The Car Wash Industry’s Hidden Economics

0:00This is why we like it. A quick dive into the industries capturing our attention in the lower middle market in the United States. We're asking the questions that unlock why and where we see value in the lower middle market. I'm Sam, and each episode I'll share why our sector stands out. We're going to bring in the voices who know it best, and we'll point to where we think the future's moving. The U.S. car wash industry is much bigger and much more structurally attractive than people realize. Today, in North America, the sector generates over$15 billion in annual revenue, and that's across over 60 ,000 operating locations.

0:40It's one of the largest consumer services markets in the country, and it continues to grow. One of the most important changes in the industry over the past decade has been the rise of subscription and membership models. Something I didn't know a lot about until I came to Access. But what that means is unlimited WASH programs are transforming what was once a transactional business into one with recurring revenue, predictable cash flow and stronger customer lifetime value. At leading operators, memberships now account for a significant portion of the total revenue, most of the total revenue in many instances, and the industry is highly fragmented.

1:20It's one of the reasons we like it so much. Despite all the recent consolidation, the vast majority of car washes remain independently owned, and that fragmentation, combined with repeat demand and localized dynamic markets has made the sector increasingly attractive to scaled operators, long-term capital, and institutional investors. And the capital, it's followed. Investment across express and conveyor formats in the industry has accelerated dramatically. There's been new builds, acquisitions, and new platform strategies expanding across major US metro areas. And at the same time, density is becoming one of the key drivers of returns.

2:04We're going to talk about that a bit today, but what stands out is the maths of the business when executed well. High asset utilization, strong unit economics, recurring revenue, and the ability to compound returns through operational discipline and new market expansion. Today's episode is about understanding the extraordinary car wash industry through that lens, not as a commodity service, but as a scaled consumer infrastructure business with durable demand and long-term growth potential. And today, I've got two awesome people, potentially the best in the industry, to talk through it with me.

2:47I've got John Stanley, CEO of Spotless Brands, and Matthew Schroeder, the CFO of Spotless Brands, two people who've worked together for a very long time and are now at the helm of this giant car wash business. Welcome, guys. Great to be here, Sam. Thanks, Sam. Nice to be here. Thank you, team. Let's jump straight in. There are a number of foundational elements that enable car wash companies to scale sustainably and dictate their success, allowing them to grow beyond what sometimes is quite a small initial footprint. John, can you tell us from your perspective what separates those that scale from those that don't?

3:26From my perspective, Sam, one of the key things is team. So at Spotless, we're a great combination of operators who are experienced at operating at scale. You know, many of us at companies that operated 5 ,000 to 9 ,000 plus locations, combined with some really experienced car wash operators, you know, who have been out in the field and operated Car Wash for their entire career. And bringing those two skill sets together has really foundationally put us in a position where we're very comfortable developing sites on a de novo basis, doing strategic M &A and really building the infrastructure it takes to operate at scale, getting those consistent operating procedures, purchasing power at scale, all the things that it takes to really run a large business today.

4:16So I think it's really for us about team. It's a combination of all those skill sets, really bringing them together in a way that helps us really deliver what the consumer is looking for day in and day out. So I think that's a big factor for me is really it's all about the team here. John, when you look ahead at the next, say, five, 10 years, what are the biggest tailwinds for the industry? What industry dynamics do you think are going to shape growth opportunities? And where should other operators be especially thoughtful as they plan for their future in this fast changing world? Well, I don't want to give away all my special sauce.

4:50I'm glad you said that. This business is really about, you know, customers and understanding the customer and really, you know, getting them what they're looking for in the car wash experience. And that's really how we've tried to come at it here. And so I think there's a, you know, I think a couple of real key things for us. You mentioned density at the beginning here. And, you know, we think customers value the network effect of density. And that really has helped our business quite a bit. and we think it's a key tailwind for the future. We think consumers want choice in their car wash experience.

5:23And so we've focused a lot on how we give consumers the choice of the type of car wash they want to get and how it's delivered. Obviously, there's a lot of technology evolving in the marketplace that's going to help this industry over the next few years. But in the end, there's still a ton of white space out there. There's a lot of growth opportunity for car wash. And so as I think about kind of tailwinds, it's really largely about continuing to unlock pent up consumer demand and bringing car wash to do markets and bringing new services to market that consumers want. This is a space over the last decade has had a lot of institutional investor attention and a lot of private equity attention.

6:07Some of the car washes have done phenomenally well, some less well. The unit economics of this industry is critically important for success and therefore the operations. From your experience, what makes for a strong partnership between the operators and investors in this space? And then how can both sides align best to support that long-term success? My experience with Access has been great. They did a lot of work before they got into this industry. They did a lot of research. They paid attention to what the consumer wanted. And they had some basic premises that they believed in when they got into the industry that have truly turned out to be true, right?

6:47Density was a key factor for them when they did their research. So, you know, their groundwork and their basic understanding of the industry or even advanced understanding of the industry and the consumer combined with a management team that knows how to operate car washes, but also knows how to operate at scale. on sort of bringing those two things together and leveraging the data and analytics capabilities that Access brings to the table, I think, has really kind of vaulted us forward from an industry perspective. So, you know, really, I think it's about using the best capabilities of both your private equity group that sponsors you and works with you every day and the management team that you're putting together, really getting those two things to fit together.

7:32And Access has, I think, done a very good job with that as they've worked with management to put this company together and build out this operating model. I think that's really key to the success for both of us. To what John just said, putting together management teams. Matt, you and John have worked together before. Tell us a little bit about your background quickly. My background, I came to Spotless here in September. Before that, I spent 25 years in multi-location retail and varying finance and executive positions. So a newcomer to the car wash space, not a newcomer to running large-scale retail operations, which there's a lot of similarities in the background I came from to the car wash space and what we're trying to build here as Bob Liss, along obviously with some differences as well.

8:19And no one knew to working with John either. Not at all. It's like putting together a sports team. You want the players that play well together. So we were delighted when you joined. And for new investors exploring the industry or operators in the industry, in your view from your operational seat, what early operational capabilities and systems do you think tend to create the strongest foundations for growth? Yeah, I think, you know, not really systems, but John talked about team at the beginning. I do think team is really important. You know, I think as you're trying to build out an investment and you're thinking about how you're going to do that, particularly if you're trying to do it with some element of M &A, understanding your M &A targets, understanding the team that comes with it, retaining great people that come with it is important.

9:07I think from a finance standpoint, the union economics of this business are phenomenal. The investment to get to the union economics is also not insignificant. And so the ability to effectively model and predict true return on investment is a capability that's absolutely critical to a management team and investor in this space because you are, you know, betting$7 million a site on the returns that you're going to get. And so being able to develop that out is important. That's something where access has been a huge help to us, you know, in thinking about how and helping us build out the modeling capabilities are successful.

9:45And then, you know, driving consistency in the infrastructure, you know, through cost synergies, through building out a technology team that drives efficiencies, and then using common financial and operational metrics to drive consistent execution are all things that are really kind of important and things that this team built out when I got here, and we're continuing to build out to really drive, you know, the best operational results we can as spotless. And for those that don't know the industry as well as we do, what are some of the unit economics and benchmarks that you think about that drive the returns most significantly?

10:22You talked about the beginning of the intro, Sam, about the subscription model and the subscription business. So certainly your ratio of subscription revenue to what we call retail revenue or non-subscription revenue is important. And the ability to consistently grow members is important. Measuring conversion of retail members to subscription members and then measuring the churn and making sure you retain as many subscription members is critical. And then when you get to the operational metrics, you know, cost per car and cost per wash is really important. Labor is our biggest, the biggest cost that we have and the cost that we need to really keep on top of.

11:04And then working down from there, certainly your cost of your chemicals, managing supplies, you know, controlling repairs. You want to do the repairs you need to do to run a great watch, but you want to be thoughtful about how you do that. Those all become other metrics that we look at. But a lot of this business and a lot of what we look at every day is really around how do we drive the top line? How do we convert retail members and members? And how do we keep those members? When we think about the various different economics of the business, we're talking about all of those factors at real scale now at Spotless.

11:41spotless operates more than 200 locations around the united states and we've clustered in in geographies with density to really build greater unit economics across the business what aspects of the operating model john gave you confidence in the ability to grow at scale so quickly because we've gone from small to large in a very short space of time let's say a couple of things sam first, just what match touched on and you touched on, obviously, private equity is here because the unit level economics are compelling. And when you wrap the subscription kind of revenue model around that, that's very attractive.

12:23So that's kind of step number one, in that you have really great economics. So that gets you excited about scaling, right? Because the more of these I have, you know, the more value I can create, the more return I can generate. So that's kind of step number one. Step number two, I think, really ties to something that I talked about earlier, and you mentioned in the intro, which is density. That was really a foundational premise for Spotless when they got into the car wash space. And we've seen it really work well for us. And when we scale, we try and do it on a market by market basis, right? So it's a big country out there, a lot of room to grow, a lot of white space.

13:05And so it takes a lot of discipline to stay focused on a strategy that takes you to the markets that you want to be in. Because it's easy, there's lots of good assets that come up for sale, five, six, 10 site operators in different areas of the country. And it's easy to go, wow, boy, I'd really like to have those car washes or run over and get involved in something. We've tried to really have a lot of discipline here across the enterprise about what we're doing so that we can build that density and get into markets that are the type of markets that have the demographics and economics that we want to invest in.

13:43The third piece has really been what you mentioned about infrastructure. And I think we've done a really good job quickly building infrastructure and management that knows how to operate at scale. You've got to have that. So I think kind of bringing all those things together is what gives me confidence about what we're doing and our ability to continue our growth trajectory into the future. There's still some really great markets out there, some really great white space left that should fuel growth for us in this industry for several years to come. So I like where we're at. I like the investments that we've made.

14:16I think one thing that's a little bit different about Access is that they did, in the early stages of this thing over the last couple of years, invest a ton of money in infrastructure to get to a single ERP, to build operating procedures and training and all the different things that Matt sort of touched on at a level that allows us to operate in a consistent way for our customers and deliver a consistently great experience. That's really what it's about. And so those early investments have really paid off in our ability to scale. That's great to hear you say that. I mean, And as you know, it's part of our core thesis.

14:51We get the platform systems in place, create that infrastructure, that scaffolding to then allow the firms to grow into it. And Spotless is a perfect example of that. And I would just say one thing on that. And this is something I kind of harp on all the time. So I'll talk about it. I think where we started was a platform and what we've built as a business. And the difference is with the platform, we buy a great operator and we let them do their thing and we provide them support. We buy great operators, but we integrate them into our business and they become part of us and we become a business versus a platform.

15:29And that's really the stage of the evolution that we're in now. And so that allows us to really leverage the benefits of scale across the business to drive value that creates value for shareholders, but it also creates value and experience for our customers. And that's what's so exciting about where we are right now in our story. Well, the story still has a long way to run. A long way to run. Exactly. The hygiene of the business is extraordinary. And that's down to your leadership, guys. it's a market leader across many categories and it's called spotless brands for a reason there are four primary brands across the different regions one question i have is a person who has a real passion for brand is how do you guys think about cultural and operational alignment when you're bringing a new brand or a new add-on into the spotless brands business we recently did an acquisition in Philadelphia where we got to kind of see how we test this out firsthand.

16:34I think the first thing is you look at is the strength of the business, certainly financially, but also really you look at the management team and what they've created and how are they taking care of their customers? Do they understand their customer base? Are they providing the quality wash? Are they committed to a quality product? You want to make sure you're buying a company and bringing someone into the fold that cares about the same things we care about, you know, from the standpoint of what we're trying to achieve with our customers and with the quality of the product that we're doing. Certainly from, you know, John touched upon this a few minutes ago, you know, market adjacency is something that's really important.

17:12To John's point, we get offers all the time on, can you take a look at this asset or that asset? But really, as we think about a growth story and a growth trajectory here that starts to take advantage of the scaffolding that you talked about, Sam, you know, market adjacency becomes really important. I think that's something else that we really kind of look at. And the other thing from a cultural standpoint, and it gets back to where John talked about how we built this team and how he and Access has built a team that combines people with large scale operating skills like what I have versus people in no car wash.

17:46You know, the best outcome is someone that wants to stay and grow with us. And to John's point, some of our market leaders and some of our best operators are people that have joined us through acquisition and have stayed and helped us grow the company. And that's something we really look at as well. And it's an intangible that doesn't necessarily pencil automatically in ROI, but it's really critical if you're going to continue to drive the momentum that you're buying with that brand. And if you're going to pay the multiples that are out there. You want to make sure you're bringing in a management team that's going to help you take that to the next level right away.

18:23Well, guys, thank you. You've got a big business to go run. Just before we wrap up, moment of jovial trivia. How many car washes did Spotless Brands do in 2025? We're sitting right about 230 car washes today. And how many individual car washes? Do we know that number? Oh, about 30 million. That's probably our projected number for 26. We'll do about 30 million washes. That's extraordinary. And recently I was sat in a room in the middle of a conversation between a couple of very knowledgeable bankers. And they spent no word of a lie, maybe 15 minutes talking about the quality of different car washes that they experienced recently.

19:05Do you guys subscribe to car washes? Do you get your car cleaned a lot? Absolutely. I go to our car washes. What do you? Of course. I'll touch on something just for a second. 30 million cars, right? So a lot of people think about our car wash industry and they think about automation. But you think about 30 million car washes in a year. That's an experience at the XBT. That's an experience loading a car. That's probably some kind of interaction potentially in the vacuuming area. that's 90 million potential customer interactions. And what we're trying to drive is a great experience in each one of those moments.

19:49Plus, having a quality wash experience inside the tunnel, right? That all operates and works correctly and does what it's supposed to do. So when you think about that, that's operating at scale, right? That's the thinking that we're pushing on to try and deliver a great experience, 90 million touches, right? And 30 million car washes at a time. It's amazing. I imagine you've probably got some funny car wash stories up your sleeve, but we will save that for another, uh, where there's no microphone, another meeting. Yeah, maybe so. Awesome guys. Firstly, an enormous thank you for featuring today.

20:26Thank you for being an extraordinary management team in the access portfolio. I'll let you guys get back to a busy day, but thank you for joining us. Thanks, Sam. Appreciate the opportunity to chat. Appreciate it, Sam. Thank you. That was awesome hearing from two people. I get the privilege to spend a lot of time with John and Matt. Next up, we have Eric Wolf. Eric's the chief executive officer of the International Car Wash Association. This is a man who lives, eats and breathes the industry, and I can't wait to get stuck into it. One little fact I didn't share with the audience, but I had food on my plate.

21:04I got to go to school. I owe a lot of my upbringing, in fact, to the car wash industry. That was my family's business. And speaking now with Eric, I think it's going to bring a whole load of memories back. The ICA is an extraordinary organization. It's the nonprofit trade association that represents professional car washes and operators and suppliers all over the world with a core focus in North America. And Eric leads the organization's strategic direction and all the efforts on behalf of the industry to champion, support, and grow the work that operators do out there. And there's a number of core assets, and we'll dig into it when I introduce Eric shortly.

21:47But under his leadership, the ICA produces so many iconic industry staples that many of you will know about. The Car Wash Show, they had over 9 ,000 attendees last year. The Car Wash Magazine and Car Wash News Publications, they have tens of thousands of readers. And each year, over 8 ,000 learners benefiting from Car Wash operator training models that the ICA puts on. It really is advancing the industry. And as technology changes all the time, as we know from every industry, that's a critical role to play. So with that, I am delighted to welcome my new friend, Eric Wolf, to the stage. Welcome, Eric.

22:30Hey, Sam, thanks for having me. Boy, that was a generous introduction. And I did not know about your personal background. We're going to have to do another podcast on your family carwashing story. That's interesting to me. I can just send you the green book behind that I wrote with my grandparents. Fantastic. Yeah. Please send a copy. Please send a copy. Thanks. You've done an awful lot in your tenure at the ICA so far, but maybe we could start with how would you summarize the ICA's mission? Yeah. We exist for two reasons. One is to support the business and the second is to strengthen the community.

23:02And so we know that every day we are here to serve those people who are washing cars, building car washes. And that whole ecosystem is really who we serve, as you mentioned, in the U.S. predominantly, but really in Australia, in Europe, through ancillary events and products and services that we offer. So every day it's about car washing for our team of 15, which are headquartered here outside Chicago. You've been at the organization for 13 years. The world looked very different then. I'm actually scared to think what the world will look like in 13 years' time. Oh, let's not do that. We'll do a little bit of stargazing in a moment, but I think AI is playing a role in every industry, specifically in automation in the car wash space.

23:45What role do you think AI and automation will play over the next, maybe three to five is for car washes? And where will those efficiency gains come from for the industry? Yeah. And thanks for saying three to five. I mean, any further with technology, even five seems ambitious, doesn't it? So, you know, I think three to five and you should be seeing some of that now, right? With that kind of time framing. And so, you know, where we're seeing some deployment of AI in the industry now beyond basic back office tools, right, and sort of the stuff that many of us are already playing with. I don't know that customers will so much see AI.

24:23I mean, I don't, you know, I think we'll talk later, I'm sure, about when AI and robotics meet. I think everything changes. But until then, I think what I would expect over the next three to five years are going to be things like, and these are extensions, Sam, in many regards to what's already happening. But you look at predictive maintenance, you look at, you know, the tension and wear and vibrations, et cetera, that are on motors, chemistry, inventory levels. I think you can get into predictive churn, churn being referencing to the car wash subscription model, which is the predominant revenue model for retail car washing in the U.S.

25:02and increasingly elsewhere. You know, I think AI is already beginning to help in site selection where to build a new car wash. AI is involved in staff training. We use some of that in our own online training for site managers. So I think what you'll see, what I would expect us to see is AI helping tighten variances, standardized systems, rollout systems as companies scale. Now, beyond five years, maybe the customer begins seeing more of that. But I think in that in that time frame, I think it's about productivity and efficiency sort of behind the customer experience. 100 percent and for a moment let's talk about that productivity and the data that powers productivity car washes as a business require a decent amount of upfront capital but if you get the unit economics right the upside from that original investment is exponential and operators generate huge amounts of data from traffic patterns to throughput to customer frequency in your mind, what are the most obvious areas that companies are still missing when it comes to taking the data that they're collecting and turning it into actionable insights the other side?

26:19I'd be interested. You touched so many other industries, Sam. I wonder if this is a refrain, but I certainly am hearing this in the car wash space. You mentioned how long I've been doing this, which doesn't make me feel anywhere near youthful, but it gives some perspective to me on where we were when I began. And back when I began, let's say 10 plus years ago, the entire industry data was really opaque, even access to it. I mean, A, you had to get it, which wasn't always possible. This is before APIs. We had real closed architecture ecosystem in this industry. Now we've got access to it, but in some ways it's no less frustrating.

27:00I mean, because a whole bunch of information is only trivia if you can't do anything with it. And so I think that we are still at the operator level, at the store operator level, really struggling. And it's not impeding growth. When I say struggle, I don't want to overemphasize, but I think the challenge and the opportunity is around integrating, dashboarding, action orientation, knowing what's signal, what's noise, all of those kinds of descriptions that you hear in other industries used. Operators today have more ones and zeros flying across their screens and into their pockets than ever before.