It’s hard to find a plot of land in suburbia across the U.S. that doesn’t have a “Car Wash Coming Soon” sign. The express car wash sector’s growth took off pre-pandemic with private-equity investment, and it hasn’t slowed much since.
There is good reason for this gold rush pursuit. These are not your rollover or bay car washes of old. Express exterior car washes are modern, fast car washes with compelling membership models that have attractive returns. Sean McBride, senior vice president at Sonny’s Car Wash Factory, said, “Car wash subscriptions quietly eclipsed over $1 billion in revenue not too long ago and continue to grow in popularity. You can’t ‘Amazon’ car washing; it’s a brick-and-mortar business. Once a customer has a good experience, it’s a tough habit to break.”
The top four reasons the express car wash sector is growing:
Customers Love It
Express car wash chains have some of the highest customer net promoter scores amongst all types of retailers. Why? They save time. In addition, price-driven customers find the unlimited-wash subscription model appealing. Freebies of vacuums and towels make it even more compelling.
Attractive Returns
The investment payback on an express car wash averages three years or less with +40% EBITDAR (earnings before interest, taxes, depreciation, amortization and restructuring or rent) margins. While everyone in the c-store and truck-stop industry is thinking about how to become less dependent on fuel margins, this sector is electric-vehicle proof as EVs still need to be washed. Cost to build, depending on where you are in the U.S. (excluding land) is $2.5 million to $3.5 million. They also complement existing convenience-store and truck-stop locations. You just need as little as a half an acre of land to add a 120-foot building with appropriate room for stacking cars.
Membership Model = Ratable Revenue
The membership subscription element is the secret sauce for this sector’s success. With just 3,000 to 4,000 members, 55% to 65% of total revenues for the average site are membership fees. Gone are the days in this sector when you waited for the weather gods to bring a rain deluge or snowstorm to make your numbers for the month. This business has high margins and profitability is consistent and stable. The members are sticky, too, as on average there is less than 10% churn in membership, even less for top- quartile operators.
Room to Grow
It’s a $20 billion sector in the U.S. and growing at more than 5% per year. The overall car wash industry in the U.S. is highly fragmented, with the top 15 express car wash companies owning just 5% of the total car wash units. Seventy-five percent of car wash companies operate only one to two sites. Because express washes are favored by consumers, a first express car wash mover in a market steals share, and members love the access to multiple locations.
So why aren’t the likes of Wawa, QuikTrip, Sheetz, Maverik, RaceTrac and Kwik Trip investing in this sector in rapid pace?
There are many synergies with the food, snack and fuel businesses. Here are a handful:
- Customer traffic destination as a one-stop shop.
- Adds a compelling subscription membership model to a loyalty program.
- Hundreds of cross-promotion options across fuel, fresh food and beverages.
- Employee career-path opportunities.
- Hedge against gasoline sales and profit decline with increased EV penetration.
Even Buc-ee’s is installing fast exterior washes at their interstate locations. No subscription model yet, but just wait.
Polly Flinn is founder of Flinnstone Strategies and is on a mission to help retailers and leaders grow. Want to hear more on how you can build a compelling fast exterior wash business that compliments your existing business? Please contact her at polly@flinnstonestrategies.com or visit flinnstonestrategies.com.
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