Equity, Chains Workin’ at the Car Wash
Editor’s note: An earlier version of this story identified ModWash as backed by private equity. It is not. The Business Journal regrets the error.
NILES, Ohio – The trend in the region began innocuously with the purchase of a closed steakhouse two years ago along Belmont Avenue in Liberty Township.
Since then, national car wash chains have saturated the Mahoning Valley with brand-new operations, sinking millions of dollars into site acquisition, construction and operations. The rapid push has caught the attention of local independent companies that work to differentiate themselves from these car wash chains but are nevertheless feeling the pressure of increased competition.
“We’ve been in the business for 64 years. And I’ve been doing it for 45,” says Jim Coates, president of Coates Car Care, based in Niles. “There have been spurts of growth over the years but nothing like this.”
Tennessee-based ModWash has led the charge of chain wash companies that have hit the market with fury. In March 2021, the company acquired the closed West Fork Steakhouse, 3850 Belmont Ave., for $500,000, according to Trumbull County auditor’s records.
ModWash is not backed with private equity funding. An earlier version of the story reported it was. The Business Journal regrets the error.
Less than two weeks after that purchase, ModWash closed on the property at 750 Boardman-Poland Road for $975,000, data from the Mahoning County Auditor’s office show.
And, just one month later, ModWash bought the former Skate Zone Fun Center on Mahoning Avenue in Austintown for $875,000. The company followed up with another site acquisition in June 2021 along state Route 46 in Niles for $550,000 and in August 2021 on Salem-Unity Road in southern Mahoning County for $550,000.
All five of the new car wash sites are now running. In a span of six months, ModWash spent more than $3.4 million just in real estate.
“There are a lot of equity firms that have invested a lot of money in this industry,” Coates observes. “They’ll see two- to three-years return in their investments. So we see a lot of money being dumped into this industry. That’s why we’re seeing a lot of growth in this area.”
ModWash isn’t finished yet. Last June the company bought the site at 3495 Elm Road in Warren for $535,000. In December it acquired a parcel at 1500 Boardman-Canfield Road in Canfield for $1 million, according to Trumbull and Mahoning auditors’ offices records respectively. That brings ModWash’s total real estate investments to $4,990,000 in the Mahoning Valley.
Attempts to contact representatives from ModWash were unsuccessful.
Others have also entered the local car wash market, records show. In May 2022, Boing US Holdco Inc., an affiliate of Driven Brands’ Take 5 Car Wash, acquired the former Citizens Bank building on Mahoning Avenue in Austintown for $950,000. The company also bought another site on East State Street in Mahoning County near Salem in July 2022 for $875,000. Driven Brands is backed by private equity.
A CHANGING INDUSTRY
Key to this growth is the changing nature of the vehicle care industry, says Rich DiPaolo, associate publisher of Professional Carwashing & Detailing Magazine.
“The primary trend in the car-wash industry over the past decade is a model called express interior,” he says. “It’s low labor, high demand, and an emphasis on high volume.”
What has become commonplace over the last eight years or so – and in turn, more valuable to investors – are subscription programs that customers purchase each month, usually between $30 and $50, for unlimited washes and a steady stream of revenue for the company, DiPaolo says. “Customers are more accepting and used to subscription-based services now.”
The express exterior and subscription-based business model has lured an entirely new funding source for these companies, DiPaolo says. “It’s really attracted large investors and private equity into the business,” he says. “It’s been an explosion of growth over the last decade.”
He points to his trade journal’s annual list of the top 50 car-washing companies in the country in terms of the number of locations. ModWash, established in 2020, was ranked in December 2022 as the 15th-largest in the United States. Take 5, which has purchased at least two local locations, is ranked the second-largest in the country and is backed by private equity.
“ModWash wasn’t on the list three or four years ago,” he says. “Now, they’re in the middle of the pack and growing.”
Such a deluge of new car washes of the same brand in a confined market such as the Mahoning Valley could be considered unusual when compared to historical trends in the industry, DiPaolo says.
“Is it unusual nowadays?” he asks rhetorically. “Absolutely not.”
These companies are out to achieve brand recognition and the best way to do this is to open several locations in a targeted market. “If you buy a car-wash subscription, you can wash at any of these locations,” he says.
Also, trade studies have shown that more people are washing their vehicles more often, DiPaolo says. “The express model is easy to replicate to scale. It’s fascinating and a lot of money is being made.”
Indeed, the estimated value of the U.S. car-wash services market in 2022 was $15.2 billion, according to a report by Grandview Research. By 2030, that number is projected to grow to $23.78 billion, or an annual growth rate of 5.5%.
Plus, growth in the e-commerce industry allows consumers to pay through apps on mobile devices that can set up automated billing and cleaning schedules, the report finds.
Jim Coates says it’s his experience that automated car washes fall short of delivering the full, deep clean that vehicles require, especially in northeastern Ohio. “We believe they cannot get the cars as clean as we were taught,” he says.
Yet express service is an option that is a necessity today, Coates says: “Our goal, every time, is to have a personal touch.”
Coates Car Care is in the process of constructing its sixth location, this one on South Avenue in Boardman. Coates currently operates washes in Niles, Austintown, Howland, Warren, Cortland and in Hermitage, Pa.
The new Boardman operation will contain what Coates calls “flex” options, much like its Niles location, he says. In addition to the company’s express car-wash services, the Boardman location would have a separate building with four garage bays where employees will dry the vehicle and devote attention to some of the more detailed areas of the car, Coates says.
Coates estimates his company’s investment in the new car-care center at $5 million and says it will employ between 30 and 40 people. “We’ve been doing this for a long time,” he says. “There’s a science to it.”
While Coates’ wash tunnels are similar in size, technology is always changing when it comes to equipment, he says. “My dad used a hooker with a chain to pull cars and they’d hand wash it as it came through,” he says, laughing.
Today, automation is essential if you want to compete in this market, Coates says. “Anything we can automate, we will.”
All of the wash chemicals are pre-calibrated and every piece of equipment has its own pump station.
“There are a lot of moving parts. But when you’ve done it for so long, you can just listen and tell whether something’s not right,” he says.
Coates acknowledges he’s unable to build at the same rate as the private equity-backed washers, such as Driven Brands. “We don’t have investors behind us,” he says. “We’re a family-owned business and we have to be careful about how we grow.”
He says most car wash companies across the country are independent family-owned operations, despite the significant investment tranches from private equity.
“The largest 50 companies are still a small percentage of the market,” he says. “Most are still owned by individuals. So we’re in a good position.”
Others in the vehicle-wash and detailing business are thinking about changing their business model to compete in the increasingly crowded market. Julius Oliver, owner of Kingly Hand Wash & Wax on Marshall Street and DNA Professional Detailing on Front Street in Youngstown, says he plans to build a multiservice vehicle-detailing and wash service where DNA is. As it stands now, both companies are hand-wash and detail shops that appeal to regular customers such as car enthusiasts and fleet owners. DNA also operates a mobile service, he says.
“Our hand wash and detailing is doing well and the industry is pretty healthy,” Oliver says. “But we’re living in a world where people don’t want to wait anymore.”
Oliver, also the city’s 1st Ward councilman, says he wants to expand services at the Front Street location and construct an automatic car-wash, detail service, a “car condo” – even a rooftop restaurant. He says he hopes to break ground before fall.
“Automatic car washes aren’t going away. They’ll always be here,” Oliver says. “The smart business model is to deal with both audiences.”
Pictured at top: Jim and Jake Coates say their business matches up against new chains, some of which are backed by private-equity firms.
Copyright 2023 The Business Journal, Youngstown, Ohio.