Hartford Business Journal

HARTFORDBUSINESS.COM | AUGUST 21, 2023 15 to $7 million into Kingz, which is equipped with state-of-the-art equip- ment, and has already gained 400 monthly subscribers, Fontanez said. The owners plan to expand and open either brand new or rebuilt Kingz car washes throughout Connecticut, Fontanez said. Fontanez has heard of private equity firms buying car wash chains, but expects Kingz to remain a small, independently owned business. Besides private equity influence, growth and investment in the last decade has been driven by the quality of new car washes, many of which are fully automated, environmentally conscientious and convenient. Drivers are also spending more money purchasing vehicles, and therefore want to maintain them longer, routinely washing away Northeast winter road sand and salt, and keeping cars shiny and clean all year long. The ease at which drivers can detour quickly through a car wash, never needing to leave the vehicle, has "been a significant draw," said Curtis, of Splash Car Wash. "We are light years away from where we were 40 years ago," Curtis said. Further, car washes are one of the few "Amazon-proof" industries that provide something that can't be bought online. "There's only one way to wash your car," Curtis said. Return on investment Ramsey W. Goodrich, managing partner of Southport-based mergers and acqui- sitions firm Carter Morse and Goodrich, said private equity firms are delving into car washes, automotive garages, HVAC compa- nies and other highly fragmented industries. Car washes, in addition to being high-cash-flow operations, are particularly attractive because of their membership models that capture repeat customers. For example, according to Michael Shullman's company history of Russel Speeder's Car Wash, he helped build a subscription model that signed up 150,000 customers. "What lenders like, and therefore private equity likes, is highly recurring revenue," Goodrich said. "They hit your credit card every month, whether or not you go to the car wash, until you tell them to stop. It's highly valu- able, highly predictable. They're not buying big factories, not carrying a lot of inventory, so the business model is very attractive." One advantage lies in the consol- idation of multiple smaller car wash businesses, and the ability to manage them under one holding company. "If you're going to buy soap, you might as well buy a lot of it," Goodrich said Industry experts predict private easternct.edu/business chelseagroton.com/growthatbusiness or call 860-448-4295 NMLS #402928 *Subject to credit approval. It's more than just a place of business… It's where you'll grow your future. We'll help you meet the right people, get a loan, * and share all you need to know along the way. equity investment is likely to grow before it slows, as 85% of car washes in the U.S. are still owned by small businesses, which are attractive acquisition targets. "There's great room for consoli- dation," and with many underserved markets, "there are more to be built," Curtis said. Goodrich predicts the trend "can be sustainable, because the industry is so fragmented. There's always going to be someone else opening a car wash, we will always see a mom-and-pop startup. And the only way to make money is to grow." Jodice said investors are seeing a need for car washes in underserved areas, but predicts "eventually they will get over built," adding that it could be years down the road before the trend cools. He said 15 years ago, new and renovated fitness centers were in high demand, with the same business model based on renewing subscriptions. Modern car washes are catching on, perhaps in part because they are more environmentally conscious than at-home washes that use more water, soap and chemicals, which then drain into local waterways. "We're paying for our use of water, so we try to minimize it," Curtis said. "We use half as much as a home wash, we're using biodegradable soap that gets filtered through before going into a sanitary sewer as opposed to a stormwater drain." Everything that comes off cars — salt, sand, oil — goes right into the filtration system, and "we're about as environmentally conscious as you can be," Curtis added. Splash Car Wash employees hand-washing a car. PHOTO | CONTRIBUTED Ramsey Goodrich

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