According to the latest data, the top 50 conveyor car wash chains collectively operate 4,350 locations or an estimated 6 to 7 percent of the U.S. car wash fleet (60,000 to 70,000 units).
So, what about everyone else? Unfortunately, there is no publicly available information that slices up the car wash industry in this manner. However, there is enough known distribution data to triangulate.
experience is critical to long-term success.
For example, we know from industry surveys that car washing is still fragmented, with most operators owning one or two sites. Reportedly, 80 percent of locations are run by operators with fewer than five units.
So, what about the middle? After accounting for the top and bottom and making some general assumptions, the estimate is 365 chains (possibly 400) with four to 25 conveyor locations. Of these, about 35 to 50 are full-service.
Although there is no publicly available information on this, it would be safe to assume that 70 or 75 percent of these chains are family-owned and operated. Such businesses tend to share similar characteristics.
The overall strategy is to create wealth and protect it long term. Business growth is incremental, with one new site every year or two. Family members hold key positions. Traditionally, these businesses are slow to adopt innovation, technology, and analytics.
Most of these operators believe their business’s reputation is their most valuable asset. Their reputation and hometown feel set these operators apart from the other 25 or 30 percent.
Independent Challenges
However, it is getting harder to maintain this reputational advantage. One major hurdle highlighted in the industry surveys and discussed by operators on internet forums is saturation. Too many new washes, built too close together, are squeezing the market.
Evidence of this has been a noticeable uptick in car wash moratoriums and zoning restrictions in the U.S. over the last two years, and it’s become a recurring planning issue in multiple cities.
Another challenge is succession. Most research agrees that 70 percent or more of operators’ children or relatives do not want to take over running the family business.
I’ve seen this multiple times. The children work at the wash but do not have the business in their blood like their parents. They have different interests and lifestyles. In some cases, the kids don’t even want to retain ownership. Consequently, 70 to 80 percent of family-owned and operated chains will need to transition to a management team or place a for-sale sign on the property.
In addition, independent operators face the cost of building and operating a new car wash, especially a full-service one. For example, it’s become increasingly difficult to keep express wash development costs below $5 million, and full-service property and building needs push the price even higher.
Over the last few years, full-service labor costs have beentrending at 50 percent of sales, whereas express labor costs have been as high as 24 percent.
As for future opportunities, arguably, it comes down to a decision to grow, sell, or pivot. For the latter, this applies to full-service chains that would find value from repurposing properties from full-service to express exterior and subscription models.
Selling can be attractive because strong regional chains usually represent the competitive layer in most areas, making them good acquisition targets for PE-backed operations. If growth is the long-term strategy, regional chains must continue to step up their game to ward off potential competitors.
For example, when selecting sites, independently owned chains tend to rely on intuition or checklist-driven approaches based on demographics and traffic counts.
Conversely, consolidators and private-equity-backed developers have shifted to data-driven SaaS applications, GPS, drive-time analysis, and predictive models to select sites. This approach allows them to pinpoint optimal sites within weeks rather than months.
Consequently, family chains should consider a more robust approach — the greatest chance of owning the local market is to cluster sites within a tight radius without cannibalizing sales. Instead of mirroring consolidators and building large washes on expensive prime real estate, consider a B+ site, building a smaller wash (e.g., a mini-tunnel or dual in-bay), or repurposing an existing structure.
Technological Investment
Of course, upgrading technology is essential for growth. For example, the useful expected life of PCs, laptops, iPads, and operating software for business reliability is only five to six years. Heat and UV can reduce readability and touch screen sensitivity, and card readers and printers wear out. Since the POS serves as the revenue gate, it should be cycled out just as often and refreshed at the midpoint of its lifecycle.
Historically, multi-site retail operators have benefited from leveraging maintenance and inventory purchasing, as well as from marketing efficiency (local saturation). In the car wash industry, we can add membership scale, which equates to having a large subscriber base and more predictable revenue.
Other indispensable technologies include remote monitoring, dashboards with key performance indicators, and AI tools such as chatbots. Chatbots can sell memberships, reduce customer friction, and automate repetitive communication. There are off-the-shelf solutions, so no need to build from scratch.
As for automation, the express segment is already one of the most automated retail formats. Only a few points can be optimized, including payment, entry, and AI-driven tunnel operation. Reportedly, there are folks working towards on-site virtual assistance, self-loading conveyors, and predictive maintenance. In the full-service arena, AI-powered robotics may be a game changer in the future.
A Look Ahead
What might the future hold for regional car wash chains?
One major obstacle is the size disadvantage. Earning a spot in the top 50 conveyor car wash chains requires more than 25 locations. Since private equity and consolidation trends are unlikely to change anytime soon, this threshold will surely increase.
In other words, competition from high-quality, high-performing sites will increase. Large chains have deep pockets to invest in data-driven solutions, digital marketing, CRM systems, apps, and other technologies that improve efficiency and consistency. Arguably, this advantage will grow as the industry adopts AI-powered intelligence platforms.
In the final analysis, regional chains or small private operators are certainly not going to fade away if they continue to focus on reputation and are willing to keep up with the Joneses.
This is like the situation in the not-so-distant past, when the express format was just beginning to roll out across the country. Then, pundits warned self-service and full-service operators to step up their game or risk being passed by. Good advice then, and good advice now.
Bob is an industry consultant with more than 25 years of experience and is a former operator of car wash, oil change, and detail businesses. He can be reached at (727) 723-9474 or bobr427@protonmail.com.