While the carwash industry is in an evolutionary state, the conveyor carwash space is still dominated by owners with one or two locations, which make up 73% of the market, according to the Professional Carwashing Industry Report: Third Edition. Even with the emergence of national brands and mega-developers, the top 10 operators combined currently represent less than 10% of market share.
But, the tides are changing. What used to be a local, neighborhood business model is undoubtedly taking a new shape. It was not that long ago when there were only a few big players in the carwash space, including Mister Car Wash and International Car Wash Group (ICWG). While Mister still boasts the largest store count at 344 locations (at the time of writing this article), several brands are announcing aggressive growth plans, looking to surpass the 100-store mark — some by the end of the year.
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So, what does this mean for the smaller operator? Especially when the branding, strong financial backing and resources available to the big guys far surpass what a local operator has access to? While bigger chains may have the overall advantage, smaller operators can still position themselves for success.
The power of community
For owners and operators with a few locations, most often they reside near their businesses. By being residents themselves, small business owners can capitalize on a local climate by celebrating community achievements or local sports in promotions and advertising. Additionally, they can tap into the community through fundraisers, charitable donations and school sponsorships not only to build goodwill but also to raise brand awareness by reaching an extended audience.
Actively hire employees from nearby high schools or community colleges. Once one or two employees are in the door, they often become an excellent recruitment tool with like kind attracting like kind. Employees can even be highly effective brand champions, promoting the business to their friends and family, especially if they feel valued and part of the team. Consider name tags to help foster relationship-building with customers and staff.
Maintain an online presence
Keep up with online reviews, prioritizing Google and Yelp, and maintain a digital presence with a current website and social media accounts. Even without a robust marketing team, responding to customers online and through social media outreach shows the community a business cares and prioritizes customer feedback.
In today’s world, third-party validation online drives business as the new iteration of good old-fashioned word-of-mouth advertising. Even negative reviews can be an opportunity to showcase how customer complaints are handled; while the reviewer may not change his or her mind, perhaps another person scoping out the business will agree with how the owner approached the negative review and decide to give the wash a try anyway. Conversely, ignoring online outreach can harm a business by looking outdated or worse — uncaring.
Embrace change
Smaller operators have something bigger brands often don’t: agility. With a single site or just a few locations, the owner is often the operator or has a hands-on role in operations. With a smaller leadership team, decisions can be made with less red tape. That ability to try new ideas and pivot quickly can be a huge benefit and an opportunity to differentiate from the competition. Don’t be afraid of change. The carwash industry is evolving and changing, and the ones who will likely suffer in the long run are those who doggedly shy away from change.
Keep it clean
No matter how big or small, all carwash operators are in the cleaning and janitorial business. All customers want to see a clean, well-maintained facility to feel warm and fuzzy about the cleaning services for which they are paying.
Implement daily cleaning routines, and pay attention to the small details. Manicured landscaping, fresh building and driveway paint, new vacuum claws, clean tunnel walls, and a lot free of litter and debris all work together to solidify the carwash’s purpose, which is professional vehicle cleaning. Replace faded or damaged signage, and regularly print brochures — making even small tweaks — to keep materials fresh. This also goes for employees. Make sure employees are in coordinated, clean and wrinkle-free uniforms.
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Enter growth mode
While there is no way to exactly predict the future, a data-driven analysis of historical trends highlights the direction the market is going — and it is positioned for accelerated growth of regional carwash brands scaling in markets over the next five to 10 years. As these brands continue to grow, smaller operators will need to grow as well to stay competitive. Otherwise, they risk being squeezed out of their own markets, especially if a customer can use a monthly membership plan at 20 locations with a bigger brand rather than at one or two locations with a smaller carwash brand.
If a smaller operator has a successful site, he or she needs to be prepared to defend it with another location before the competition does. Look to see if there is room to build inside a five-mile radius of the existing location(s) to capitalize on the branding power and established community position. The good news is that today there are more options available for owners looking to grow. Be it from a strategic partnership, majority or minority sale, or raising capital without going to traditional lenders requiring 25% to 30% cash equity, more availability of capital means smaller brands can grow, especially as the cost to build is on the rise.
Prepare the exit
The market is red-hot with regional and national brands in a race to get big fast. With demand ramped up, business valuations are at an all-time high, especially for multi-site carwashes with the stability in revenue from a monthly plan membership. Because of this explosive growth in the industry, smaller operators are in a favorable position, because they have something of immediate value.
As larger brands are looking to rapidly expand their footprints, in many cases there is an advantage to acquiring an existing location instead of opting for greenfield development. But at some point, as larger brands achieve scale in a market, it becomes cheaper to build from the ground up than to buy an existing location. In this seller’s market, carwash owners considering a full exit should take advantage of the interest in their operations now, before their markets become saturated and diminish their valuations.
The carwash industry is growing at a rapid pace, and now is not the time to stand still. While smaller operators still hold the lion’s share of the market, private equity’s interest in this fragmented business is driving a paradigm shift towards consolidation. Smaller operators have a unique opportunity to take the next step and scale their businesses or consider selling at a time when valuations are possibly at the peak. Whether selling or scaling, seeking guidance from a trusted advisor that specializes in the carwash industry can help maximize the value of operations.
Lanese Barnett is the vice president of business development for Amplify Car Wash Advisors, a national carwash advisory firm. With a mission of creating wealth for clients, Amplify helps carwash owners sell, partner or grow using practical industry experience as operators coupled with expertise in mergers and acquisitions and capital advisory. Learn more at AmplifyWash.com, or reach Lanese at [email protected].
