🔒Private equity investment, lucrative membership model spur CT car wash boom

A local business owner recently bought and then sold a Hamden car wash property within six months, making a $200,000 profit on the real estate.

The facility dates back to the 1970s, and now joins a flood of recent car wash sales and new development projects that will bring more modern vehicle cleaning services to the state.

Numerous Connecticut towns — including Windsor, Cheshire, Enfield, East Hartford, Newington, Bristol, Wallingford and Waterbury — are awash in land-use applications for new car washes.

The recent surge in activity is being spurred, in part, by capital injections from private equity firms, which are attracted to car wash businesses because they are high-cash-flow operations that come with real estate and repeat customers, experts said.

For example, private equity-backed Russell Speeder’s Car Wash of Connecticut in July purchased the Hamden facility, at 210 Skiff St., for $1.95 million. It was sold by Nick Magnotta, of Trumbull, who originally bought the property in January 2023 for $1.76 million.

Russell Speeder’s was founded in Norwalk in 1963 by the Shullman family. The company expanded over the years to 21 locations with over 260 employees and just under $60 million in revenue, before it was sold in 2022 to New York City-based private equity firm New Mountain Capital, according to a company history on the LinkedIn profile of Mike Shullman, who led the sale.

New Mountain, which says it has $37 billion in assets under management, now operates Russel Speeder’s under its Summit Wash Holdings company.

Summit, which is dual headquartered in Norwalk and Florida, says its strategy is to acquire and develop express car washes in key markets, and implement improved operations and membership programs that provide reliable revenue streams.

Summit now consists of several car wash operators with 37 sites across the Northeast, Florida and Nebraska, it said.

The U.S. car wash industry was estimated to be a $15.2 billion market in 2022. It’s projected to grow at an annual compound rate of 5.7% through 2030, according to Grand View Research.

Milford-based Splash Car Wash, which has 18 locations in Connecticut and New York, was recently acquired by Boston private equity firm Palladin Consumer Retail Partners.

CEO and co-founder Mark J. Curtis said he started Splash with one car wash more than 40 years ago, acquiring a second facility 14 years later.

As the concept of washing cars by hand on a conveyor began to grow, Splash got a third location in Norwalk in 1996, “then we got a few more here and there.”

Five years ago, Splash was up to 20 locations before Palladin took a majority stake in the company, said Curtis, who retains some ownership.

Private equity funding allowed Splash to acquire more facilities and update existing car washes.

Now with 1,200 full- and part-time employees, the company’s portfolio has grown exponentially, from 20 car washes over 40 years up to 60 in the last five.

Splash was always profitable, Curtis said, but he wanted the capital to grow more quickly.

“And it was hard to grow as fast as we wanted,” due to “limitations of local financial institutions,” he said. “We were not able to finance multiple deals,” which range from buying or renovating existing car washes to building new, he said.

Having a successful car wash means staying in or venturing into underserved markets, with densities that will support it, Curtis said.

Flooding the market

Bill Jodice, president of South Windsor-based PDS Engineering and Construction, has seen firsthand growing demand for new and renovated car washes.

Today, nearly 10% of construction jobs by PDS are car washes, as opposed to zero demand for the projects just three years ago, Jodice said.

He’s also seen the influx of private investors, with car wash ownership sometimes changing hands in the midst of construction or renovation.

PDS built the new Kingz Kar Wash & Auto Detailing at 924 W. Main Street in New Britain, which debuted in May. It had been a Diamond Brite car wash before it was revamped by owners Bill and Steve Wells and Jim Fontanez.

The team invested $6 million to $7 million into Kingz, which is equipped with state-of-the-art equipment, 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 acquisitions firm Carter Morse and Goodrich, said private equity firms are delving into car washes, automotive garages, HVAC companies 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 valuable, 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 consolidation 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 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 consolidation,” 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.