Mastering Car Wash Metrics for Premium Valuations with Chris Jenks, CFA Part 1

Discover what truly drives car wash business valuations beyond simple multiples in this deep dive with Chris Jenks, CFA. The car wash industry's M&A market has evolved, demanding more sophisticated analysis than ever before. Learn why factors like recurring revenue, customer retention, and operational efficiency are paramount for achieving premium valuations and how a disciplined approach to business strategy can transform your enterprise. Whether you're an owner, operator, investor, or lender, understanding these dynamics is key to navigating the competitive landscape and securing long-term success. Tune in to uncover the metrics that matter most in today's car wash M&A environment.

What You'll Learn:

• Why car wash business multiples are more than just fixed numbers.

• The impact of market selectivity and buyer discipline on valuations.

• Key operational drivers like recurring revenue, site execution, and customer retention.

• Historical trends and patterns in car wash M&A consolidation and valuations.

• How membership penetration and churn rates are crucial for assessing business health.

• The role of private equity and institutional capital in the car wash sector.

• How to assess earnings quality, growth potential, and risk profile in an acquisition.

Don't miss this essential guide to understanding and maximizing your car wash business's value in a dynamic market.

#CarWashIndustry #BusinessValuation

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Listen in for the latest car wash mergers and acquisitions updates and pulse on the industry. Hear monthly from our team of experts as well as industry icons and thought leaders.

Transcript

SPEAKER_01 0:00

In our industry, people often talk about multiples as if they're some sort of fixed magical number, and if every car wash business is worth a certain number based solely on even our location count. But in reality, the multiple is the output of much deeper story. More recently, the market has become more selective. Buyers are still in fact active, but they are definitely more disciplined today. Capital is still available, but it's being deployed with much more selectivity, and overall, a lot more discipline. This isn't just a presentation about selling your business. In many ways, the same things that drive value in a transaction are the same exact things that drive better operating performance every single day. Cleaner financial story, stronger recurring revenue, better site execution, disciplined labor management, higher customer retention, and capable leadership team all create value. All right, everyone. Really excited to spend some time with you today talking about a topic that is highly relevant to owners, operators, investors, lenders, and anyone else who's trying to better understand where the car wash industry is headed. What actually moves valuations in today's MA market, and what metrics matter most for increasing valuations? So today the title of this presentation is What Moves the Multiple Metrics and Trends Driving Car Wash MA. And that phrase is intentional. In our industry, people often talk about multiples as if they're some sort of fixed magical number. And if every car wash business is worth a certain number based solely on even our location count. But in reality, the multiple is the output of a much deeper story. It reflects the quality of the business, the durability of the revenue, the strength of the team, the growth runway, the competitive landscape, the conditions of the asset, and the confidence that the buyer has in the performance they are underwriting today will continue and ideally grow over time. So over the last seven years, um, you know, the car wash market has gone through a dramatic evolution. We saw a period of rapid consolidation, aggressive capital deployment, elevated valuations, and significant new development within this space. More recently, the market has become more selective. Buyers are still, in fact, active, but they are definitely more disciplined today. Capital is still available, but it's being deployed with much more selectivity and overall a lot more discipline. And the difference between an average asset and a premium platform has become much more pronounced in today's market. So that is really what today's value uh discussion is all about here. We're going to look beyond headline multiples and talk about the specific metrics and trends that influence value, things like membership penetration, churn, revenue per car, labor efficiency, site level margins, market density, all factors relevant today to understanding what's the value of your business. So for owners, you know, my hope today is that the session helps you better understand how buyers think, what they prioritize, and where you may have opportunities to strengthen your respective business before considering a transaction. For investors or lenders in this space, I hope this provides a clear view into how quality is being assessed in the current market. And for operators, whether you're actively thinking about pursuing an MA or not, uh, these are just the same metrics that generally separate stronger businesses from weaker ones. And if you're not currently in the car wash industry and are wondering why you're seeing all these car washes popping up all over your town, this will help you understand why. So, one important point I want to make at the onset here is that this isn't just a presentation about selling your business. In many ways, the same things that drive value in a transaction are the same exact things that drive better operating performance every single day. So a cleaner financial story, stronger recurring revenue, better site execution, disciplined labor management, higher customer retention, and capable leadership team all create value. So whether you sell next year, five years from now, or never, you just cash flow your business, highly relevant topic today. So as we go through this, I encourage you to think about your own business or the businesses you work with and ask where are we strong? Where are we exposed? And what would a sophisticated buyer investor see if they look under the hood today? So with that, let's go ahead and get started. Uh a little bit of an introduction to Amplify Capital Group. Um, you know, Amplify, we're a boutique MA and capital advisory firm with deep specialization in the car wash sector. So while we do represent clients across a different or a wide array of different uh sectors, we do have deep vertical specialization within the car wash space. And we built our firm by combining Wall Street transaction experience with real operator perspective. Um, I myself am an owner operator of six car washes here in the Chicagoland market, and that really helps us understand this space with deep intimacy. So we know how to talk the talk and walk the walk. Um, in our track record, we've closed over $5 billion worth of transactions, specifically in the car wash sector, including several of the most significant deals in the space today over the last five years. And what we're going to cover today isn't just academic or theoretical advice. These are metrics, structures, and valuation conversations that we work through in live deals every day. Um, this isn't AI driven, right? This is real practical insights. And our experience across the space gives us a real front row view into how buyers are underwriting the sector today. So most of what we'll cover again, not theory. These are numbers, questions, and deal structures that we negotiate every day on behalf of the owners and operators that we have the pleasure of representing. So a little bit of what we do. Um, you know, we do support clients across the full continuum of solutions that include sell side, buy side, capital raising, partnerships, operations advisory, uh, venture capital, and brokerage. And in CarWatch, that matters a lot because value creation doesn't just happen at the point of sale or transaction. It is long before that. Uh, so full exit is really just one of many options. We could help assist our relationships, our clients with recapping their business, you know, whether it be reforming their debt for growth or bringing some minority equity, participating in joint uh ventures, selective monetizations, uh, which is increasingly relevant today's world, as well as the need for liquidity is very real. Uh but the best outcomes usually happen when financial strategy and operational performance and real estate strategy are all aligned. Um, so we are often known as just the deal people in car washing, but the reality is we do a lot more than that. You know, we've helped incubate some of the most innovative solutions in the car wash space today with our partnership, the like of AMP memberships, retention express. And the reason why I want to highlight this is this gives us a real full 360 view of the car wash sector beyond just the transactional side of the business. So, first level set today. So before we start jumping into the metrics that do matter, uh really want to level set down where the market is today, where we've been, and cover kind of where multiples are, who the active buyers are, and what's really driving deal flow. All right, so looking at some notable transactions as of late here across the car wash sector, going back to 2021. And really, you know, the logos matter less on this page than more of the shape of the volume. And what we saw in 2021 and 2022 were record years for car wash consolidation. Uh, 2021, we saw approximately 63 transactions representing 391 car wash sites uh in terms of transactional volume for the year. And as you look ahead to 2022, you see that number balloon. 102 transactions across 521 units. And this is really the pinnacle of car wash consolidation. What you saw then in 2023, 2024, all the way through the first half of 2025, was almost a reset and a pause of car wash consolidation. And a large reason for this was really kind of the cost of capital environment, right? 2022 going to 2023, we saw the Federal Reserve start to tighten by way of increasing interest rates to combat rapid inflation. And as a result of that, just coupled with the sheer volume of new units coming online, as well as some stress in the marketplace with the likes of driven brands divesting their Take 5 car wash portfolio and ultimately zips emerging from Chapter 11. We saw a significant reset and a pause in car wash consolidation. And a lot of platforms and sponsor-backed groups redirected their focus from growing unit count to operational excellence. And as we looked in 2025, in the second half of the year in particular, we saw a remergence of car wash consolidation, largely fueled by the restoration of bonus depreciation by way of the One Big Beautiful Bill Act. So looking back last year, 2025, we saw a pickup, uh 51 transactions across 663 sites. And as you look over, as you look over to the right hand side of the page here, um you see a big driver of that was Whistle Express, formerly known as Magnolia, acquiring the Take 5 stores from driven brands, 383 units. So a significant portion of those 683 sites trading hands last year were largely attributed to the Whistle uh acquisition of the Take 5 stores. Now, as we flash forward to 2026 here, uh you may note at the top of the page here, proud to announce uh a recent uh transaction here that Amplify was a participant in representing Kit and CarWASH uh through the acquisition by by L CarWASH. And this really marked um, you know, an expansion and entrance into new market for L. And I think it's just the ultimate proof statement that high quality transactions are still getting still getting done in today's world. But the key takeaway here is that discipline is back. Uh so it's not competition for you know assets just for the sake of building uniccount, it's competition for quality assets. And that's precisely what we saw here with the L CarWASH uh acquisition of Canton Car Wash and the Baltimore market here. Good businesses are still getting strong attention, but just the market is a lot more selective today than they have been historically. All right, looking at multiples over time, and one of the clearest valuation patterns as we look across this board here uh kind of coincides with that previous page as we saw kind of that increase in deal activity over 2022. This was definitely the peak of multiples here. So we're looking at this page as we're breaking out average multiples for four sites or fewer versus greater than four sites, and we're going back to 2020. And we'll see here, you know, smaller chains represented by four sites or fewer. These are typically what we we'd consider bolt-on acquisitions, have averaged around 10.5x EBIDAR. Portfolios with more than four sites have averaged roughly 13.2 times EBIDAR. And again, as mentioned here, as you look at 2022, we saw this is really kind of the height of uh valuation multiples with average units, uh, average transaction representing four units of more hitting roughly 17 and a half times EBIDAR. And we've seen valuation multiples have moderated quite a bit from this peak here. And you know, really what I highlight here, I think a lot of groups, you know, have in their mind, hey, you know, I'll wait to sell or entertain selling my business once multiples recover to those 2022 levels. Well, you may be waiting for a while here. You know, something we often talk about in the marketplace is, you know, the reality is 2022 is really the exception to the norm. If you look at that long-term average, you know, again, four sites or more hovering around 13 times EBIDAR. If you look at where we've been the last three years, we're back to where normal has been historically. So a little caveat there. You know, if you're expecting multiples to recover to those 2022 levels, you know, that may not happen. Uh, but nonetheless, as we look at kind of the spread between sub-five sites versus four sites or more, you know, there's a pretty consistent spread of about 250 to 300 basis points in a premium. And that premium just isn't simply about size, it reflects what scale enables, right? Which is denser operations, stronger management infrastructure, uh, better customer acquisition strategy, and just overall more strategic relevance to buyers. So, in other words, scale is valuable when it produces better, more defendable economics. And it's not just necessarily a free lunch for being large. Uh, so you see that pretty pervasive spread across time here. Uh, but the reality is here, you know, we get asked this question all the time. You know, we're valuation multiples today. And um, you know, I think what a lot of groups will tell you may be a little bit misleading, right? Because the reality is no two businesses are valued the same way. So a big part of the focus for the remainder of our conversation as we move on here today are what metrics matter and how do you command a premium multiple in today's marketplace? Uh, before I wrap up on this slide here, you know, the last point I want to make here is 2026, the the comp set that we're using here, uh, this would include both completed deals as well as deals that we have visibility into that are currently under exclusivity. Uh, so have yet to close. And, you know, the one thing I do want to highlight here is that, you know, we are seeing a lot more uh asset-like transactions in which the real estate would not be included as a part of the deal. Uh, so we are seeing a little bit of a shift where historically, you know, a lot of the multiples that we're using are EBITDAR-based multiples, where we are seeing a greater composition in our data set of EBITDA, meaning that the real estate is not included. And do want to highlight that because that's one very important caveat because you generally see, you know, about two to three turns in a premium on multiples for EBITDAR versus EBITDA, in which the real estate is included as a part of the transaction. Uh, but again, don't want to focus too much time here over where multiples are at today, because again, there are a lot of groups out there that, in our opinion, are spreading a lot of falsehoods in terms of how businesses may be valued. And we want to do today is provide that depth and really separate kind of where the market is versus how buyers think about your business and what that means in terms of extrapolating greater value. All right, moving on, looking at kind of a snapshot of the largest operators in the US. Um, the top 10 operators have grown dramatically since 2021. If you look at the top 10 collectively, they've expanded by more than 125% over the last five years. And what this tells you is that consolidation has not paused. It has continued, albeit unevenly, right? If you were to look at kind of the growth going in from 2022 to 2023, 2022, 40% growth, saw a big pretty big pause in 2023, as we've previously mentioned, about 10% growth, and the top 10 adding an incremental 194 units. Again, as we look forward to 2025, saw a pretty big pickup in activity, 519 new incremental units. Collectively, uh 2021 through 2025, again, as mentioned, the top 10 operators and platforms have added over 1,700 units to their unit count. Conversely, looking from 24 and 25 here, 519 incremental units. Uh so again, some pretty interesting consolidation here on the board. Uh, Mr. Car wash re-establishing themselves as the largest car wash operator in the country. Um, big news around Mr. Carwash in 2026, going from public markets to private. Uh 2025, they're currently hovering just north of 500 units. You see Whistle Express at about 477 units, some rapid expansion there over the last five years, growing north of 900%. Again, with the acquisition of the Take 5 stores in 2025. The Wildcap platform, which is a multi-brand unit, uh, Club Car Wash being one of the quickest growing brands underneath the Wildcap platform currently today at 385 units. QuickQuack, we saw a pretty rapid acceleration of growth as they brought in some sponsor capital with KKR, uh Tommy's with the franchise model, but nonetheless, here again, top 10 experiencing some pretty significant growth here as we look back to 2021 through unit counts, most current in 2025. All right, looking at other notable operators here, this would really represent that, you know, the next 10. And I really think, in my opinion, you know, this group is equally important because this is where some of the most interesting sponsor-backed and regional growth stories are happening today. And what you'll see here is that gap between the largest players and the next tier has narrowed significantly. All right, as we look at the pace of growth here within this subset of operators and platforms, you see last year, 2025, 695 incremental units added. And going back from 2021 to 2025, this cohort specifically has grown by 131%, adding 2,247 units to their platform counts. So, again, this is a really you know important reminder that the Body universe today is not limited to only the very biggest names within this sector. A lot of the strategic value sits in these emerging platforms that are building density, improving their brand awareness, and preparing for that next stage of consolidation here. So this to recap again, you know, who's growing most aggressively in this space? You know, you really see six sponsor-backed platforms that accounted for a majority of the net unit additions in 2025. Um, this is important because it shows that private equity and institutional capital in general is still very active in the car wash sector. So sponsors are definitely not just sitting on the sidelines. They're deploying capital and by and large represent the fastest growing operator pool. And that's all largely sponsor-backed. So the real key takeaway here is that institutional capital still likes this space, especially when it sees runway fragmentation and recurring revenues, which is something that is very, very evident within the car wash sector today. All right, so now this next section is really the heart of the presentation here. We're gonna move from you know market context in terms of who's growing where and the history of consolidation in the car wash sector to really the operational and financial drivers that separate you know market valuations from premium valuations. All right, so every transaction, whether it's four locations or 40 locations, ultimately comes down to this equation. Enterprise value equals EBIT or EBITDA times the EBADOT or EBITDA multiple. And I will tell you most operators obsessed over the left-hand side of this slide, which is EBIT. But the multiple is often where the biggest value creation opportunity lies. You can't control where the market multiple is, but you can absolutely control how you position your business for premium multiples based on the KPIs and metrics that matter most for the buyer pool. So we take a business out to market, say we have illustratively two operators, both the same EVADA profile at roughly $10 million in EVADA. One trades at 9x, one trades at 12x. They're the same industry, same market. So this is why premium multiples are usually earned operationally, not just negotiated financially. What we want to do today is understand what drives the difference between the multiple. So, really, as we look at the impacts of what drives a multiple, the difference really boils down to these three points here on the page. When buyers underwrite a transaction, they really ask themselves three questions. How durable are the earnings, how scalable is the platform, and how much growth is left, and how risky is the cash flow that I'm underwriting to. And buyers underwrite every deal through these three lenses. It's all about earnings quality, growth potential, and the risk profile of the acquisition. So, first as we assess earning qualities, it's really understanding kind of how durable are the earnings themselves. And some of the metrics that really matter most here would include recurring revenue as an overall percentage of the transactional mix. We call that membership penetration. We'll talk more about that here in a moment. You really want to understand margin durability, concentration, risk of revenues, as well as just the overall, you know, in general quality of the financials that they're underwriting to themselves. And this is usually teased out through the quality of earnings process. Second, buyers always ask how much runway is left and how scalable is this platform? So really looking at ramp profiles of new stores, understanding same store sales trajectory, uh, the pipeline, white space in the local market, the brand strength in market, the ability to drive higher revenue per car by way of optimizing pricing, or just the overall scalability of the operational infrastructure for the acquisition. Third is how much risk sits underneath the cash flow. And I will tell you right now, private equity hates underwriting to risk. So some considerations here are you know, lease versus own real estate mix. Owning that real estate certainly offers a very attractive backstop to mitigating risk for acquires. That said, it's not to say that they will only buy car washes with own real estate in certain geographies that offer tremendous density, um, as well as you know, entitlement's tough, that may be landlocked, leased opportunities are certainly abundant, but nonetheless, owning real estate certainly helps lower that risk profile. Uh maintenance and CapEx outlook, I will tell you, as we've seen that reset in that 2023 through 2024 timeframe, a lot of groups today are certainly a lot more sensitive and aware to deferred maintenance. So they understand if they acquire that unit, what it's going to take in terms of additional CapEx spend to meet the operational standards of that platform of that acquiring platform. Um, so really understand maintenance and CapEx outlook, management depth beyond the founder is definitely a key consideration here, as well as just the overall potential for encroachment. You know, again, I've talked about white space being consideration, the growth potential of the platform, it's certainly a consideration here too as it relates to the risk profile of the acquisition. Uh, we have seen tremendous amounts of encroachment in certain markets. Um, so definitely a heightened sensitivity today to the white space within that particular MSA. And as we think about risk here, you know, this is really an all-encompassing equation, right? Multiples in general compress when there's more uncertainty. Multiples expand when you have greater predictability, scalability, and professionalism, right? So, what we really want to do here now is pivot to the rest of this section, which is about the metrics that help to answer these three questions here, which are what are the quality of earnings, what's the growth potential, and what's the risk profile of this acquisition? So, first, I want to start with membership penetration. You know, as we talk about earnings quality, a big reason why there's so much interest. In this sector is the recurring revenue model by way of the unlimited subscriptions. And the best way to talk about how much of the revenue is derived from the subscription model is by talking about membership penetration. So, what is membership penetration? What does it capture? Membership penetration overall is just simply the percentage of revenues or wash volumes that come from your unlimited subscription members versus your single wash retail customers. And it helps to capture the strength and adoption of your unlimited program, the stability and the predictability of your revenue base, the degree of customer loyalty and retention, and the overall resilience of your business against weather or other traffic swings. You know, no surprise to anybody here if you're in the sector, it's an incredibly cyclical business. Having the backstop of a strong membership program provides a tremendous amount of certainty in your financial performance. And it's really, you know, the heartbeat of your recurring revenue model, right? The higher the membership penetration rates, the steadier your cash flows, the stronger your customer loyalty, and ultimately the higher your enterprise value. Because as we talked about in the previous slide, predictability reduces risk. Lower risk results in a premium multiple. So you in general will receive a higher valuation for your subscription revenue. And as we talk about kind of what sits in best of class, some of the best in class operators within this sector will have membership penetration rates in that 65 to 80% range. So again, 65 to 80% of revenues being derived from their subscription program. And this would represent a mature, well-managed membership program. You know, conversely, if we see groups with less than 30% in membership penetration rates, you know, this would suggest that there's heavy retail dependence, uh, which will ultimately result in inconsistent sales and performance and overall greater exposure to cyclicality in your business, whether it be just the normal seasonal element to the business or unpredictable weather impacts. Um again, membership penetration here really captures the lifeblood of this business, which is the membership model and the degree of revenue that you have that could be derived from the membership program you implement. Continuing down, talking about memberships, um, you know, really want to talk a lot here about membership, conversions, and churn, right? Because these are really the two flywheel metrics of your subscription model. Conversions tell you how effectively you're adding members, while churn tells you whether the bucket is leaking faster than you're filling it. Okay, so a healthy chain converts consistently and retains efficiently. So as we think about conversion, that number tells you how effectively you turn your prospects and retail customers into a paying recurring subscription member. Conversely, as we talk about churn, this is measured on a monthly basis. This is the percentage of members that cancel or stop paying for their subscription every month. Okay. So again, a healthy car wash chain maintains steady new member conversions and a low churn, which means high retention of your membership base. That combination in itself leads to predictable compounding membership revenue, which is the foundation of valuation growth. So, really, the most successful operators don't just focus on signing up new members, they focus also on keeping them because every retained member adds months and dollars to lifetime value, which we'll talk about here in a moment. And as we talked about, again, buyers under right to risk, in which membership retention is a critical factor. So, talking about what good looks like in this business, you know, some of the best operators, I think an ideal zone to land in would convert 10% to 20% of retail customers as subscription members. So, in other words, if you have 100 retail customers, you have about 10 to 20 customers signing up as an unlimited subscription member. Um, I'll tell you some of the best operators in the country, they they certainly hold a higher standard for their operation and they try to incentivize their teams to hit you know 20% or more. But really, some important levers to pull on here to help improve your conversion rates. You know, really it all starts with that frontline engagement at the point of sale, ensuring that you have a well-trained staff that could properly and efficiently articulate the benefits of a subscription plan and why it's so important for that customer to consider, you know, not paying for a single high-priced ticket, but instead pay one flat monthly rate for unlimited car washes. Uh, pricing and promotional strategy is certainly a significant lever to pull here as you think about enhancing your conversions, uh, customer experience, throughput, uh, employee incentive structures, and just overall data and KPI tracking, all very valuable levers to pull here as an operator to help improve your conversion. Churn, on the other hand, again, churn is the hole in the bucket, uh measures how fast you're losing your members. In the ideal range, you know, churn should be should be around 7.5% or lower. Um, if you're north of 7.5%, that usually suggests you have a little bit of a problem. Um, if you're if you're lower, you know, that would say you're doing a really nice job delivering exceptional customer experience, and your customers and your members in general see the benefit of their subscription plan. Uh, but what's really you know important here is taking that next cut of understanding the drivers of churn here. And you can break churn out into two separate buckets. You have voluntary churn, which is hey, I'm moving or I'm not using my subscription, or I'm just not happy with the wash quality or customer experience I'm getting. That would be considered voluntary churn. And in general, this should represent approximately two-thirds of your aggregate churn. So, again, if you're hitting that ideal level of 7.5%, about 5% would be voluntary. Uh, the other side of that, you have involuntary churn. So people may ask, you know, what would that be? Uh, these would be customers that end up canceling due to failure to recharge. And this could be, you know, decline credit cards, uh, this could be expired cards, new cards, you know, people just not having the balance and their in their bank accounts if they're putting debit cards on file. Uh, but you know, really, you know, failed payments in general, that's in my opinion, one of the cheapest fix. And there's a tremendous amount of insights that could be derived from monitoring and voluntary churn. Um, I'm telling you today, as an operator, in light of you know, environment where we're starting to see 90-day default rates on credit cards and car loans pick up, to me, it's the ultimate canary in the coal mine to assess if whether or not there's economic stress on the horizon. And more importantly, making sure that our teams are churned up of having solid retention strategies in play. So the reason why I highlight this is you know, it's important to understand churn, making sure that the churn of your membership base is within a healthy level. But it's also really important to understand the drivers of churn and putting together strategies and programs that can help combat, because again, the best operators just don't focus on conversions. They focus on conversions in conjunction with membership retention.

SPEAKER_00 28:39

Stay tuned for part two, airing next week, where we will continue our discussion on another exciting episode of Behind the Business. See you then.