car washes are taking over the US, with 60,000 locations across the country. It's a $14 billion industry that's growing fast, and now some municipalities are imposing saturation bands to keep them out, leading us to ask, why are there so many car [Music] washes? To get a sense when the car wash industry started shifting, we have to go back to the '60s and '70s [Music]. You know, at that time, the industry was really filled with a lot of mom-and-pop owners, a lot of sort of colorful local commercials. Um, might recall the 1976 film and uh, disco hit Car [Music] Wash, but at that time, the industry was in a more sort of basic setup. Labor was a really big expense for owners. You might have dozens of people working near a car wash. Something as simple as like a rainy weekend when most people would wash their cars at the time could literally wash away the profits. This started to change in recent decades. One of the big shifts was a move toward more

automated car wash locations. This so-called Express exterior setup where you'd have automated payments, a smaller footprint, where a machine would do all the work, this really helped usher in a of lower costs, which made it easier for franchises and chains to expand. This explosion is especially evident in the town of Streetsboro, Ohio, a small suburb located just outside of Cleveland. About 6.5 million cars go through the city every year, making it an obvious attraction for the industry's investors. The biggest car washes, CL and Sergeant Clean, are right on the main Corridor. And then we have another car wash that is on the East end of town, which is a 24-hour drive-thru car wash. And then we also have a car wash up at the intersection of 43 and Frost. And then we're currently building our fifth Car Wash, and that will be the last car wash. But this growth extends Beyond Ohio, with other states like New Jersey, Florida, and California seeing an increase in car washes. A firm called

Leonard Green and Partners from Los Angeles began investing in Mr. Car Wash, and that really turned into a tidal wave of investment. Now there's 50 plus groups investing in these trains and really expanding them across the country. When you look at the numbers, you can see why private equity is so excited. There's about 280 million cars and trucks across the country, and they tend to get pretty dirty. Secondly, the industry is already big and growing substantially. And over the last couple of years, despite all the dislocations and uncertainty of the economy, it's been growing at about 5% annually. So the real strategy here is the membership model. The way that so much of the economy has geared towards services that people like having these sort of recurring memberships that allow you to do a car wash or do something whenever you want, whenever you please. And that's sort of the hook that really has driven profits in the industry. We have customers that honestly come every day with the membership. You have unlimited time you want to come.

every day or all day. You can do that one. Private Equity analyst told me that if you were to change 10% of drivers to this membership model, you would increase the industry's profit from 2 to 3 billion. On that front, another big Catalyst for growth in the Car Wash industry was 2017 during the Trump Administration. This change in tax regulations wasn't anything necessarily brand new, and it wasn't necessarily aimed at car washes, but because it applied to car washes and the depreciation and the investment in new equipment, it gave investors much more incentive to add new locations and expand, which has helped really fuel the growth of these locations across the country. [Music] Technology has changed a lot for car washers, and that's been really Central to the economic success of the sector. They figured out how to cut expenses just about every single point in the journey. Labor's down, right. The footprint of real estate is down often because these are smaller facilities. The cost of

water is down because they're being a lot more efficient with water. You know, it used to be 150 gallons in your driveway, and now it can be, you know, five or 10 gallons because so much of it gets reused wash to wash. Big cities have seen an incredible growth, so much so that you're seeing these so-called saturation bands take effect there or municipalities are pushing back and saying, Hey, think we have enough car washes, we can slow down a little bit. We start off with the moratorium on the acceptance of plans for car washes. In that one-year period, we had a market study done, and they determined if we go more than the five car washes, it's going to start having a detrimental effect on the car washes that are here, and the last thing I want to do is have businesses closed. People were happy that we decided to put this band, and it's caused to look at other things that we have in the city too, other saturation.

bands have emerged in nearby Northeast Ohio cities like Stow and Parma. In Buffalo, New York, a surge of suburban car wash openings in 2023 triggered opposition. Last fall, the Planning Commission in Lebanon, Tennessee, rejected a permit to build a new Mr. Car Wash location. In response, the company successfully sued to reverse the decision. I look at some of the uh saturation bands that are going in the car wash industry, and you know, I look at it from their perspective as well as ours, and this is tough. Obviously, I'm not excited about any potential bans or anything in our industry, but I look at we have 16 locations in multiple different cities. When we enter a community, you know, the economic impact. So for every one team member that we bring on site, it actually affects 7 to 9 local businesses. On another front, we generally take over blighted distressed properties. In Streetsboro, we took over an old Perkins Restaurant, and we're building a $6 million structure there. That structure then gets re-engaged with property taxes, and this

is a direct investment into the local school district. There's 100,000 CI in America and I know that there are places out there that need a car wash and want a car wash. And whenever we get someone that decides to locate in the city, there are always going to be people that are for and people that are against. [Music]

The Peculiar Rise of America’s Car Wash Obsession

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