Carwash operators now shift from quantity to quality

Quality over quantity

Focusing on improving carwash operations will drive overall value.

Focusing on operations to drive value.

The “get big fast” mentality of the carwash industry has changed, making way for a more sustainable pace of growth through calculated mergers and acquisitions and selective greenfield development. With continued, stubborn labor concerns, lingering inflation, and higher cost of capital, operational performance is now front and center.

As lenders and investors take a measured approach to development, most operators are pursuing “A+” locations only, and platforms target growth in MSAs with existing market control. Same-store sales growth outranks site count growth, and the importance is on quality over quantity.

For smaller independent operators, this is encouraging news. With the growth trajectory of larger platforms slowing, encroachment becomes a lesser concern. As such, independent operators can work toward establishing a dominant regional brand by focusing on a single market and creating more value-add for consumers with greater convenience and strengthening brand loyalty.

As the close of 2023 nears, here are strategies for operators to consider to help strengthen operations as well as insights on the carwash market ahead.

Leveraging technology and data

The carwash industry has experienced a tech boom in recent years. Capturing robust data and knowing how to leverage it into actionable insights helps operators gain an informational advantage. Integrating emerging technologies and solutions can help operators better understand consumer motivations and sentiment, which will become even more important in an environment marred by slowing retail sales.

Technology companies, like AMP Memberships, create branded mobile solutions for carwash operators, helping them gain valuable insights into customer behavior, preferences and patterns to create audience segments for targeted marketing. With a fully customized mobile app, operators can engage with customers on-site and off-site using the tech company’s advertising and promotion engine with access to powerful marketing tools to launch, grow, and maintain a successful membership program as well as nurture relationships with retail (non-member) customers.

Customer growth and retention

Monthly plan memberships have been a game-changer and a key revenue stabilizer for an industry heavily dependent on weather. Capturing and analyzing feedback about what motivates a retail member to convert to a monthly plan member and, if they leave, why they want to cancel helps operators understand the true reason for churn. But members aren’t the only important customers. Fostering the relationship with retail customers matters too and may generate as much or more revenue with fewer operating costs. Understanding the customer’s connection to the brand can help influence operational decisions.

Dedicating staff and resources to customer service support can be a pain point for operators. Companies like Retention Express have emerged to address that, providing operators with an in-brand customer experience support solution. With expertise in all POS providers, agents can close the loop with customers across all inbound customer touchpoints. Because all interactions are captured and documented, owners gain valuable analytics and actionable insight from the voice of their customers in real time while keeping their teams focused on the primary roles on-site. In addition, they are more successful in creating win/win outcomes to keep customers coming back and to save operators money through a consistent negotiation process with customers.

By regularly collecting and monitoring customer data through various communication channels, operators can set trigger points and detect patterns outside the norm, creating the opportunity to address an issue early. Are retail prices too high? Does a new promotional marketing campaign need to be clarified? Are there employee complaints operators are not aware of? Developing an intentional customer retention strategy that enables operators to build deeper, stronger customer relationships reduces churn and grows the bottom line.

Looking ahead …

Operators can expect strong regional brands to see continued success with less risk of competition as the challenges of encroachment will wane. Solidifying regional brand dominance with a solid competitive position will be more important than growing the overall store count.

Carwash M&A volume will be down from the heights of 2022, but deals will still occur. For operators, it is important to understand that to the buyer/investor universe, not all carwash chains are created equal. Businesses with greater cash flows, efficient capital structures, stability in sales and attractive long-term growth will be more valuable.

Buyers will likely rely on tried-and-true cash flow valuation methods, which are influenced by the cash flow an asset generates, its growth profile and the buyer’s cost of capital. Important factors contributing to a premium valuation start with having “A+” real estate and include well-established site operations, consistent equipment maintenance and improvement, strong marketing and branding, and a focus on customer experience. The way to drive value is to drive more to the bottom line by focusing on operations.

Even in a softer consumer market, widespread adoption of the express carwash model remains steady, with continued value placed on memberships supporting the long-term thesis of the carwash industry. Technology will continue to innovate the space and create more efficiencies and opportunities to understand the customer better.

Focusing on operational excellence by improving existing site-level performance will be essential. Measured capital expenditures investment, enhancing operational efficiencies, and integrating new technologies and solutions to capture and leverage customer data will help operators make strategic business decisions with a competitive advantage and position for long-term success. 

Lanese Barnett is the senior vice president of business development at Amplify Car Wash Advisors, the number one advisor of carwash chains nationwide. 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 (M&A) and capital advisory. Keep up-to-date on the latest carwash M&A activity with Carwash M&A, The Podcast. Learn more at AmplifyWash.com, or reach Lanese at [email protected].

You May Also Like

Navigating opportunities and challenges

The dynamic express carwash industry offers promising opportunities for entrepreneurs and investors amid growing consumer demand for convenient, eco-friendly automotive solutions.

Navigating opportunities and challenges

Is now the right time to invest in the express carwash industry?

In today’s fast-paced world, the automotive industry has witnessed a surge in demand for express carwash services. As more consumers seek convenience and efficiency, the express carwash sector has emerged as a promising avenue for entrepreneurs and investors. However, before delving into this dynamic industry, it’s crucial to explore the opportunities, challenges and strategies necessary to thrive in the competitive landscape.

Featured profile: Zax Auto Wash

Following the business’ journey from humble beginnings to a bright future.

Zax Auto Wash feature profile January 2024 issue of PC&D - Car Wash Advisory
Open for business

With the excitement of a new year, what can operators expect in 2024?

open for business sign
Welcome to the 2023 Top 50 list

In December 2023 issue, we unveil the leading conveyor carwash chains in the country.

2023 Top 50 U.S. Conveyor Chain List

Our annual listing of the leading tunnel brands and operators in the U.S.

Other Posts

ProovStation expands in the U.S.

MIAMI — ProovStation brings transparency and trust with a 100% automated, transparent and accurate vehicle inspection scanner.

proovstation-carstation
OpenShine to bring Tommy’s Express Car Wash to Canada

BRAMPTON, Ontario — The new OpenRoad Group division looks to open more Tommy’s Express Car Wash locations in Canada in the next three years.

tommys-express-logo-feature
Express Wash Concepts continues Hampton Roads expansion

OHIO/VIRGINIA — Express Wash Concepts celebrated the opening of its 16th Green Clean Express Auto Wash in Virginia Beach, Virginia.

Kleen-Rite Missouri moves into new distribution center facility

COLUMBIA, Pa. — The new distribution center in Kansas City, Missouri, aims to enhance inventory and shipping efficiency for the region.

Kleen-Rite Corp.