Locked in a stalemate over car wash valuations, independent operators and private equity groups make some tough decisions .

Quick Clips 

• “In today’s world, 61% of the high-volume express-exterior market is owned by private equity and institutional investors,” Harry Caruso said, compared to 13% in 2019. “It’s wild that all this could transpire in six years’ time.”  
• Though valuations have dropped from their 2022 highs, many operators are still selling — or considering it. “The days of selling for multiples of 17 to 20 times EBITDA are gone,” George Odden said.
• Sellers should approach negotiations with caution and expertise, especially regarding deferred payments. “Don’t fool yourself into thinking deferred compensation is worth its full stated value,” Chris Jenks said. 

No matter how skilled you are at answering tough business questions, there’s one that might give you pause. And it might be the most life-changing question you will ever encounter as an owner: Compete or capitalize? Compete with private equity or entertain the idea of capitalizing on this funding option by partnering with a PE firm?  

Making the decision to lead the charge on the growth of your car wash or deciding it is time to join forces and move forward in a partnership is not just a business decision, it is a personal one as well.  

And, the supportive arguments for all sides are strong.  

While there are different nuances to each, there are four basic strategies: compete, tread water, partner or sell.  

In this five-part series, we’re going to look at these strategies and delve into some front-line stories about each one.  

First, though, an overview of private equity and current insights on its impact from three experts in this field: George Odden, a partner at Ardent Advisory Group; Harry Caruso, chief executive at Car Wash Advisory; and Chris Jenks, CEO of Amplify Capital Group. 

For independent operators who’ve built thriving businesses, getting into the car wash industry surely ranks among the smartest decisions they’ve ever made. But now, successful operators face an equally weighty decision: whether to sell to private equity groups at today’s moderate valuations or stand their ground and compete against deep-pocketed investors with ambitious plans. 

It's a question that a lot of car wash operators have already answered, as reflected by the growth of the PE-owned washes in the past six years. “In 2019, the documented ownership percentage of private equity in the high-volume (100K+ cars/year) express-exterior market of the United States, by site count, was 13% — nothing to scoff at, but far, far, far from a majority. Three years later, we nearly doubled that stake to roughly 25%. That’s significant,” said Harry Caruso, chief executive of Car Wash Advisory, during his presentation at The Car Wash Show 2025. “What’s crazy is this: In today’s world, 61% of the high-volume express-exterior market is owned by private equity and institutional investors. … It’s wild that all this could transpire in six years’ time.” 

Investors see a lot to like 

Chris Jenks, CEO of Scottsdale-based Amplify Capital Group, said car washes are attractive to PE groups because of their strong operating margins, recurring revenue from unlimited-wash clubs and the scalability of the business.  

Washes that generate at least $2 million in annual revenue, with about 75% coming from subscription clubs, and have EBITDAR margins of 40% to 50% are especially appealing, Jenks said. EBITDAR, or earnings before interest, taxes, depreciation, amortization and rent, is a financial metric used to gauge a company’s operational performance and profitability. 

In addition, Jenks pointed to “secular growth” in the car wash industry, as busy consumers increasingly opt to pay for the service rather than wash their cars in their driveways.  

“A number of private equity funds have studied the car wash sector and formed a thesis but have yet to deploy capital based on where valuations were in 2022,” Jenks said. “They’ve been disciplined about finding an entry point. Multiples have compressed from their highs, and the fundamentals of a well-run car wash are still intact, so those groups that have yet to dive in certainly are looking to deploy capital in a meaningful way.” 

As the industry consolidates, independent operators face mounting threats from bigger rivals. In February, for example, Whistle Express agreed to acquire Take 5 Car Wash from Driven Brands, becoming the largest express car wash company in the United States, with 530 locations across 23 states. Whistle Express, based in Charlotte, N.C., is backed by Oaktree Capital.  

To grow its market share, Whistle Express pledged significant investments in tunnel and equipment upgrades, a smartphone app, enhanced membership clubs and environmental sustainability. With a large marketing budget and more locations for wash-club members seeking convenience, a large chain can enter new markets with sharp elbows.  

Looking at their current revenue figures, independent operators might overestimate the strength of their competitive position, failing to detect the bigger fish creeping closer. For some small operators in competitive markets, maintaining market share and preserving valuations will be long-term challenges, so it might make sense to cash out sooner rather than later. 

“The operators are in a strong position because they’re making money,” said George Odden, a partner at Ardent Advisory Group, a Scottsdale, Ariz.-based advisory that represents small and midsized companies in mergers and acquisitions. “That’s true to a point, but I do believe that dynamic is changing. There’s a huge threat to those operators that I don’t want to understate, and that is large private-equity-owned chains that have been aggressively building and acquiring.  

“They often have brand-new facilities that are very attractive to the customer, so the level of competition has risen dramatically,” he added. “The large chains have significant structural advantages, and that has left the mom-and-pop wash at a relative disadvantage to where they have been historically. It’s becoming more difficult for single- or two-site operators to retain that cash flow in the face of competition primarily from the big, private-equity-backed chains.” 

Valuations: Shaky or stable? 

If operators are holding out for valuations to return to the sky-high levels of 2022, they’re likely to be disappointed, Odden said. Car wash valuations are not expected to change substantially in the near term.  

“A number of operators are now willing to look at transactions at lower valuations,” Odden said. “Part of their reasoning is that they don’t see things changing dramatically in the near to midterm future, and I agree with that. I think the days of selling for multiples of 17 to 20 times EBITDA are gone, and the industry is going to trade lower than it did during the peak. That’s the new normal.” 

Likewise, Caruso said he expects valuations to remain relatively stable unless new private equity groups enter the market. A recent example came in January, when Argosy Private Equity acquired Mr. Splash Car Wash, a six-site chain in Wisconsin. Argosy described the transaction as a “platform investment,” meaning it planned to grow the brand through acquisitions and new construction.  

“While it may be some time before we see significant movement in valuation multiples from current levels, the clearest early indicator of rising multiples will be the acquisition of independent, non-financial-sponsor-backed multisite operators by private equity groups entering the industry for the first time,” Caruso said. 

Seek expert advice 

It’s not uncommon for PE groups to contact car wash operators directly and inquire about a sale, but advisors caution against going it alone. PE groups have professional dealmakers who are determined to fight for every penny, and their experience with complex sales negotiations gives them an advantage over most small-business owners. 

Through professional representation, operators may be able to secure better terms for themselves and their employees, Jenks said. Since there’s no one trusted template for a car wash acquisition, the terms can vary widely, and operators could fail to secure maximum value for their businesses.   

“You only get one shot at selling your business, so you want to make sure you get the best terms possible,” Jenks said. “To do that, you have to run a competitive-bid process. It’s critically important that you create a sense of competitive friction to maximize the value of your chain. There’s more to consider beyond the total dollar amount, and there are different levers to pull to optimize the deal structure.” 

Many offers include some sort of deferred payment for the seller, which lowers the buyer’s initial cost and helps to facilitate the deal. That strategy also may allow the buyer to capitalize on the operator’s expertise. In some cases, operators sell a minority or even a majority share of the company to private equity but stay on to run the business.  

While large PE groups typically want a controlling share of the business, “there are pools of capital that are designated for minority deals,” Jenks said. That capital often comes from the financial offices of wealthy families, which tend to be more patient as investors than large PE groups, he said.  

Operators should note, however, that minority shares will sell for proportionately less than majority shares because of the so-called control premium, the amount a buyer is willing to pay over the fair market value of a company in order to gain a controlling interest in the company. 

In many cases, PE groups will buy 100% of a business and assume full control of it, with no ongoing role for the seller. Alternatively, PE groups will ask operators to reinvest a portion of the sale price, say 20%, into the company in an equity rollover. This practice reduces the upfront purchase price for the PE firm and ensures that the seller keeps some skin in the game.  

The operator may remain with the company as a consultant or board member, hoping for a second payday when the PE firm eventually resells the company. PE groups tend to hold car wash assets for an average of seven years before flipping them, Caruso said. That way, they can return more money to investors and reach their targets for internal rate of return.  

Caruso said several large portfolios of car washes likely will change hands in the next few years as PE groups seek to exit positions they entered four or five years ago. However, since the pool of potential buyers and sellers for those large-scale transactions is small, major deals, such as Whistle Express’s acquisition of Take 5, have little impact on the valuations of independent washes, he said. 

You’ll get the rest later 

Another common practice is for a PE group to offer the seller a deferred payment supported by a corporate guarantee, say, 10% of the sales price paid out two years down the road. Caruso said that in those arrangements, “the devil is in the details,” and operators may end up getting shortchanged. 

In one proposed contract from an industry consolidator, a footnote said that a deferred payment was “subject to current debt levels and our senior creditors’ approval of payment,” creating a sizeable loophole for the buyer, Caruso said. In other instances, deferred payments have been based on the buyer’s ability to purchase additional car washes in the area to solidify its market presence, something the seller has no control over.  

“There are no rules for these types of payment structures, so you’ll see anything and everything under the sun,” Caruso said. “My biggest piece of advice: Do not fool yourself into thinking that deferred compensation or equity that you’re not receiving on the day of close is worth nearly as much as its fully stated value, if anything at all. You are putting that payout in a variable state of contingency that isn’t under your control.” 

Carryback notes are yet another way PE groups seek to lower their initial costs, according to Odden. In a simple example, a $10 million transaction may include $8 million upfront and a $2 million promissory note to the seller. The buyer agrees to pay the seller that amount plus interest over a specified timeline.  

“That debt typically is deeply subordinated to the senior debt that comes in front of it, and it’s also often below market in terms of interest rates,” Odden said. “To me, it’s all about what that carryback note represents. If you’d be happy with the transaction minus that, then it’s icing on the cake, and that’s great. But if it’s what you have to do to get to a number that is acceptable to you, then you should know that it’s not without risk.” 

Stay tuned for the next article in this series, to be released in the Q4 2025 issue of CAR WASH Magazine.  

What Did You Decide? 

If you have a story you’d like to share about your perspective and decision — competing with or capitalizing on private equity — reach out to Matt Koch at mkoch@carwash.org. 

• Perspective 1: Stay and Compete/Grow: Finding Ways to Compete and Grow Without Taking on PE
• Perspective 2: Stay and Tread Water: How to Thrive as a Small Wash in a Field of Big-Time Players
• Perspective 3: Join Forces/PE Partners: Using Private Equity to Back Your Growth
• Perspective 4: Time to Sell: Capitalizing on Demand and Finding the Perfect Price and Buyer, Sometimes Again and Again