Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

I would like to discuss the car wash business with you. I'm trying to learn about the industry, which you are obviously very familiar with. Ultimately, I want to understand the public car wash companies, Driven and Mister Car Wash. But first, could you spend a few minutes explaining your background in the car wash industry? I've had a chance to see your bio, but it's always better to hear it directly from you. After that, we can move on to my questions.

I've been in the car wash industry for over 35 years. My family was in the car wash industry, manufacturing car wash equipment. I put myself through school, not intending to run car washes, and earned an accounting degree. I sat for the CPA exam but remained in the car wash industry. I also took the 7 and 63 exams. Over the last 27 years, I have managed the two largest car wash companies in the country. The first was Wash Depot, from 1996 to 2012. I stayed with them until 2018. It was the largest full-service car wash company and the first to attempt to go public. After that, I worked for Mister Car Wash as the Director of Operations, Midwest Operations, and then as the Senior Director of Facilities.

In these roles, we built our own stores, installed our own equipment, and handled all our own maintenance. I then became the Chief Operating Officer of Clean Freak, which later became True Blue Car Washes. We were acquired by Circle K and became their car wash platform. We currently have 65 stores and are planning to expand to around 150 through mergers, acquisitions, and greenfield projects in the next two years.

That's impressive.

I've pretty much done it all.

How do you decide where to locate a car wash?

Location is crucial. We examine the demographics of an area, favoring those that are up and coming rather than declining. Let's discuss car washes. There are various types, but currently, 95% of new builds are express car wash models, based on subscriptions. With this model, we aim to build locations convenient for customers to capture subscriptions, which changes the ideal car wash location. For instance, I might have previously considered placing a car wash in a destination location, like near a Costco. However, now I prefer to place car washes near daily necessities. People need gas and food, but they don't need a car wash. So, if I can place it near a daily necessity, like a Starbucks, a convenience store, or a grocery store, it becomes more convenient. Ideally, I'd have four locations in a city covering where people live, work, shop and play. This makes it convenient to have a subscription.

Do I need to be on a corner? Not necessarily. I don't need the prime corner spot, but I also don't want to be hidden behind a shopping center. I need decent visibility and good access. I don't want a location where the speed limit exceeds 45 miles per hour. There are numerous variables to consider, but these are the main ones. I also avoid building too close to other car washes. Unlike gas stations, which often build across the street from each other, we don't do that in the car wash industry, even though the cost of entry is similar, around $6 million per location.

Could you elaborate on that last point? I'm interested in understanding how the presence of competitors influences where you place a car wash.

It depends on my strategy for that particular town. If I'm trying to flank a competitor, I will certainly place locations on either side of them. People tend to get gas and wash their cars on their daily routes. Most people tend to get gas on their way to work and wash their car on their way home. If I can position my car wash as the last stop before they reach their neighborhood, I can attract more business.

How does the presence of existing competitors influence your decisions about where to locate your car washes?

The choice of competitor and demographic in the area I'm operating in are crucial. For instance, if I'm competing with Mister Car Wash, I first consider the demographic within a three-mile radius, or a nine-minute drive time. This radius might not equate to nine minutes in cities like Houston, Texas, or Atlanta, but it could in smaller cities like Austin, Texas. I also consider the competitor's presence in the area. For example, if someone proposed building stores in El Paso where Mister Car Wash has 25 stores, I might be hesitant. However, I might be more inclined to build in Pensacola, Florida, where the only competitor has three stores. If I build five stores there, I would control the market. This decision is significant because building in either El Paso or Pensacola costs $6 million per store. Many people are looking for what they call a "blue ocean" strategy. I refer to it as the AA baseball strategy. The question is, would I rather own in smaller towns like Knoxville, Tennessee, or Pensacola, or try to be a significant player in larger cities like Chicago, Houston, or Los Angeles, where I would need to establish 25 or 30 stores?

Could you clarify how many stores are needed in a market to be defensible? Or perhaps I'm misunderstanding the concept.

No, you're correct. Some markets are oversaturated. You want to establish a presence due to the subscription model. Regardless of the location, you should have at least three stores within a 10-mile radius. For example, in Houston, I don't need to control the entire city. If I could control Montgomery County, the northwest corridor of Houston, I'd fare well. I could establish six car washes there and dominate that market, which is currently experiencing growth and development. Our customer base is approximately 55% female and 45% male.

Have you observed situations where someone has built a density of about half a dozen car washes in an area, and someone else comes along and overpowers them?

Not really. What I've observed is that these businesses either become acquisition targets for companies like Mister Car Wash or Driven brands, or they stand their ground and succeed. The latter are usually family businesses that have been operating for 30 to 40 years and have a solid reputation. They sponsor local Little League teams, and their customers, who used to visit with their parents, are now grown-ups bringing their own children. It's challenging to overpower such businesses. For instance, chains like Crew Car Wash in Indianapolis or Mike's Car Wash are considered super regionals. No one can easily overpower them. However, businesses that have been operating for less than 10 years and have three stores are likely to get acquired or outcompeted.

How far from home or work do people typically travel to go to a car wash?

Consider the scenario of a car wash that is nine minutes and three miles away. When you're at work, you have to leave, get something to eat, get a car wash, eat, and be back at work within an hour. That's our measure. If I can't get you in and out in five to 10 minutes, including you vacuuming your own car, you're probably not going to come to me during your lunch break. If I don't have a car wash near where you live, I've lost you as a customer. Therefore, we focus on speed, quality, and consistency in our product. We measure uptime, which is crucial, so maintenance is of utmost importance. For chains that outsource their maintenance, that's a significant mistake.

Consider a situation where you turn on Netflix and a message pops up saying, "Station unavailable, try back later." You might say, "Okay," and switch to Hulu or something similar. If you come back tomorrow and get the same message, you're probably going to cancel your subscription. For us, maintenance and uptime are crucial to maintaining our customer base.

How do you decide on the density of your car washes? If you're going to build six car washes in an area, why six and not seven or eight or five or four?

We want 15,000 to 20,000 people per wash. There are some variables that may sway that to less. For instance, in Yuma, Arizona, or San Luis, Arizona, where you're right up against the border and you're in the Walmart parking lot. Half the population of three cities in Mexico come over the border to go to that Walmart.

In such a situation, you can have one car wash, and the population there is like 8,000 people. If I could build another car wash three blocks down, I would, because that car wash is maxing out at 1,500 cars a day due to that unusual circumstance. There are some things like that which happen.

Suppose I go into a city where someone has six car washes and I open a 7th car wash, but someone else already has six. What happens? It sounds like you don't think it works very well, but maybe walk me through why it doesn't work or how it doesn't work.

Are the six owned by the same person and the seventh one is a standalone?


Firstly, they have the ability to leverage convenience in the subscription model because those six are spread out over six convenient locations. You have one. Why would someone buy a subscription model with you versus them? Now you're competing on price.

Let's talk about that for a second. In the last 50 years, in the car wash industry, things have settled down to where, as a customer, all the equipment looks the same, all the soaps look the same. What's my unique differentiator? Why am I coming to you? It's not because your building is blue and their building is red. Yours is brand new. That's going to get them to come over and see you first because you're the shiny new box.

Then they're going to go back to the other guy because it's just too convenient. Unless that six chain car wash does something to upset you, tears your rear window wiper off or something, or you have a bad customer experience, you're probably going to stick with them because it's just too convenient not to. So in an area like that, if I was going to go into a city that had six car washes that could support more, I absolutely wouldn't go in with just one. I'd go in with three to start and I would make sure that I'm strategically placed to hurt at least three of their stores. Now all of a sudden, I'm competitive.

Could you clarify what you mean by strategically placing your car washes to impact three of their stores? Do you mean close proximity, such as across the street?

Not necessarily across the street. For instance, if there's a single lane road with their car wash and a high demographic neighborhood three miles apart, I would place my car wash halfway in between. This means they would have to pass my car wash to get in and out of their neighborhood before reaching theirs. Similarly, if there's a grocery store between my car wash and theirs, I would position my car wash in such a way that it's more convenient for customers.

However, in cities like Grand Rapids, Michigan, where there are numerous car washes in a small radius. There are probably 12 car washes in a 12-mile radius. I would strategically place my car wash to severely impact their biggest or oldest store. If one of their car washes starts underperforming, they might close it down, especially if it's not in a sale leaseback. In such cases, the owner would just sell the property, reinvest the money in their other car washes, and move on.

Do consumers value and utilize the network of car washes? These might be slightly different questions.

Yes, consumers both value and use the network. Unfortunately, we don't have syndicated data in the car wash industry like in the convenience store industry. However, we can pull individual reports showing that customers use multiple locations throughout the month. We base our subscription model on twice-a-month usage. So for you, if you come in and buy a $10 retail car wash, I'll sell you that monthly membership for $20.

We know that our current customers use our services about three times a month. This makes the subscription a good deal for both us and the customer. We can also pull reports showing that customers use different locations, such as one near their work and another near their home. About 35% of our customer base uses multiple locations, although this varies from company to company, and city to city.

Changes in traffic patterns and shopping habits also affect usage. For instance, if a new shopping center opens up and we're located on their property, we might gain customers who used to use our services at different spots. Or, if we open a new store closer to a customer's home, we might gain that customer. However, they might still use the other location when they're on that side of town.

For example, my wife uses five different locations in a town that has 16 car washes, all from the same company. She appreciates the consistency in the product and the model, and uses different locations based on her needs and convenience.

The value of the network really comes in when customers can use different locations based on their convenience. However, to achieve this, there needs to be consistency in operations and branding. This is now starting to happen, especially with the acquisition of many car washes over the last five years. Most of the new car washes you see now are greenfield.

Mister Car Wash is a good example. They have 450 stores, of which around 360 were acquired. However, moving forward, most of their expansion will be through greenfield projects. They plan to acquire five locations per year and build 50. So, we are likely to see a seven to 10 to one ratio.

Are there too many car washes at this point?

No, there is still a lot of untapped space. The Dakotas, Montana, and the middle of the country, including Nebraska, haven't been touched. Oklahoma and Texas have a lot of open space. They are just starting to branch out in Minnesota, from the Minneapolis Metro area to Duluth, St. Cloud, and other areas like Brainerd that were never touched before. These are places that can support a car wash or even multiple car washes. So, no, I don't think we're overbuilt. I believe it will be 10 or more years before we reach that point. However, there are some cities and areas that are currently oversaturated, with Atlanta being one of them.

I believe Mister Car Wash and Driven have mentioned some challenges where more car washes have been built closer to their existing locations, affecting their results. Could you elaborate on what you're seeing? Is this issue exclusive to them, or is it an industry trend? Please tell me more about that.

There's a trend in the industry with smaller players like Club Car Wash and Clean Freak. I live in Tucson, Arizona, where Mister Car Wash is based and where there are currently around 25 car washes. I own five, Mister Car Wash has 17, and there are three other independent operators.

These independent operators don't interfere with us, and we don't interfere with them. They don't do much. I'm preparing to build five more in Tucson, a city with a population between 800,000 to a million. We have a unique strategy. We're co-locating on Circle K properties.

My subscribers receive a co-branded gas card for a 20 cent discount at Circle K. This is a unique offering. When I need new retail customers, I distribute a coupon at Circle K offering $2 off a car wash. When Circle K needs retail traffic, they give me coupons to distribute to my customers.

However, Mister Car Wash is concerned. It's not just me expanding. Another brand, Superstar, is planning to build five car washes. Tommy's Express is also planning to build five. Everyone seems to be planning to build five, adding 15 new car washes to Mister Car Wash's existing 17.

To be honest, Mister Car Wash is a bit full of themselves. They believe they're the best car wash company in the world and untouchable. But from the customer's perspective, there's not enough to differentiate them from others. Convenience will always win. They're not a low-cost provider either. If my car wash costs $8, theirs costs $10.
They don't offer discounts or certain services that others do. We provide towels and dash wipes to our customers, among other things. Mister Car Wash doesn't do this. Their model is very consistent, which makes sense for scaling. The experience they offer is the same whether you're in North Carolina or Newport Beach. They've done a great job with that. I have nothing bad to say about Mister Car Wash, but everyone else has caught up.

As I consider this, I wonder if Mister Car Wash made a mistake by not opening enough stores in Tucson. Should they have opened an additional eight or 10 stores to deter others from opening five more?

Indeed, but instead, they established five locations in Des Moines and five in Cedar Rapids, with plans to expand nationwide. However, even with unlimited funds, capacity is finite. Someone still has to construct the buildings, install the equipment, and procure the equipment. After Covid, it was challenging to obtain the equipment we needed to open a facility. The primary issue was with the electrical switch gear, especially the large 480 motor control centers. It was unavailable. Mister Car Wash had buildings ready to go, with plumbing and equipment installed, but without the switch gear, they sat idle for one to three months. Their geographical strategy was hindered because they were trying to expand across too many MSAs. They could have probably done some things better, especially in their hometown.

Am I correct in assuming that you and other competitors expanding in Tucson are accepting lower returns than what Mister Car Wash has made and is currently making in Tucson?

Correct. My model doesn't require more than 200,000 cars a year. It works with 150,000.

Is that because of the synergies with Circle K?

Actually, that's even without these synergies with Circle K. It's using an average sales price that I know I can achieve in Tucson, coupled with a lower volume expectation as we share the market. I'm planning to build a car wash within a mile of a Mister Car Wash that services 350,000 cars a year. It's one of their better locations. I'm estimating mine at 170,000. Theirs will likely drop to around 300,000. Mine will easily reach 170,000, probably 200,000. I'll appear successful, but I didn't build an extravagant facility. I built a value-oriented model that's going to do well. I'm not on a prime corner. I'm one off a corner, but still in a shopping area that people are going to pass by and get enough visibility.

A smaller building, fewer frills, lower rent. The idea is that it might take a bit longer to attract customers, but you'll be able to make it work with fewer customers and at a lower price. You should still attract them based on convenience and price. After all, it's a car wash; they don't need frills.


What frills are you cutting, if you don't mind my asking for a better understanding?

I don't have a 180-foot tunnel, which would mean a 180-foot building. My building is 130 feet. In the car wash industry, the length of your tunnel determines your throughput if you aim for a clean car. At 130 feet, I'm likely maxed out at 150 or 160 cars per hour. They could reach 200 cars per hour if they know what they're doing and have the right staff. However, you'll only reach 200 cars per hour a couple of times a year for a few hours. So, is that investment worth it? I'd rather consistently wash 100 cars per hour a few times a week. I don't need the peaks and valleys; I need consistency.

In Tucson or Arizona in general, we have 330 days of sunshine. We don't have snow like in the Midwest or Connecticut. When it rains in Connecticut, how many cars do you think are being washed? None. Or when it's snowing and you know it's going to snow 10 or 11 inches, we know nothing's going to happen. We have people there being trained and doing preventative maintenance, if I was in your neighborhood. I know the next day we're going to wash like crazy as soon as they throw salt. There's a geographic variable as well.

If you could start Mister Car Wash over, would you build smaller car washes generally, and perhaps more of them? If convenience matters so much, it seems to me that two 130-foot car washes might be a better choice than one 180-foot one.

Yes, there have been discussions about that in many companies, including Mister Car Wash, about the benefits of a smaller footprint and lower land costs. I could place it on different types of properties instead of needing an acre and a half or more.

Why 130 feet and not smaller? I'm not sure what the technical limitations are, but why didn't you opt for a five-foot car wash? Presumably, that's not feasible, right?

In the tunnel car wash industry, if you want a viable car wash, it can't be less than 100 feet.

Why did you choose 130 feet and not 100?

Due to the equipment layout we use, we believe we can achieve a better quality wash. With a 100-foot car wash, I'm likely to max out at about 100 cars per hour to get them clean. You could send them through as fast as you want, but they won't be clean or dry. Each type of equipment, such as washing, rinsing, and drying equipment, requires a certain amount of space. You also need a certain amount of room between them. So, with 150 feet, I can wash 150 cars per hour.

So, for an extra 30 feet, you have 50 more cars' capacity, and then you go an extra 50 feet, you said that gets to 200 cars?

Yes, with the extra capacity, I could accommodate another 50 cars.

There's a curve from 100 feet to longer for the speed. I'm not familiar with the history of car wash equipment, but if we're having this conversation in 10 years, do you think car wash equipment will have evolved so that I can make an 80-foot car wash and wash 100 cars an hour? Is that plausible?

Indeed, it has improved over the last 10 years, which is largely due to advancements in chemistry. The paint finishes on cars have also improved significantly. In the car wash industry, we collaborate with automotive manufacturers to design cars that are wash-friendly. This involves the design of the mirrors, the type of paint used, the windshield, and other factors. We certainly don't want to cause any damage to the vehicles.

Is part of Mister Car Wash's problem that they acquired brownfield buildings designed for car wash equipment that required longer structures in the past? Was this also during a time when proximity was less crucial, and there was no subscription model?

Absolutely. That's a challenge they are currently facing. They have a number of old buildings, particularly in colder climates like Minnesota, Iowa, and Michigan. These large full-service buildings now appear vacant because only the tunnel is being used. Instead of having 50 employees, they now have five.

Changing topics slightly, it seems like you're trying to create the Planet Fitness of car washes. If I understand correctly, you're building no-frills, slightly smaller, more convenient facilities compared to the existing ones. Is my analogy accurate, or am I somewhat off?

I'm not very familiar with Planet Fitness or Curves, but perhaps we could be likened to the F45 of car washes. We aim to have slightly smaller facilities, but in more and better locations.

The locations are designed as a network, unlike Mister Car Wash's facilities, which were built over time, in a pre-subscription era.

Now, what Mister Car Wash is doing is revisiting the Minneapolis market where they had 17 stores, all of which were acquisitions. They are now building 10 stores to fill in the gaps.

One thing that strikes me about the car wash business is that it isn't also a convenience store. I'd like to delve deeper into the potential synergies between your business and Circle K. It seems to me that while a customer's car is being washed—a process that takes five to 10 minutes—it would be an excellent opportunity to sell them a cup of coffee, a pack of cigarettes, a bottle of water, or whatever else is sold in a convenience store. However, I don't see a convenience store attached to most Mister Car Wash locations. Could you help me understand why this isn't the case?

We're going to revisit the topic of consistency, specifically with Mister Car Wash. Mister Car Wash sold off their loop, the car washes they had with oil changes, to a third party. They also divested all the gas stations they had. They don't want to be in any other business. Their sole focus is on being the best car wash company in the world. There are many companies that don't follow this model. For instance, Delta Sonic and Cobblestone in Phoenix, both great super regionals, have convenience stores attached to them.

However, splitting focus between a car wash and a convenience store or a QSR can be challenging. A car wash, with its many moving parts, requires constant maintenance and supervision. This is probably why Circle K's in-bay automatics, the small 50-foot rollover car washes next to a Circle K, have an uptime probably in the 60s. If the car wash doesn't work, the convenience store manager simply puts a cone out front or shuts the door. They're not equipped to fix it or adjust the chemistry.

When I was with Wash Depot, we managed 108 full-serve stores, 70 with oil changes, 14 with gas stations, convenience stores, and a couple of restaurants. We ran everything. However, excelling in the convenience store space and the car wash space simultaneously is likely a challenge for most.

We haven't discussed Driven. Have you ever examined their car washes? Is there a pattern to their sizes, shapes, and locations?

Driven is a different case. They rapidly assembled a collection of car washes to establish a presence in the Driven organization. These were under various names, but they settled on Take Five, aligning with Take Five Oil Change, which I thought was a smart move. However, they didn't consider how to scale the business. They lack training systems, internal maintenance, and an operating strategy.

As they're trying to put this together and build stores, they're realizing that you can't get to 400 stores without an operating model. It's too late for them. Had they done this at 100 stores, scaling would have been much easier. Currently, the industry news on Driven is that they have a high turnover rate at all levels in the company. They've brought in people from different industries to help run things, but they're probably two years away from getting it right and being ready to grow. Right now, it's chaotic, and that's their reputation.

You mentioned that 150,000 washes a year would make your washes break even. How should we think about, not specifically for Circle K but for the industry at large, the return hurdle that must be met for people to continue investing in a wash that costs $6 million?

That's what I was referring to when I said I calculate it at 150,000 cars. My return on investment is 17%. My hurdle rate is 17%.

Could you clarify how you're calculating the return? Different people often use different methods.

Circle K operates on a fee-based model, they purchase all their real estate.

You're not leasing, but buying and building for $6 million, everything included?

Yes. My revenue is from 150,000 cars a year at $10 per car.

Is that a mix of mostly subscriptions?

Approximately two-thirds are subscriptions. My margin is around 80%.
If you want to be conservative, considering I don't know where you're operating. California is more expensive than Texas. Connecticut is expensive. Let's say 75%. That's how I'm calculating it. So, based on those numbers, you're looking at a return of about 15% to 20%.

Because there's one and a half million of revenue at 80% margin. But don't you have overhead costs?

Yes, there are a lot of variables in that.

And maintenance and replacement costs over time?

Your maintenance is included in your G&A. Your overhead varies. For instance, Mister Car Wash has a significant overhead. I have no idea what Driven's overhead is. Mister Car Wash has 400 people in their corporate office.

That's quite a lot.

Yes, for 450 stores, I had a dozen. I had 12 people in my office.

What are those 400 people at Mister Car Wash doing?

Many of them are in the accounting department, and because they're a publicly traded company, they have a lot of investor relations. I can operate with much lower overhead.

I'm curious, we've criticized Mister Car Wash a bit, but they seem to have done well. Are there aspects of their operation that you admire, given that you run a smaller operation?

They've done an exceptional job with their learning management system, processes, and operational procedures. They are very efficient. They can take someone who has never been in the car wash industry, which is their preference, and train them to be customer-focused. I would describe them as a marketing company that happens to wash cars. They market to their employees internally and customers externally. They've built a great culture, and I'm trying to emulate that in my smaller company. If you build a strong culture, you don't have to repeatedly instruct your employees. They will naturally do what's expected of them. They excel in this aspect.

How many people work in a car wash?

In an express model, you will have about 10 to 12 people on your schedule. However, at any given time, we always maintain a minimum of two for safety reasons. With four people, I can manage 200 cars an hour.

How do you handle the maintenance requirements of the system?

We have an internal maintenance team. We use a formula of about six, depending on the distance between the stores and their age. But it's usually five to six stores per technician.

Is this why everyone's opening five stores in Tucson? So they can afford a technician to keep all five stores operational?

Yes, a technician will cost you around $80,000 a year.

And you need to distribute that cost across five stores.

Correct. Plus, you're providing them with a van full of tools. If you have to use a third-party for maintenance, those guys start at $125 an hour. That's a trip charge, and then the first hour. And they'll get to you when they can.

Your business isn't prioritized over others. So having our internal technicians pays for itself. Our internal tech rate is $47 an hour, including the van, benefits, training, uniforms, etc. So I've made that pay for itself. Circle K jumped on board with that. They want me to have technicians to take care of their 3000 in-bay automatics, which I told them we would get to eventually. We're conducting an experiment.

That sounds like a headache you definitely don't need. It sounds like a losing proposition.

But we're going to do a test where I already have technicians here in Arizona. They have about 50 stores and we have 27. So we'll see how that works.

Is there an IT system that everyone uses in this market? How are you running all this?

There are a couple of different point of sale systems. The industry leader, the IBM of our industry, is called DRB. They've been around for a while.

They've been in operation since 1985. They are considered the gold standard. They are the most expensive, and much of their equipment is proprietary. The next one, I would say, is Micrologic. Micrologic is somewhat of a newcomer that's taking over the industry. Their equipment is not proprietary, so if you want to use a tablet that you purchased from Best Buy, you can. That's one of their major selling points. However, that system is not without its flaws. That's the system Mister Car Wash switched to. It used to be less expensive, but I believe it's quickly catching up with DRB in terms of cost. And then, of course, you have all the associated support costs.

The largest car wash manufacturer is called Sonny's. They have their own point of sale system that's relatively new to them. It's a basic point of sale system. They're just beginning to explore that area. The last one I would mention is called ICS. They are based in Pennsylvania and have been around for over 20 years. Their operating model is not great. The owner knows how to create a point of sale system, but he's not a great business person. So, that business hasn't grown as much as it could have. They might be a good target for you.

You mentioned the lack of syndicated wash data. Why do you think that's the case? And what would you like to see if you had access to syndicated wash data?

Our industry has really taken off over the last 10 years, particularly in the last seven with the involvement of private equity firms who have really dug in and not just dabbled. So, it's coming. There are a couple of companies that have recently started. We just signed up with one called Rinsed, a company based in New York. Their focus is to help you manage your subscriptions. They provide conversion rates, churn rates, revenue streams, and other analytical data. But it's only for my stores. They don't provide data across all their stores or the industry. There's no one doing that.

There's another new company called Wash Metrics, and they do similar work as Rinsed, but more so on the expense side. They monitor my chemical costs, utilities, and labor. Most of their data is a bit late because they're pulling data from your P&L, which happens 10 days after the month's close. So, it's mostly historical data. But we're working on some things with them. That's about as far as we've gotten in the industry.

For example, Wash Metrics doesn't tell you how you rank in terms of chemical costs or anything like that?

No, no one has that data, not even the International Car Wash Association.

Would you want data that allows you to compare your churn and acquisition statistics, washes per bay, and cost per wash for various types of costs to the industry? Is that the kind of data that you feel is missing?

Yes, currently, DRB has acquired a marketing company named Suds. Suds provides a traffic report that compares my stores in Arizona to all other DRB stores in the same region, showing car counts and revenue. The information is quite basic, but it is useful. I requested them to compare my 27 stores with competitors that have 10 or more stores, which I consider as a chain. This adjustment provided better data. However, many in our industry are not considering these aspects or are just beginning to do so.

How do customers typically pay for their car washes? Do they use credit cards, debit cards, or cash?

We still accept cash. However, Mister Car Wash has gone 100% cashless, a move they made during Covid and have maintained since. It's unclear how many customers they may have lost due to this transition, but their business has continued to grow. Now, it's their standard operating procedure. At Clean Freak and True Blue Car Wash, about 15% of transactions are cash and 85% are credit card. We have a similar ratio and have considered moving to a cashless system in the future.

Does this include subscriptions?

Subscriptions are always paid with a credit card.

When you mention the 15% cash and 85% credit card ratio, does this include both transactional washes and subscriptions?

Yes, it includes both subscriptions and cash transactions.

40% of transactional washes are cash?

I must correct myself. Our recharge revenue doesn't pass through the store revenue. When we recharge, it's a separate corporate billing.

You're referring to the subscription fee recharging?

Correct. The 15% cash ratio refers to customers who sign up and make their first payment at the store.

So it includes the first payment and transactions?


From what I gather, it seems like Mister Car Wash might be in a challenging position. Their stores might be generating more revenue than they should due to less competition over the years. Additionally, their stores might not be the ideal size, shape, or location. As more car washes are being added, this might change over time and they might reach a new equilibrium where they generate just enough revenue to dissuade others from building new car washes. Would you agree with this assessment, or do you have a different perspective?

I agree with your perspective. Seven years ago, Mister Car Wash had a significant amount of funding from Leonard Green and others, which allowed them to expand without urgency. That model was effective then. However, now we see around 30 or 40 different private equity firms making substantial investments in our industry. Additionally, we have players like Circle K who are ready to pay cash to buy properties. This is a new dynamic that is just beginning, and it necessitates a strategy adaptation.

They should consider reinforcing and protecting their position in markets where they have been very successful. Perhaps they should even consider divesting from markets where they are struggling. For instance, if they had five stores and now someone else has built 10, it might be wise to withdraw from that city.

What are the most effective marketing channels for your company at the moment?

Digital and social media have been the most effective. For recruitment, we use LinkedIn. If you follow certain car wash companies on LinkedIn, you'll see them celebrating anniversaries, promotions, and other events as a recruitment tool. We use Instagram to reach our customers, as it represents the demographic that washes their cars, which is predominantly females aged between 25 and 65.

Some companies have started using TikTok, but I don't believe that's the right approach. Billboards are effective if you can afford them, and digital billboards have become more affordable. Radio advertising is no longer effective, even in smaller markets, as most people now listen to SiriusXM. Print ads are also not used much anymore.

Have you tried card-linked offers?

Card-linked offers? We base our membership offers on the individual customer. Through Rinsed, we can target offers based on various factors such as longevity, the package purchased, frequency of use, and locations used. We have started implementing this approach, but it's worth noting that these members represent 65% of our audience.

Have you considered partnering with banks like Chase or Bank of America? They offer deals to their customers.

Yes, I'm familiar with those deals. I've used them personally, but not in the car wash business. It's an interesting idea, though I haven't seen any car wash companies do that. We've also tried partnering with Costco, offering deals on wash books and memberships. However, the success of this approach has been inconsistent.

Would you be interested in being introduced to the individuals who could integrate you into the Chase, Bank of America, or Wells apps, among others?

That would indeed be beneficial.

I don't want to steer you in a direction you're not interested in, but if you're open to exploring this, I can facilitate the connection.

Yes, I would be interested.

Have you noticed any shift in people's willingness to construct these facilities due to changes in interest rates?

Yes, significantly. Many people have laid off their development teams. We're currently examining some plots that other companies, like Take Five, are offering. We're in negotiations to purchase a property from Take Five that they had planned to build on but decided against.

This has been extremely helpful. Thank you so much for your assistance.