The talk was about numbers. And that was to be expected as this was Mister Car Wash’s Q2 2021 earnings call. Suffice it to say, the Q2 results exceeded the company’s expectations. But reading through the transcript of the call, I was struck by a couple of discussion points that could not be summarized in columns of figures. To get our arms around the size of this operation, though, the following few numbers were helpful: Since its founding 25 years ago, Mister Car Wash has become the largest national car wash brand in the country with 350 locations and 1.5 million Unlimited Wash Club members, washing more than 70 million cars a year.
A large workforce is required to handle an enterprise of that size. Many an operator can attest to the fact these are trying times for businesses trying to hang onto adequate staffing. Clearly, Mister Car Wash prioritizes personnel issues. Company chairperson and CEO John Lai is effusive in his praise for his team. He credits Mister Car Wash’s people as its biggest competitive advantage, asserting that a strong culture drives strong performance. But the company offers more than mere acknowledgement; it provides competitive wages, excellent benefits, training, career advancement (more than 90 percent of its managers have been promoted from within), and, during the IPO, it launched an employee stock purchase plan. This attention has paid off. Productivity is at an all-time high, says Lai. Cars per labor hour is up more than 70 percent, while labor dollar per car is down 30 percent.
The car wash market is an active one. Aside from the ongoing chain building through acquisitions, express washes are being built at a dizzying clip. Such rapid expansion naturally generates concerns over saturation, particularly in preferred markets where new washes have been known to be developed as close as one mile from an existing location. Mister Car Wash is not perturbed, pointing out that while being the largest car wash operator in the country, it has less than 5 percent of the market. Looking ahead, Lai sees lots of opportunity for continued growth. In fact, he envisages the number of conveyorized washes in the United States doubling. The industry is large, highly fragmented, and very resilient, he says.
Lai is not looking to enter only new markets in his drive for growth. There are pockets within markets where Mister Car Wash already has a presence that, in his words, are underserved. In a move he calls the “network effect,” he aims to increase store density, which is expected to grow wash club membership due to more member options being available. On average, a little more than 30 percent of wash club members use more than one location to have their car cleaned in markets where the company already has increased density. Unit growth will be driven by greenfield development to infill existing markets, he says, along with strategic acquisitions.
In the end, cars will always get dirty, Lai says. There will always be a need to have them cleaned. Having such an ongoing demand for your service is a good thing. Right now, he cautions, there is a race to control the lion’s share of each market, and Mister Car Wash is but one of the competitors.