With broader consumer acceptance of express exterior only wash operations, the establishment of recurring revenues via monthly plans, and advances in technology and automation, the car wash industry has certainly caught the eye of the investment community. Last year surprisingly revealed that COVID-19 was actually a catalyst for accelerated interest from private equity and institutional investors. With its pandemic-proof and Amazon-proof model, what was hyper-growth has shifted to explosive growth.
The pace of activity will continue to quicken as many top chains are in a race to get to 500 or even 1,000 locations. Now that private equity has entered the space and seen measurable, stable returns from investment, institutional interest has intensified and that means a lot of dry powder is there ready to deploy. We foresee transactions doubling from last year with some private equity backed platforms trading hands and continued consolidation of smaller chains. Following Mister and Driven Brands going public, 2022 will likely see others following suit as well. Though the cost of building a car wash is climbing, with an entry point at about $5 million or more depending on the local market, greenfield development will also continue to rise in an inflationary environment. Currently many chains are prioritizing acquisitions in an effort to gain new market share, but at some point, it becomes cheaper to build than buy, even with elevated development costs. Especially with valuations at an all-time high. For potential sellers on the fence, now is a good time to examine where you want to be in a few years and learn about your options. There may be more than you think.
Here’s the “secret sauce.” Scalability through solid operations and a deep bench when it comes to your team. In today’s market, scalability is everything. Even if you are just starting out, plan for growth from the beginning. The most valuable chains that have sold or brought in partners have done it because they have solid infrastructure – not only did they have a great car wash, but they had a phenomenal team that was driving same store volume through marketing, training, memberships, et cetera, and they can replicate that success time and again as they scale.
With the current boom, we get asked daily where we are in the growth cycle and when the music will stop. While no one has a crystal ball, we do think the car wash industry has a lot of opportunities for continued growth and there is still quite a bit of runway left. At the end of the day, the express car wash model caters to emerging consumer preferences, and the industry is still very fragmented. So, the 4th inning in our estimation. Want to dive deeper into car wash M&A predictions? View all Car Wash M&A, The Podcast episodes here: http://amplifywash.com/podcast