Express Exterior market saturation

[OurTown]

This article explains why some areas are getting saturated by overbuilding express exterior washes. It is interesting to me that this article is on a tunnel equipment manufacturer's website. That's saying something.


https://www.sonnysdirect.com/sonnysdirect/en/smugglers-blues

 

[slash007]

So that's why they built 11 express washes here in Lexington in the past year?

 

[Greg Pack]

I wonder if he is referring to Tommy Car Wash. In a presentation I heard Ryan Essenberg mention they planned to build every two miles in a certain area of Florida.

 

[OurTown]

I wonder if he is referring to Tommy Car Wash. In a presentation I heard Ryan Essenberg mention they planned to build every two miles in a certain area of Florida.

I Think it is on Tamiami Trail between Tampa and Fort Myers. IIRC it was RR that said that before he (apparently) banned himself from here.

 

[Axxlrod]

I learned yesterday, from equipment suppliers of course, that there are two more express washes coming to my town.

I just don't get it. This is a town of only 100k people, and we already have 12 conveyor washes in town. Now we'll have 14. That is splitting the market really thin.

A new express wash is about $5M now to build in total. That's a big number to invest into a saturated market.

 

[washnshine]

There is a large chain in Western New York - about 18 locations in Buffalo and Rochester. They’ve been around since the 70’s. These two cities also have a bunch of smaller operators as well - smaller and/or single or location sites.

Another new company started building washes in these two cities and is already up to 10 locations between theses two towns - all within the last 5 years or so. There is one location in Buffalo where they are both currently building less than one mile apart from each other. At least they are on opposite sides of the street - one can get the northbound and the other the southbound traffic. I don’t get it.

 

[Greg Pack]

If anyone has been around since the self serve boom days in the 90s and early 2000s you remember the overbuilding of Self Serves. There are some similarities. Express washes with club membership is a superior business model to most any other type of wash. Small private equity groups are buying up small chains owned by individuals and selling to larger private equity groups who will continue consolidating process with the intention to sell to publicly traded corporations. It's another gold rush. There will be dramatic successes and failures. Even operators who successfully sold their chains out for enough money to retire on a beach somewhere have gone to other parts of the Country and are repeating the process. Some folks will indeed be left holding the bag. Other wash types will feel the fallout. Be the best you can be and don't over leverage. Have a plan (maybe a better term would be "survival strategy")when an wash is built down the street and cuts your gross in half.

 

[washnshine]

It is a shame because I think a lot of operators enjoy the business. Maybe not every aspect, every customer and everyday, but as I read posts on the forum, it seems there is a general enthusiasm for the business from the operators who post here.

When the business gets flooded with people only with profits on their mind and are distant from the day to day grind and operations, it gives less of a chance for people who genuinely enjoy the business to get a shot at participating and contributing.

It happens with all types of businesses, so I guess I should not be surprised.

 

[CarWashAdvisory]

Greg Pack said it best. Completely 100%. And leverage and judicial financial outlay (in the ways of purchase price, asset coverage, and leverage) will be key in determining who succeeds (and survives) through the next inevitable shake out.

One thing is for sure, private equity is speeding up. I personally deal with these guys every single day as buyers. There appetite is not slowing down or being lessened in any way.

 

[Axxlrod]

There was an interesting discussion on the facebook page about EE market saturation recently. Someone posted how Tommy's franchise model is basically to woo new people into the car wash industry and encourage them build on top of existing car washes, and destroy their business because Tommy's is the best EE model around. Debatable of course. But I found it interesting that Tommy's execs are saying they want a EE wash every two miles, regardless of existing washes.

 

[Car_Wash_Guy]

There was an interesting discussion on the facebook page about EE market saturation recently. Someone posted how Tommy's franchise model is basically to woo new people into the car wash industry and encourage them build on top of existing car washes, and destroy their business because Tommy's is the best EE model around. Debatable of course. But I found it interesting that Tommy's execs are saying they want a EE wash every two miles, regardless of existing washes.

I went to their seminar at the show. They basically compared their model to fast food. FF is built on top of each other and they all thrive. I honestly think there are fundamental differences between different FF chains and car washes, but I'm no specialist. I just think that eating vs cleaning your car are two different things.

 

[CarWashAdvisory]

And there is a reason why fast food / quick serve restaurants publicly trade for 13 - 16x EBITDA. I agree the models are very dissimilar in many ways. I also know that there is a lot of money in this industry right now that is bet on express car wash multiples converging with that of QSR. I am not saying I agree or disagree with the oversaturation thesis as a whole. But this is a projected future many people are both personally and financially betting on. Whether it will or will not come to fruition will be interesting.

 

[washnshine]

I went to their seminar at the show. They basically compared their model to fast food. FF is built on top of each other and they all thrive. I honestly think there are fundamental differences between different FF chains and car washes, but I'm no specialist. I just think that eating vs cleaning your car are two different things.

I’m no specialist either, but 2 things come to mind in the FF/ car wash comparison.

1. You gotta eat - you don’t have to wash

2. Chicken/hamburgers/pizza/tacos - there is some variety there. Not the variety in car washing.

 

[Axxlrod]

Can't compare fast food to a car wash.

People's taste in food is very diverse; even between same type of food. For instance, if someone wants a cheeseburger, there is a big difference in taste between McDonald's, Burger King, Wendy's, In N' Out, etc... even though they are all burgers. That is why FF stores exist next to each other; they have different customers.

People view a car wash as a service commodity; ie, they are all the same. So they very much cannibalize each other.

 

[Clay Weber]

Also... people generally eat three times a day

 

[Car_Wash_Guy]

Precisely. Not sure about most, but speaking for myself, eating ( quality food not FF ) brings me a certain type of satisfaction that car washing can't.

 

[CarWashAdvisory]

For anyone who didn't see it this morning - and the timing literally couldn't be more fitting to this conversation:

Jed Gold Joins Mister Car Wash

/PRNewswire/ -- After nearly 14 years with Yum! Brands, Jed Gold has joined Mister Car Wash as CFO. Gold brings to Mister Car Wash 20 years of financial and...

www.prnewswire.com

Fast Food exec joins Mister....