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Car Wash is Big Business and Private Equity Is Going After It

Buyout firms are buying and bundling small businesses, from car washes and dentist offices to auto-repair shops and dry cleaners
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Image from video clip below

Image from video clip below

With more people signing up for monthly deals, washing cars is a big money-making operation. 

The Wall Street Journal reports Private Equity Wants to Wash Your Car

The car-wash industry has become a hotbed of private-equity activity. Investors are now paying big prices for regional chains—as much as 18-to-20 times earnings before interest, taxes, depreciation and amortization, according to bankers involved in the deals.

Car washes held little appeal for private equity until recently. They were primarily cash businesses whose sales fluctuated with the weather and required multiple employees to be on site. When car-wash owners introduced prepaid wash memberships, revenue became more consistent and fewer employees were required to be on site. That made private-equity investors pay attention.

Subscriptions also mean much of the actual car-washing process is automated, which helps boost profits. Subscribers get a radio-frequency identification tag for their windshields that lets a machine read which package they have, triggering the right mix of cleaning and chemicals. A typical express wash needs only two employees working at a time, resulting in hefty operating margins of around 65%, excluding rent costs.

When Mammoth enters a market, it buys a dominant brand with multiple locations and then scoops up smaller players in those same markets, which it rebrands to match the bigger chain. Its car-wash brands include Swifty, Marc-1, Finish Line, Wiggy Wash, PitStop, Busy Bee, PureMagic and Silverstar, among others. It is also building new locations, which typically cost $4.5 million to $5 million a pop, including land.

Mammoth saves money by buying cleaning chemicals and other supplies in bulk. It has centralized customer service, recruiting, training, human resources and back-office functions such as payroll and accounting.

Car washes have become a hugely popular real-estate play for individual investors, said Jeff Lefko of real-estate advisory firm Hanley Investment Group, where car-wash deals now account for a significant portion of revenue.

“There is no other operation on a 1-acre site that can do $1 million to $2.5 million in sales and pocket half of that,” he said.

Car Wash | "Workin' at the Car Wash, Yeah!" Theme Song

Here's a musical tribute.

I had no idea what a cash cow the car wash business has become. And I am happy to provide a flashback to a hilarious 1976 movie.

Q: Is the car wash movie Car Wash still there?

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A: The 'De Luxe Car Wash', an existing facility kitted out with all modern gimmicks, stood on the southeast corner South Rampart Boulevard at Sixth Street, near Lafayette Park, downtown LA. It's since been demolished and replaced by a strip mall.

The above from Movie Locations.

I hazard a guess that demolishing the strip mall and putting back in the car wash would be a smart move.

This post originated at MishTalk.Com

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