right, yes! And you touched on kind of one of the other personal things that are very important to me. So one, on the relationship side, just building these meaningful relationships so that you have both… Again, you have your professional hat on, but then also it’s such an added bonus and such a gift when you have the personal relationships as well, like you and I do. I would call us friends, which we are friends! I’m not just calling us friends, but also the second thing, and they’ll kind of just wrap up our time a little bit, but practicing curiosity in every aspect of everything that you do. It’s kind of like the relationship subject. It doesn’t end anywhere. It’s everything. And that’s the same way feel about curiosity because for a perfectionist like myself I can be a little, just a tad judgmental, of myself, very critical, but when I reframe it from practicing curiosity, even just shifting that language to looking at it and phrasing it that way, it opens up my ability to be able to say, I can look at somebody else doing something in a certain way that may be even better than the way that I have been doing it. But by calling it curiosity and just giving a little space to look at it, then you can kind of use that information, process it, file it, maybe take actions on it in a different way than just I’m doing it wrong, or they’re doing it wrong or better. You can just give yourself a little bit room. My ears perked up when you said that because I very much identify with just that mantra of just practicing curiosity in whatever you’re doing.

Andrew

Absolutely. It’s really important, and I hope more people are curious about looking at selling their car wash. I hope more people are interested in helping fuel the industry’s growth for the next few innings, however long that takes. And I hope that we can get more people interested in Trademark Car Wash because you personally added so much value to this company that I wear on my shirt every day. Except when I’m traveling through competitor tunnels.

Lanese

Yes, yes. Yeah, you’re like, Hi!

Andrew

Scoping out sellers. Don’t worry, I’m not wearing this…

Lanese

I know it’s 100 degrees. But I’m wearing this vest because I’m cold!

Andrew

Right, exactly. But I do think I owe a lot to you for a lot of the introductions that you’ve made for me. And also, I owe a lot to Amplify and Alex Pavone specifically. He might be almost 20 years younger than me. But he shepherded me through a fast forward process of buying, financing and selling that I couldn’t have imagined eight months doing that many, that much volume of deals, and I definitely owe a lot to you guys for that. So thank you personally, and thank you to the business.

Lanese

Well, definitely appreciate that. But Andrew, it’s such a pleasure to have you on the show today. And I really appreciate that you have brought us along on this journey. The relationship that we have with you from both the Amplify and Commercial Plus ideas is so interesting, because it’s the most complex transactions that have gone on in such a short period of time. But it’s just really neat to see how fast things can move and how finding the right people at the right time can make a big difference if you have that relationship and that trust with each other, so thank you for trusting us. I am very excited to see where Trademark continues to grow. And of course I will continue to watch and follow the brand because I’m interested, and I want to see how it can keep growing. And I also wanted to ask you just kind of as we wrap up, if you would tell me the names of your two most precious little white dogs.

Andrew

There are two little dogs that I co-parent, and it’s LeDanian Pomlinson.

Andrew

I definitely would never have remembered that.

Andrew

If you know football, there was a great running back named LeDanian Tomlinson, but we changed the boy to LeDanian Pomelinson, and the girl is Lily Pomelin.

Lanese

I will ask you for a picture to have them because I did see these dogs, and they are the cutest things I have ever seen. They look like they are my four and a half year olds favorite little stuffed animals. I could just look at these dogs all day long. So you are lucky to have these beautiful creatures, these little cute white Pomeranian dogs that live with you, and I’m jealous.

Andrew

Amazing. I want to thank you so much for everything again.

Lanese

Thank you everyone for listening to Episode Eight of Car Wash M&A, The Podcast. Today I had on the show Andrew Goldberger, who is the founder of Trademark Car Wash and also the director of mergers and acquisitions for Trademark. You can find the episodes on Google or Apple, and we would love if you would leave a review for us if you so choose, and tune in the last Thursday of every month for new episodes. Until then, thanks!

About the Episode:

Ready to grow your car wash chain and wondering about your financing options? There may be more available than you think. In this episode, guest Bill Koenig, a seasoned investment banker, shares with host Lanese Barnett various financing options to facilitate meaningful growth or fund capital improvements on existing sites, many without going to the local bank and signing another personal guarantee.

Bill and Lanese also talk about how firms like Amplify Car Wash Advisors support and advocate on behalf of car wash owners going through a capital advisory process helping ensure the best terms for the owner to maximize their value. Having professional investment banking representation coupled with running a competitive bid process to create healthy tension among potential financiers and lenders can make a major difference in how favorable the financing terms are for the car wash owner. Listen to this episode to learn more about your options to fund growth, and how to get started.

More about Bill Koenig:

Bill Koenig has more than 25 years of financial services experience in the areas of investment banking, corporate finance, leverage finance, subordinated debt financing, equipment leasing, commercial real estate investing, and both primary and secondary loan syndications and trading. He has completed more than $3 billion in M&A and capital markets transactions encompassing management led buyouts, sell side engagements, international financings, complex commercial real estate, and various structured debt transactions.

Previously, Bill was a managing director with CREO Capital Advisors, a FINRA-registered investment bank based in Los Angeles, where he led multiple sell side mandates and was head of Capital Markets. Prior to CREO, Bill served as executive vice president for Western Alliance Bank (NYSE: WAL) in Phoenix, Arizona where he managed various specialty banking groups including corporate finance, leverage finance, equipment leasing, municipal finance, resort finance, and the bank’s equity investments in several SBIC funds.

Bill holds a Master in Business Administration (MBA) degree in corporate finance from the University of Southern California where he graduated with Beta Gamma Sigma honors, and a Bachelor of Science in economics from San Diego State University. He serves on the board of the Alliance of M&A Professionals, Phoenix Chapter, and was a previous trustee with the Phoenix Art Museum and Phoenix Symphony. Bill is registered with FINRA and holds the Series 63 and 79 licenses.

Check out the full transcript below:

Lanese

Welcome to episode seven of Car Wash M&A, The Podcast. Today I have Bill Koenig, who is managing director of mergers and acquisitions at Amplify Car Wash Advisors, on as our guest. And Bill has more than 25 years of experience in investment banking, and brings such depth of knowledge to our team on the financial side. And so today we’re going to talk about some of the insights and tips that Bill can share on how to fund growth that is separate from selling part of your business and just looking at other ways to fuel that growth. So Bill, I’d love for you to share with our listeners a little bit about your background. And then also what got you interested in the carwash space particularly.

Bill

Sure, I’d be happy to. Well, you know, I’m a California native by origination. I’ve been in the capital market pretty much my entire life. I started off on the private equity side working for a business in San Diego called Home Capital Development Group. And then I ended up going to work for Warehouse Venture Company, which was 100% focused on joint ventures in the commercial real estate space. But then ultimately, I ended up coming over to the banking side and was a corporate banker for a number of years, both real estate industries and then non-real estate industries. And then I ended up getting my MBA from USC, gosh, 20 years ago now… seems like forever ago! And then I ended up going more on the investment banking capital market side. So I worked for a boutique middle market investment bank out in Los Angeles for a number of years and really kind of met Jeff Pavone when I was in that prior role. We were working on a similar client, a shared client, and got to know each other through that process, and eventually decided to work together. So now I’ve been here about 18 months. I was originally an independent contractor and am now full time. And 80% of what I do is really sell side engagements, like you mentioned. That’s really… you know, Amplify talks a lot about that, sell side mandates. But then there’s also this 20% that’s capital raising or debt placements. And so I focus on that as well.

Lanese

We’re happy that you made the transition over to a full time car washer and on the team here. We came on board around the same time. And it’s been fun to watch how the team has grown with Amplify Car Wash Advisors, and seeing again, the depth that our resources we have through the experiences of each of our team members. So one quick thing, too, just about your transition into specifically working more in the car wash space. What has surprised you most about the car wash industry as you’ve become more familiar with it as a specific area of business?

Bill

You know, to be honest, it’s the margins! You know, I’ve worked in a lot of different industries, many of which I thought had very attractive EBITDA margins, EBIT margins, you name it. And when I got exposed to the car wash business, it was really remarkable how thick the margins are, but also how stable they are. You know, with this growing subscriber base, this recurring revenue base, it’s made the industry incredibly attractive, not only from a risk perspective, because the cash flow is so stable, but also from a valuation perspective. And the people. I would say that’s the third thing. There’s a lot of really great people in this industry. Very smart, very hard working, salt of the earth types. And it’s a pleasure to work with people like that.

Lanese

I totally, totally agree. That is one of my favorite things about the car wash industry and the community itself is that you have this broad spectrum of people that all have this shared niche interest (and I think niche to kind of the broader world) that car washing always kind of gets a side eye — “Oh, you’re working in a car wash?” — but it’s a very, very dynamic industry that I think that once people get exposed internally to it that they really get drawn because of that communal sense amongst the people. And then it is an attractive business model in and of itself because the money is good. So… Okay, so you also mentioned earlier that we do a lot of sell side representation. And a lot of our business is kind of focused on… We have these three areas in our tagline: sell, partner and grow. And so we we do talk a lot about the sell side of it. And we talk a lot about the partnering side with private equity groups. But what about this third part with grow? What are some of the methods and ways that car wash chain owners can fuel that growth? Especially if they’re a smaller chain, let’s say five to seven locations. What can they do?

Bill

Yeah, that’s a great question. So, you’re right. You know, a lot of the activity is around these majority buyouts. But there’s also this smaller recapitalization play on the balance sheet. Maybe it’s a minority equity raise. Maybe it’s a non-dilutive debt placement. Maybe it’s even a sale leaseback.

Lanese

Bill, can you talk to me a little bit about the non-dilutive debt placement just for our listeners. Can you unpack that for us, please?

Bill

Yeah, so essentially, it involves going out to a traditional financing source like a bank or maybe a finance company, or maybe institutional REIT that will do a sale leaseback. Where there isn’t an exchange of equity interest in the business, it’s really a debt facility that’s put on the balance sheet, right? So no change in control. It’s very cost effective, especially on an after tax basis, versus equity, which can be much more expensive. And it can be used for a variety of things: it can be used to do a technology refresh at the business, it can be used to go out and buy new equipment, or it can be used to do acquisitions, tuck in acquisitions under the existing business. And a lot of times, you know, we’ll find, you know, smaller car wash operators, like you mentioned, five to seven units that don’t want to sell their business, aren’t looking for a transformation, and all the cultural issues that come with that. All they really need to do is find some, you know, attractive capital to go out and do some acquisitions and grow their business. And we get calls like that quite frequently. We’ve done quite a few debt placements in that space both with banks and with non banks. And like I mentioned earlier, it can be very attractive in terms of the cost. It’s non-dilutive in terms of the equity, there’s no change in control of ownership, the due diligence is often significantly less than it is with an equity buyout. And there’s an abundance of capital in that world that’s looking for a home. So I get emails and calls every day, from banks, finance companies, looking for opportunities, both in the car wash space and the non-car wash space. I mean, it’s clear that, you know, good times and bad, banks, lenders, whatnot, are constantly looking to deploy capital with attractive opportunities. And there’s no shortage of that in the car wash industry.

Lanese

For sure. They’ve figured out what you have, that once you scratch the surface on the car wash industry, that there’s more to be found there than maybe meets the eye on first blush. And really, you’re right, the revenue stabilizing monthly plans have been such a game changer for our industry, because this is a business that historically lives and dies by the weather. And to my knowledge, so far, you can’t control it. So that has been such a change in how the value of and the stability of a car wash is really seen. And then also, of course, we’ve seen explosive growth in the industry over the last several years. So with that growth, and with increased competition coming in, these alternative means of funding and fueling growth are more important than ever, because if you have a regional chain that’s coming to your market, and you have a couple of locations that have been really rock solid in that market in that community, but as somebody that’s maybe going to open five stores, or six stores in your area, it might be time to be thinking about ramping up as well to defend your turf.

Bill

Yeah, that’s right. And not only just in terms of maybe new builds, or new site acquisitions, but also in terms of tech refresh. You know, leveraging capital to deploy back into the business, you know, to enhance the operation, enhance the equipment, enhance the technology that’s in use to drive efficiencies… all those things that will help make the business more competitive, and ultimately more attractive to customers.

Lanese

Oh, absolutely. And you mentioned the investment in technology. And that’s another thing that we are seeing currently is this technological boom, where there are a lot of new and emerging innovations that are addressing operational issues that car wash owners face that are helping streamline what they can do in the technology front. It has been interesting to watch that. I feel like this has kind of lagged a little bit behind some other industries that have adopted some of these technological advancements sooner, but we’re seeing it on the digital side and with automation in how the payments are processed or how… We’ve had pay gates for a long time, but taking things a step further with app-based platforms, and so on and so forth. All of those things cost money, and so, in order to keep up, you have to be able to invest into that to do it.

Bill

Right. I couldn’t agree more!

Lanese

Let’s talk a little bit about what options car wash owners have. So we talked about these alternative lendings and non banks. So who might be a non-bank lender that you would suggest for an option for car wash owners that they may not be aware of, or may not have the same access to? What are some of those?

Bill

Yeah, so the two most common ones that come to mind are REITs or finance companies that are doing either sale lease backs, you know, where the car wash owner will sell the underlying real estate and improvements to a third party and then lease it back over some duration of time — 20 years, 25 years, whatever. Or there’s the avenue where a car wash owner can approach one of these finance companies, lever up their existing balance sheet, you know, get an enterprise value loan, which is a loan that’s basically lent against the enterprise value of the business. It is typically expressed as a formula: funded debt to EBITDA. And those are typically, you know, 3, 4, 5 times or less. But you can take that capital from that source, that REIT financier or that finance company, and then go use it like I mentioned — to do other things, to grow the business enhance the business, or whatnot. The issue comes with, you know, kind of… There is somewhat of a cost to debt. You know, I mentioned it was cheaper than equity, which is true. But as you look at smaller businesses, you know, under $25 million of EBITDA, as you kind of go down, you generally don’t tend to see debt facilities that aren’t personally guaranteed, right? And that can get can be a little concerning to some owners. As you get above $25 million of EBITDA, we start to see those personal guarantees go away. And the reason for that is, is because the corporate governance in the business typically becomes more robust. They often have audited financial statements, they often have advisory boards advising them on the business, they often have more defined management teams, and they have bigger market share. So all that kind of comes together to reduce risk and negate the need for those personal repayment guarantees.

Lanese

Right. And that’s huge, because signing on that dotted line for the personal guarantees… I mean, that’s a really big way for a car wash owner to de-risk personally by using an alternative source of funding that doesn’t require another personal guarantee that maybe they’ve already been using to get to where they are.

Bill

Right.

Lanese

And the ability to grow faster, because I would imagine that there’s only so much capital that they could raise going to their local banks, within a certain period of time… that there’s a limit to that or a ceiling.

Bill

Yeah, you know, there’s over 7,000 banks in this country. Everything from small community banks, $100 million of assets, to Bank of America, and Wells Fargo and everything in between. So there’s no shortage of traditional bank financing, and it’s cheap. But the problem with banks is that they’re slow. They tend to be focused on, you know, three sources of repayment: the asset liquidation value of the business, the enterprise value of the business, and then a personal repayment guarantees. And if they can’t get all three of those, it becomes more tenuous for them to get to the finish line. You know, finance companies, refinanciers, tend to be much more creative, a little bit more nimble. They can be more expensive. So there is a trade off, you know, in terms of price, cost benefit analysis, but they all pretty much require, like I said, personal repayment guarantees under $25 million. So that’s been a pretty fairly constant element.

Lanese

And you mentioned the sale leaseback option. So let’s talk a little bit about that. Is there a threshold if you have a portfolio of sites that you want to be mindful of how many of those sites that you’ve already sold the real estate as pertains to a future sale of a full exit? Is there anything that car wash owners need to be kind of mindful of when it comes to how they’re choosing to fund their growth… like if they did all sale leaseback on all their properties, does that affect the future value of their business when they’re looking to exit?

Bill

Yeah, it does. It does affect the future value of the business. You’re taking an asset on your balance sheet, and you’re moving it off your balance sheet; you’re agreeing to make a lease payment over time to service that facility. And so you’re reducing those assets on that business and the enterprise value goes down accordingly. The EBITDA is also impacted, right, because you’re now paying rent on an asset that before you own yourself and may or may not have been paying rent on, or it could have been pocket to pocket rent. That will typically get added back in terms of coming up with an adjusted EBITDA for evaluation exercise. But the flip side of that is is that when you do a sale leaseback you’re reducing the invested capital in the business. And all things being equal, if the marginal benefit of that EBITDA exceeds the cost of that lease, the invested capital goes down, the return on invested capital goes up, and so, cost of capital being the same, that’s how you create shareholder value. So it can be a very attractive way for any owner of any business to create long term shareholder value. But you’re right. I mean, there is a bit of a cost there in terms of when you do exit, the business. Evaluation can come down a little bit. Just using simple math, it could be without sale leasebacks your 15 times, your trailing 12 month adjusted EBITDA in terms of evaluation metric, after you might be 12 or 13 times. Still a great number; still a great outcome. But there’s always give and take. Same thing with debt. You know, if you lever up your balance sheet and you go sell your business, you know, most sales are structured on a cash-free debt-free basis, which means the seller gets to sweep the cash, but they have to pay off the debt. So if you lever up your balance sheet, when you sell your business, it’s less money in your pocket at the end of the day.

Lanese

So it’s like everything; there is a cost. Nothing’s free.

Bill

Nothing’s free. No free lunches.

Lanese

But that’s where having somebody help you walk through these different options and guide you through this process, like yourself, can really make a difference. Because if you are a typical car wash owner that you’re laser focused on your operations, and that’s what you’re really good at, and maybe sourcing these different financing options is not your area of expertise… So what are some of the reasons that someone might benefit or the advantages of having a professional advisor in this area to walk an owner through what their options are and walk them through the process?

Bill

Yeah, so that’s where we can really add a lot of value. You know, you think of the large fortune 500 company that has a dedicated internal Treasury team and a CFO, it’s easy for them to go out and raise capital, either debt or equity, because they know who the key sources are. They know who to call. A small business owner may not know who to call. I mean, I mentioned earlier, there’s 7,000 banks. You know, there’s literally 1000s of finance companies. And I don’t know how many RIETs, but there are a lot of them, you know, and who do you call, right? And if you do know, somebody at Bank of America or your local community bank, you know, are you calling the right person? If you call somebody in the real estate industries group, they may know nothing about car wash and they may just decline the credit, and it dies on the vine. That’s where we come into play.

Lanese

And it wastes time.

Bill

Yeah, it wastes time. So it’s not just understanding what banks look at, right? I mean, they’re looking at liquidity, they’re looking at solvency, they’re looking at how to mitigate risk. We can help with that. I was a creditor; I know how to mitigate risk, I know how to structure credit facilities, so we can help with that. But then we also know who to call internally. We know who the lenders are within these banks that actually will do car wash lending, that have an appetite to do it. So you get a response that’s favorable, not just a no return phone call. And there’s a lot of work that goes into this, too. I mean, banks don’t just want to see financials; they want to see projections, they want to see management team bios, they want to see subscription trends, they want to see churn trends. You know, it’s not the same level of due diligence that a private equity buyer or a strategic buyer would look at in a full blown sale. But there’s still a fair degree of due diligence that they dive into. And, you know, we can help pull all that together, put it in a nice clean package that we can then share with 20 or 30 lenders and create that competitive tension, that dynamic, that’s going to get our clients the best price in terms.

Lanese

And that’s really the key here is that competitive component of it to secure the best price and the best terms. So let’s talk about some of the terms that can be more favorable to a car wash owner that we would advocate for that maybe wouldn’t be on the table unrepresented.

Bill

Well, first of all, it’s the interest rate. Without a competitive process, you know, who knows what you’re going to pay? And it’s not just the rate; it’s the fees as well. There’s usually an upfront commitment fee. Sometimes there’s unused line fees, and so you take all that in connection with interest rates, and it can push the yield up considerably for the borrower. So that’s the obvious one. But the other one is terms, advance rates; how much will the lender lend? Typically on a… if you’re looking to borrow funds to go do acquisitions, it will be more of a leverage type loan structure that will be governed by funded debt to EBITDA covenants, fixed charge coverage covenants. You know, as a borrower, you want the most liberal covenants you can get. And again, you’re not going to find that the top, the limit, unless you test that with the broader capital market and create that competitive tension. And again, you know, I mentioned personnel repayment guarantees. We try ad nauseam to try to get those off the table as best we can. You know, it’s very difficult to do that. But sometimes you can get there with alternative structures. Carry agreement structure is one that’s not widely used anymore, but I still use occasionally. And sometimes I’ll get resonance from that. And they basically that instead of a personal repayment guarantee, the obligor agrees to carry the property while the bank goes through a mitigation exercise if there’s a default. Right. So that was used in California, you know, many years ago, and still used some extent, but a lot of people don’t know about that. So there’s some creative things we can throw on the table. There’s burn offs on the guarantee. You know, you may start with high leverage, but then as the business burns the leverage down, you know, say from maybe four times funded debt to EBITDA down to two times funded debt to EBITDA or even less… We’ll advocate for those guarantees to go away. And sometimes we’re successful. Sometimes we’re not. But you know, if you don’t have those dialogues… If you don’t ask for that stuff, and you don’t offer up some creative alternatives, you’re never going to get it, right?

Lanese

Right.

Bill

But all these are ways we can add value to the process. And then, I think the third thing is time. It’s very time consuming to talk to 15 to 20 lenders. I mean, we’ll take those phone calls, we’ll respond to those emails. We’ll negotiate on your behalf. We’ll be the bad cop if we have to be to get you the best outcome. So when a relationship is actually solidified, the loan is closed, the financing is in place, you know, everybody feels good about it, right?

Lanese

Exactly. And that’s something that we talk about on the M&A side as well. While we’re representing the car wash owner, we’re also having these relationships with the other side. So in this case, the lenders or whoever the capital providers are… They’re looking to put their money somewhere. So they want a place to put their money. And we want to just make sure, if it is with our client, that we’re maximizing the terms and everything for them. But it can be a win win situation for both parties involved, that everybody walks away happy from it.

Bill

Absolutely.

Lanese

And that’s definitely our goal.

Bill

Definitely.

Lanese

With this topic, we spoke a little bit about the rising competition in the car wash space, what do you see coming through for the end of the year, and then into 2023 as far as any trends, or just your predictions of what we might see on a growth level, or how car wash chains continue to scale up…

Bill

A lot of people were concerned about an economic slowdown and how that may affect the M&A activity in the car wash space. And frankly, I haven’t seen that yet, there still seems to be a tremendous amount of interest to consolidate in the industry, you know, from financial buyers and strategic buyers. That doesn’t appear to be slowing down at all. So I expect that to continue, the consolidation trend. The technology overlay is going to be tremendous. Virtually every financial buyer, we talked to talks about the lack of technological innovation, artificial intelligence, other electronic digitization methods that have not been overlaid over the industry or used to leverage efficiencies in the industry. That’s definitely going to continue through the end of the year and into 2023. And I think you know, the availability of financing, the appetite from creditors to continue to lend into the industry, it continues to evolve. Car wash is a lot like the fast food franchise industry was 20 years ago, same exact concept. You’ve got a commercial pad; you’ve got to building on it. You got people going to a fast food lane buying food… Lenders struggled with that years ago as well, right? Is it a business loan? Is it a real estate loan?

Lanese

Will people want to pick up their food and take it with them? Won’t they want to sit down at a table and have someone serve them? That’s what we heard with the Express exterior model; no one’s going to want to vacuum their own car. This is ludicrous. Right?

Bill

Right. And so all those fears have now gone away, right? People see it as a legitimate business. The capital market has become very sophisticated. Everybody knows now what good margins are versus bad margins, what a good operator looks like in terms of churn statistics and membership profile versus what a poor operator doesn’t. You know, six years ago, that wasn’t the case. Nobody had a clue. And so now it’s become very sophisticated, which is good because more people, more lenders, have entered that fray, that capital provider segment of it. The ability of funds has gone up precipitously because of that.

Lanese

And it’s beneficial for the consumer as well. Because as this iteration or this genesis of the car wash industry keeps going, we’re providing a better product, too. We as the car wash industry, we are providing new services in ways that are appealing to customers, because we keep seeing the demand and the appetite for professional car washing rise. So we haven’t even peaked on where saturation may be because people still want it, and even through COVID, there was a huge concern about people aren’t driving, they’re not going to work. But the car wash industry was very resilient. And so that is something that leaves some optimism with the current economic climate that’s a little bit changing, or there’s some fears with things going on and interest rates and global issues that affect all businesses. But so far we’ve seen that continued resiliency with the car wash industry.

Bill

Yep. The “Do It For Me” trend is going to continue right and car wash plays right into that. It takes a lot less water to go through a commercial car wash than it does to do it yourself. And with the water issues, especially in the west, where I live, that’s a real concern. And so, I think that all benefits the industry long term.

Lanese

Gosh, you know, you talk about water issues. So, I’m in Texas; you’re in Arizona. Big drought situations right now, but this is something that happens a lot. But even globally, in Europe, they’re having crazy wildfires and their main river sources are low, and so it is a little bit of a… It’s something to be mindful of that water is going to remain a very hot button topic that… Again in Texas and Arizona particularly, it’s always something that’s kind of (and California), it’s always something you’re kind of thinking about. But it seems globally that water continues to be a big issue. Bill, we talked a little bit in the beginning about those three things: Sell, Partner, Grow. And I just wanted to circle back with that and talk about some of the benefits specifically, of using capital advisory and using these alternative means of funding to grow your business as opposed to funding through equity.

Bill

Yeah, so there’s a number of benefits in using debt versus going to a sale and raising equity. I mean, the most obvious one is that the business owner retains control, 100% control, and also is not diluted in terms of their equity ownership. That’s a big one, right? Debt is non dilutive. The second one is that debt is cheap, both on a pre tax basis, and even more so on a post tax basis. You know, equity can cost now more than 25 to 30%. Debt is typically in that kind of 5 to 10% range pre tax, which is significantly less than equity. A lot of people don’t realize that equity has a cost, even though it doesn’t have a mandated fixed payment every month or every quarter, there’s an opportunity cost, there’s a public capital market, and everything’s benchmarked according to that, in terms of equity return requirements.

Lanese

And the control side of it.

Bill

Yeah, and the control is huge. You go out and sell 51% of your business, your partner, obviously, is going to be very smart, hopefully, there’s going to be a great cultural fit, and they’re going to help you scale the business. But they’re going to demand a lot. I mean, the reporting is going to be monthly; there’s going to be quarterly board meetings, if not more. You don’t have any of that with debt. I mean, you have some reporting requirements that are typically quarterly, and then there’s annual, as well. But there’s no typically monthly reporting; there’s no mandatory sit down meetings with your lender.

Lanese

And that’s something that we find a lot with car wash owners that they are used to being their own boss. And so they have started their business, grown their business. And when you change the structure of that, that now they’re not their own boss, it can be really beneficial. But it can also be a very tough transition. So this is a way for, especially people who are looking to continue their career and growing and scaling and are not ready to take that avenue, this is a great option for them.

Bill

That’s exactly right. I completely agree. The other thing is, there’s a couple of more things here. The level of due diligence is nowhere near as exhaustive with debt raise as it is with an equity raise. And that’s another thing to keep in mind, in that for businesses that have a modest amount of leverage on their balance sheet right now. You know, leveraging up that balance sheet to go do acquisitions or maybe even do a dividend recap. And it was a very viable alternative to an equity raise. So those are all things that business owners ought to consider when they think about you know, a full sale, a partial sale, or a debt placement.

Lanese

And talk to me about the dividend recap.

Bill

Yeah, so a dividend recap essentially, is a company borrowing money, leveraging up their balance sheet, and then distributing out those debt proceeds to the equity owners as a dividend distribution, a special one time dividend distribution. It’s common place in the corporate world to see leverage recaps; not so much in the car wash space yet, but I think there’s an opportunity for that. A good example of that would be someone who had, you know, seven to 10 or more stabilized car wash assets, they’ve been in the family or they’ve been in the under the common ownership for many years. Very minimal debt, maybe there’s some equipment debt, but that’s it. So there’s an opportunity there potentially to go from kind of zero debt up to maybe three, three and a half times funded debt to EBITDA and use those debt proceeds either as a full dividend distribution or as a partial dividend distribution, or an equipment refinish or a technology refresh. So lots of different flexible avenues that one can take with that.

Lanese

Right. And what would you suggest to car wash owners that are looking to begin this process? Are there any tips or suggestions that you have on what they can do internally to prepare either their books and records or prepare their materials as they start navigating potential capital raises through these alternative means?

Bill

Yeah, my advice to them is exactly what we would do if they were to hire us right to go out and seek capital for them. You know, I would start thinking about getting the financial house in order; make sure your books and records are clean. If you haven’t had a CPA do your accounting, your bookkeeping, it might be a good idea to start thinking about that. If you don’t have a CPA, then definitely pull all your tax returns together, because that will be something that lenders will want to vet. Make sure you pull together your ownership schematic so someone can easily see how the business is structured. Pull together your functional org chart of your people; pull together bios on your key people. Look at key statistics on your customer base, you know, customer churn, growth trends, how you’re taking… any new marketing initiatives you’re pursuing to drive revenue in the business, any technology initiatives you’ve taken in the past or are planning on taking in the future… Clearly identify what the sources and uses of the loan proceeds are going to be for, and clearly think about what the repayment sources are going to be. Your cash flow, the value of your assets, the value of your business, all that stuff goes into kind of a lender’s mindset of how they wrap their brain around whether this is a good opportunity for debt or not a good opportunity for debt.

Lanese

Well, and that stuff takes a lot of work. So that is where it’s nice to have an outsourced option that’s a professional that knows exactly what those lenders are looking for to help compile all the information that owners may not just have laying on their desk in a nice folder that has everything prepared ready to go to show someone else, so that is a really attractive part of it, of not getting bogged down with pulling together all that information that we can help with that.

Lanese

Right.

Lanese

Well Bill thank you so much for being on with us today. Again this was episode seven of Car Wash M&A, The Podcast. It’s hard to believe that we’ve crossed over the you know the halfway mark of the year and the seven months have gone by so fast. Where can people reach you if they have any questions or want to reach out to you directly?

Bill

Oh, my cell phone is always the best place to reach me that’s 602-769-4501. Text or call anytime.

Lanese

I’ll take you up on it, Bill. I’ve got some questions. But thank you again, and thank you to all of our listeners. You can find new episodes the last Thursday of every month. Please feel free to review our show if you are so inclined, and we will see you next month.