Specialist
VP at Spotless Brands
Agenda
- Trends and developments across the North America car wash industry
- Comparative analysis of key operators including Mister Car Wash (NYSE: MCW) and Driven Brands (NASDAQ: DRVN), and Zips Car Wash
- Consolidation trends and subscription model growth expectations amid inflationary environment
- 2022 mid-year outlook and 12-18-month expectations
Questions
1.
Could you provide an overview of the North America car wash industry, highlighting 2-3 key trends or developments that you’ve been following?
2.
In today’s market, we’ve been seeing a shift towards express, given the labour consolidation and lower operating costs. What percentages of the market do you think are express vs full service vs full-service flex? When people are thinking about building new units, is everyone going with the express route, or is there still a place for the full-service operators?
3.
What is the rough size of the market today, and at what pace has it been growing?
4.
Could you outline the competitive dynamics and landscape? Who are the key players, and what are their positionings?
5.
Is there any additional positioning or differentiation that you would highlight among top players such as Mister Car Wash, Driven Brands, Zips and Quick Quack? Is there a more regional-driven focus?
6.
Is there any customer loyalty, or are customers more brand-agnostic today?
7.
If the equipment and chemistries are a differentiating factor, are we starting to see more proprietary or private-branded chemistries going into the car wash, or are players still buying from top vendors or leaders?
8.
How do you think about the car park density, where to put locations and how many washes a market can handle?
9.
What are the unit economics of opening up a car wash location, and what returns might you expect on a new location? How long would it take to achieve that, and how has that expected return profile changed in the current environment?
10.
Is a location taking off after a slow initial six months related to strengths such as being part of the community, who see the customer service and the quality come through, and then business picks up, or are there other factors leading to that?
11.
We’ve discussed relative to other car wash locations how you think about saturation and finding a new location. You highlighted a situation where you were willing to pay more than USD 2m for the land itself. What key factors do you look for when you are trying to place a location? What factors would justify going over that USD 2m mark?
12.
What is the average size of a location build-out or the land that you are acquiring?
13.
Is there a certain wash volume or number of subscribers that are needed per location to break even, and what might incremental margins look like after that point?
14.
You highlighted the membership trend and club focus. What are your thoughts on different pricing models in the industry and how players are thinking about that?
15.
You mentioned an International Carwash Association statistic that 66% of US drivers get their cars washed 1-2 times per month. It sounds like you’re maybe accounting for USD 12 per wash. Are these monthly subscription prices that you’ve highlighted for us?
16.
What is the typical churn with the subscription plans? How long does the average customer stay on the subscription plan?
17.
How promotional is the industry? We’re obviously seeing a lot of inflationary pressures across all sorts of industries, so are we starting to see consumers be more conscious about subscriptions today vs historically? Have we continued to be promotional through this environment where consumers have just been paying the upfront prices and we’ve been seeing the inflationary pressures?
18.
How do operators think about pricing competition? Would a national-level brand typically be a price leader and the rest of the market adjusts or promotes based on what it does? How quickly does the market react to a pricing leader?
19.
We talked about de novos, and you mentioned the better returns from a de novo vs an acquisition. What are your thoughts on the M&A landscape, having discussed how fragmented the market is? Are there any viable, attractive tie-ups in the market, or any markets that are particularly attractive today? What’s the difference in return profile between de novo and an acquisition?
20.
Does underperformance of a location signal that it’s a bad location? Would you see an opportunity around the current owner not operating it well or having the right experience and it’s actually a good location?
21.
How do you expect demand for car washes and the subscription model to perform through this period? How could the industry be affected in a recessionary environment? What have we seen historically?
22.
What are the best- and worst-case scenarios for the North America car wash industry over the next 12-18 months?
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