In recent years, there has been a noticeable shift in consumer behavior towards convenience. The "Do-it-yourself" boomer and Gen X generations are making way for the "Do-it-for-me" Millenial and Gen Z generations. This is driven by the generational transitions of Gen Z and Alpha alongside Millennials entering middle adulthood. There is a tremendous growth in preference for professional car wash services over traditional home washing. Consumers value their time more and more.
The car wash industry, once viewed as a routine sector, is now emerging as a lucrative investment opportunity, undergoing significant transformations to meet the needs of modern consumers who prioritize time efficiency and quality service. Tommy's Express Car Wash exemplifies this transformation, rapidly expanding due to its focus on customer convenience and technological innovation.
"The car wash business is transforming from an automotive service business adjacent to oil changes and collision repair to a retail consumer experience similar to Starbucks or Tim Horton's."
Tommy's Express Car Wash has positioned itself as a leader in this evolving market, growing from 5 locations in 2015 to a projected 200+ by the end of 2024. Innovations such as license plate recognition for members and high-speed conveyor belts enhance both customer experience and operational efficiency, supporting the company's impressive service capacity of handling over 200+ cars per hour. Their team has been delighting car wash consumers and powered industry change for over 50 years.
"The Canadian car wash market is 10-15 years behind the United States. The majority of existing car wash infrastructure is 20+ years old. Canadian consumers are eager and ready for a better, modern car wash experience."
To learn more about our KEILTY Car Wash Funds and opportunities to co-invest with our team, click here.
A Strong Investment Thesis
Strong Cash Flow - Recurring Revenue Model
Car wash investments benefit from a robust recurring revenue model, primarily through memberships and subscription services. This model assures a continuous stream of income from regular customers who pay a monthly fee for unlimited washes. The predictable nature of this income provides stability and makes financial planning and forecasting more reliable. Such a model not only enhances customer loyalty but also ensures a sustained cash flow, crucial for the operational and financial health of the business.
Low Labour
One of the significant advantages of car wash investments is their low labour requirement. Modern car washes utilize advanced technology and automation to handle most washing tasks, which significantly reduces the need for manual labour. This reduction in staff requirement lowers operational costs and simplifies management, while also reducing the potential for human error and increasing the efficiency and speed of service, all of which contribute to higher profit margins.
To learn more about our KEILTY Car Wash Funds and opportunities to co-invest with our team, click here.
Investor-Friendly Limited Partnership Structure
KEILTY Car Wash Funds are centered around a Limited Partnership structure which is particularly investor-friendly. This structure allows investors to participate as limited partners, contributing financially while leaving the operational management to an experienced team of operators. This arrangement limits personal liability and provides a passive investment opportunity with the potential for attractive returns, making it ideal for those who prefer not to engage in day-to-day management but still wish to benefit from the investment’s returns.
Tax Benefits on Initial Limited Partner Returns
Investors in express car washes can benefit from significant tax advantages, especially when structured as limited partnerships. Initial returns to limited partners can often be sheltered by depreciation and other deductible expenses, effectively reducing the taxable income generated from the investment. Initial capital is also returned tax-free to the Limited Partnership. The initial return of capital and any returns generated from the use of debt financing are not taxed.
Recession Resistant
Express car washes are often considered recession-resistant investments. Even in economic downturns, consumers continue to require and utilize car wash services, especially those who wish to maintain their vehicle’s value and appearance. The relatively low cost of car wash services compared to other automotive maintenance services ensures ongoing customer retention and steady cash flow, making car washes a stable investment during various economic conditions.
Growing Institutional Demand
There is a significant institutional demand for car wash businesses, evidenced by portfolios of car washes acquired for substantial multiples, typically ranging from 17x to 24x times EBITDA. These high valuation multiples reflect the attractive and stable cash flows, low operational risk, and scalable nature of car wash enterprises. Institutional investors, such as private equity firms, view car washes as valuable assets for portfolio diversification and robust income generation, driving up demand and investment in the sector.
To learn more about our KEILTY Car Wash Funds and opportunities to co-invest with our team, click here.
A Better Consumer Experience
Tommy's Express stores are supported by strong vehicle membership numbers ranging from 4,000 to 8,000 members in most locations. Members love the unlimited Tommy Club wash model and consumers are choosing it over the more traditional pay-per-use model.
Why Do Members Love Tommy's Express?
- Easy to Load - No rails, guards, or chains to be seen. It is easy for members to load onto the dual-belt conveyor system. Double-wide tires and large trucks can finally use a car wash.
- Easy to Use - Wide entryway with friendly team members guiding your vehicle onto the conveyor. An automated video loading screen facilitates easier throughput.
- 15X Faster Than Traditional Car Wash - Vehicles are in and out in less than 3 minutes and tunnels can wash up to 220+ cars per hour at peak volume. Say goodbye to lines and waiting a long time for your wash. The tunnel is capable of washing 3,122 cars per day. A new car can load every 19 seconds.
- App-Based Member Experience - Easy-to-use mobile app for members to manage their vehicles, subscriptions, and payment information. It's the experience consumers of today (and tomorrow), expect.
- Free Vacuums - Free vacuums are available to use all day, every day while open. This perk is open to all customers and provides members with a premium experience.
- Free Mat Washers - Complimentary mat washers are one of the services members love the most. Stores offer free mat washers for use by all customers for both flat and molded mats.
- Unlimited Washing - A Tommy Club membership allows customers to wash an unlimited number of times in a day, week, month etc. This freedom transfers a tremendous value to the member.
- 190+ locations and counting... - The network effect of a growing number of locations across North America means that a Tommy Club membership gets more and more valuable with every new location that opens.
"In the next 10 years, 1 in 5 Canadians will have a car wash membership"
Overall, the car wash industry, led by pioneers like Tommy's Express, is poised for continued growth and transformation in the Canadian market, offering enticing opportunities for investors ready to engage with this dynamic sector.
Our team at KEILTY is perfectly positioned to capitalize on the market opportunity with our KEILTY Car Wash Fund.
To learn more about our KEILTY Car Wash Funds and opportunities to co-invest with our team, click here.