In the next issue, as well as next month on Carwash.com, Professional Carwashing & Detailing (PC&D) will be posting its annual Top 50 List of U.S. Conveyor Carwashes. This is one of the most anticipated news events of the year in the carwash industry.
With all the change that is occurring, I have been asked to provide a perspective on changes that are not happening, identify areas where there have been significant changes and give any thoughts on what we might see next month in the new Top 50 list. So, here we go.
Changes that have not occurred (yet)
From 2019 to 2021, there was only one change to the top five spots in the Top 50 list. Only one change will likely occur this year, as well. What this means is that the top five chains are not only the biggest, but are also continuing to grow, so it does not look like there is going to be much change at the very top any time soon.
There are now two publicly traded carwash companies and this has brought the carwash industry into the investor limelight. However, from a consumer perspective, there is still no McDonald’s of the carwash business.
It took decades for Mister Car Wash and Take 5 Car Wash to get into the 400 location range. Although they will undoubtedly go faster, and others will get in the game, locations in the thousands are what is needed to be national in scope.
Major family firms
There has always been a rock solid base of approximately a third of the Top 50 firms that are family-owned — mostly second or third generational operations. These firms are continuing to grow, have no intention of selling out and are fairly dominant in their markets. Put it this way: They are not up late at night worrying about people who are new to the industry.
Branding and marketing
There is still a very small percentage of the revenue of Top 50 firms that is devoted to marketing, and especially branding. Most fast growing industries are investing more in attracting new customers and, more importantly with the growth in competition, want to differentiate themselves from the crowd. There is a lot of opportunity for increased revenue in this area.
Changes in the last three years
Three years ago, it was not as clear as it is now that the biggest change financially in operational profitability is the level of acquisition and retention of monthly subscribers. Not only does having a huge, predictable cashflow from members increase the frequency of customer visits, but it also lessens the impact of unpredictable weather on the business.
There is another factor that is not talked about as much, but it is particularly important given the next trend we will be reviewing: the growth in competition.
Having a large monthly unlimited wash club (UWC) in place is the strongest defense against competition I have ever seen in all my years in the industry. First 3,000, then 5,000 and now 10,000 members per location has been achieved. Ask yourself: would you really want to build a location across the street from a good carwash with 10,000 UWC members? Yeah, I didn’t think so. Whoever gets there first and builds the biggest UWC plan wins the volume race almost every time.
In the past three years, I have seen more Top 50 carwashes being built near other carwashes than ever before. Although the exterior express conveyor carwash segment of the industry is underbuilt nationally, there are sub-markets of major markets that have been overbuilt. These overbuilt sub-markets have the potential to be the biggest threat to the successful growth of the carwash industry.
This phenomenon has occurred in many industries, but the carwash industry has seen very little of this at the level we are discussing. And, there is plenty of room to grow — just not on every corner where a carwash already exists.
The number of total locations has grown in the Top 50 from the top of the list to the bottom every year. Also, the number of locations needed by a company to get into the Top 50 has gone up every year. In 2019, the 50th largest conveyor carwash chain had 11 locations, in 2020, it had 13 locations. This year, it is anticipated to have 16 or more locations. There are two factors helping fuel this recent growth.
First, more of the Top 50 companies now have a full-fledged development team working on ground-up new sites. I believe this occurred because the overall growth was stalled because the pace of acquisition did not proceed at the rate of growth desired. Also, it is a lot less expensive to build than to buy with some of the multiples of EBITDA being paid right now.
Second, more firms than ever before entered the market to build 10 washes immediately. All of the above factors are still in play and so high growth has continued.
The pandemic itself, and the psychological impact on employees’ belief in their increased value, has thrown a monkey wrench into organizational effectiveness in the carwash industry just like it has for many U.S. businesses.
Almost every carwash I know of has openings on their staff. Reduced staff means the wash is not as clean, safety is on the edge, subscription sales are not as achievable and staff burn-out is occurring. It was always tough to attract, develop and retain a great team in the carwash business; it is just harder now. The firms in the Top 50 that are not private equity fueled organizations will tell you that this is their biggest challenge right now.
Safe and short predictions for the 2022 list
Same top 10
The top 10 companies will virtually be the same with maybe one change and a slightly different order.
It will take 100 or more locations to make the top 10.
Top 50 qualification
The minimum number of locations to get into the Top 50 will go up to 16 or more locations.
A new record will be set for every level. Top five grows by 150, Top 10 grows by 250, etc.
I can hardly wait to see the 2022 Top 50 list in next month’s issue of PC&D — and to see how this all plays out.
Steve Gaudreau is the President of Brink Results, a training and consulting firm that specializes in working in the carwash industry. He is the author of the books, “Creating Exceptional Managers” and “So You Want to Own a Car Wash,” and can be reached at [email protected].