Featuring some of the largest leaders in the industry.
0:00
Thank you everybody for joining and welcome to the car wash advisory podcast. This week, we have a very special two guests from Madison, Capital Group and links Car Wash being that of Anthony Warren and Joe Teague. Thank you for joining us, gentlemen. Thank you appreciate it, Harry.
0:19
And this is exciting for us. So I think to kick everything off. What would be most helpful for all listeners, viewers and the alike, is maybe if both of you could give a quick background on your personal and professional backgrounds, that would be super appreciated. Yeah, good, Anthony, I'll let you kick it off. Oh, right. So always kind of like to make a joke that you know, sort of wash cars in 17 and never got a real job. So, you know, I've been in the car wash industry 17 years. Started with Audible Car Wash full serve, back in the day, in high school, never with any intention of make this a long term career. Spent five years with the audible team. You know, it was great experience. Learned a lot about work ethic. Guys helped pay for my college. So great organization. Graduated with a accounting degree, kind of the tail end of the recession, and I got a interesting job offer from a group, Sam's Express car wash out of Charlotte, one of the early adopters of the Express model in the Charlotte market. So, you know, I took a, you could call it a gamble, you know, turned out some bank jobs to go take a a job as a site manager with the car wash startup, you know, rolling out an express Car Wash group. So I spent, you know, long time with the SAMS Express team, up until recently, was hired by Madison Capital Group to be the chief development officer to lead the links Car Wash startup. So, you know, we're 18 months into this, and it's been a absolute blast. You know, learned a lot, and these guys have a absolute, fascinating approach to how to do Car Wash funds, how to structure this kind of a different outside perspective than some of our other competitors.
2:13
Very good. So yes, this is Joe Teague.
2:17
I when I graduated from college a long time ago. I practiced in public accounting for a while. Then we went back to law school at Chapel Hill, and having a CPA and a law degree, the first thing you get pigeon holed into when you practice law is you're a tax attorney. And immediately got into like kind exchanges under 1031 and over the years, developed expertise in that area, and kind of evolved into commercial real estate development. And several years ago, left the private practice law, came over to Madison Capital Group to be their president and partner. And then few months ago, back in the early part of 25
3:01
I backed away from Madison a little bit as an officer and can. And now I've come over to links car wash and Fresh Stop, which convenience store chain to help run those kind of in startup mode and and there's, you know, there's a lot of tax components to both of those verticals that I think's been
3:23
my expertise has been very helpful in that. So that's how we got here.
3:28
That makes complete sense, and it's super helpful by way of background. But you guys really aren't a startup anymore. You've been around the block. You guys are growing quickly. No,
3:38
no, we are, but it's still startup mods. You know, it's a very fast growing startup.
3:44
And how many sites are we up to today?
3:47
Currently, we're operating 14 units. We've got seven development properties, with a couple of them under construction, and we've got several sites that we're closing on in the very short term future.
4:03
That's exciting. And for all the listeners out there, Anthony and I have had the pleasure to become close with one another over the last two years, I would say, and it's always an absolute pleasure. And one of the reasons that I wanted to make absolute sure that we had Joe and Anthony on the podcast was links and Madison Capital Group are doing something very unique that we've never seen in the car wash space, which is a different approach, really, to the capital structure via utilization of a DST type approach. Is that right?
4:32
That is correct, absolutely. So Madison capital is one of the larger DST sponsors in the in the country, so we have a lot of infrastructure in place, great wholesale team that you know, works with the different reps and broker dealers to sell the DST interest based in storage, in self storage and multi family. So this will be our first venture, and I think maybe the first DS.
5:00
T in the car wash space that we just kicked off, just hit the marketplace with it a week ago.
5:08
Congratulations, and for all the nincompoops out there, such as myself, Joe, would you mind explaining what a DST is?
5:15
Yeah, sure. DST stands for Delaware statutory trust, and years ago, the IRS acquiesced, through a couple court cases, to recognize that buying a buying a interest in a DST is the equivalent of buying a direct interest in real estate. And while that is in while that is why that is important, is because that allows someone do a like kind exchange into a Delaware statutory trust, because it's considered an interest in real estate and is therefore replacement eligible replacement property.
5:50
So,
5:52
you know, it's, it's mainly structured and built for kind of the small, like, kind exchanges. You know, think 100,000 $500,000
6:00
investor that has an exchange. It's not big enough to really go out and buy, you know, a single asset by themselves. And so it's, it's a marketplace for them to do the exchange.
6:11
And so we are, oh, go right ahead,
6:14
Joe, go ahead. Yeah,
6:17
well, I was going to say just so I can wrap my head around that. So for somebody who wanted to utilize a 1031 exchange in buying a whole property, a DST is an alternative for them to feel that same benefit and be the beneficiary of it without buying an entire standalone unit. That's correct. That's right. That's correct. Our average DST offering may have, you know, 50 to 200 different investors, depending on the size of the offering,
6:47
and that that DST is a primary securities offering, is that, yes, that's right. So, you know, we do a private placement of the DST interest, that's correct, under a PPM, that's exactly right. And then sort of throw all these questions at you, but um, so then, are those traded in a secondary market? Are they? Is there a lock up period? How does that work? There's no lock up period, but they're not. There's no There's no secondary market for them. There's no liquidity in that market. So
7:19
it's not much different than a direct from that perspective, is not much different than direct investment in real estate. You can always find somebody to try to sell your interest to, but there's no there's no organized market for that.
7:32
Is it fair to say that the DST market is more liquid than a single use tenant property? Per se, it is more, I would say it's about the same, yeah,
7:45
yep. And then the main benefit is that you don't have to go out and identify that property, and you still get all the benefit
7:53
stuff to identify. The Exchange works exactly the same for the taxpayer. They have 45 days to ID 180, days to close, right? It's typical 1031, exchange. The benefit to DST, like I said, is it's the smaller it's the smaller investor that has the small exchange. You know, if I sell, you know, residential, lot of help for investment. For $75,000
8:18
it's really hard to find replacement property to work. There's just not that many assets that makes sense and an asset that will pay a dividend, right? And so this gives that smaller investor the opportunity to buy into a larger piece of real estate than one that ideally pays distributions.
8:37
One more mechanical question as to how this all works, and you'll have to forgive the naivety on my side. I am pretty naive when it comes to sort of this stuff, as well as real estate, more so than the investment banking side. But can you, let's say that you have 5 million of proceeds from a sale and you identify a property that somehow fits the bill for 4 million, can you then take the million remainder and put that into a DST, yes, you could identify up to three pieces of property as your replacement. So it's kind of like a fungible plug to that, yeah, yeah. Is that right? Yep. And this
9:15
car wash is all cash. There's no debt involved. So if you need debt replacement for your lockdown exchange, this wouldn't work.
9:25
So, but we're doing this on all cash.
9:29
So, Joe, so that makes complete sense from an investor point of view, and then from your all point of view. What makes the DST structure both attractive and kind of differentiated from, let's say, a sale, lease back approach,
9:42
yeah, so we, we like the DST approach, because we're still in control. So we sell the property will be owned by the Delaware statutory Trust, which will then master lease the property to Link's car wash,
9:56
and Lee's car wash will will pay a rent payment. So.
10:00
However we control the Delaware statutory trust,
10:03
as we're the trustee of the trust. So whether that trust buys or excuse me, or when they sell or exit, the real estate will be completely within our control. So it's a way, it's almost like a sell, lease back internally.
10:21
So it's a way for us to capitalize deals, but stay in control. And the typical exit on the DST is, I mean, you can sell the property, it's called full cycle, and return the, you know, return the money to the investors, and they can do another like kind exchange if they want to keep rolling their gain out. But typically, a lot of times we will look to do an up rate into a private REIT, or, you know, a section, section 721, contribution to an LLC, which are all tax free and and just, you know, try to continue to roll with the asset and the operations, as long as It's cash flowing.
11:00
And also another benefit, if we do, if you do, if you do an upgrade, into a into a private read or to an LLC, at that point, you can put place debt on the property, do a cash out refi to the investors. All
11:15
right, you're going to kill me drop. But what is an upgrade?
11:19
That's just a fancy way of saying, we're going to contribute the property to an LLC, tax free. So each Delaware statutory trust investor will contribute their interest in a DST into an LLC in exchange for membership interest, tax free transaction, then that LLC could put debt on the property and return a cash free distribution to the or tax free distribution to the investor. Okay, so the DST entity itself cannot have debt. But if you move the DST into an LLC structure, it can't, okay, it can have debt. It can have acquisition debt from the beginning. Once it's closed, it cannot add debt. Got
12:01
it? Okay, that's interesting. So you're still, yeah, so you're still,
12:07
so it's almost like this is grossly inappropriate use of the terminology, but it's almost like a closed end security, like you're locked it terms out, and that's it. You can't incrementally add that on top of it. You're saying, unless you move it into That's right, you cannot, that's right. And that's the 721 of the upgrade would give you the opportunity to put debt on it, and, and investors normally love that, because they're going into tax free distribution of, you know, refinance proceeds,
12:37
you pay that out as a dividend,
12:39
yep.
12:41
And because it's because it's loan proceeds, it's non taxable under the Internal Revenue Code. Okay, so really stupid question, why doesn't everybody do this?
12:54
Um, well, you know, I think the market of available 1031, investment proceeds is not huge, right? And then, like I said, we, we've spent 10 years developing a reputation in the DST market. It's, you know, the alternative investment market. So when we go to market, people know, hey, this is a good product.
13:18
You know, someone you know, just doing it for the first time. It's really hard. We started off 10 years ago doing small self storage DSTS, and it was, it was painful for a while. And lot of, lot of meetings in hotel rooms, you know, meeting with reps and brokers and that that, you know, manage money for individuals, and it takes a long time. So it's not, it's not an easy space to get into. However, we're fortunate, because we're into it and other other verticals we own. I think that's fortunate. I think that's a lot of hard work and foresight. Yeah, it's not for free. Yeah.
13:54
And then, and maybe, well, both of you will probably have a perspective on this, but Anthony, maybe you as well. The what ramifications does this have on the operating side? Any having so we get to operate it almost like a hybrid of a lot of our competitors to do traditional sale lease backs, you know, with your normal REITs out there in the marketplace. But the difference is, is that we always have control of the asset, if that makes sense. So you know, where, typically, if you sold off your car wash site through a sale, lease back, you know, you're never going to get that asset back. You know, that's sold to a independent, third party group, and you know, it can be traded, sold, whatever have you where for us, through a DST, we have the ability, whether it's, you know, at the end of the fund period, or whenever, you know, Joe determines, basically, you know, we have the ability to gain the asset back, you know, where we don't completely separate the operating and the real estate forever. So say we get to the end of our two.
15:00
DST period in five years. And we want to do an exit, you know, we can buy our DST investors out of the fund, the DST fund, and we buy it back under link, so we can merge the operating company and the real estate asset back together. And so it allows us to operate it very similarly to like a sale, lease back. But all of our competitors that do so don't have the ability to get the real estate back whenever, you know, they take it to market. So, you know, it allows us to have an exit strategy. This is a little more unique. And so, you know, it's identifying the right assets that are going to fit for a DST. You know, these are sites that are greenfield development, or their sites that, you know, just recently constructed, that you know, there's not a big goodwill value. It allows us to buy a site based on the real estate asset value, place it into a DST, then links becomes the tenant, and then at the end of the DST period, then links could purchase the real estate asset back, if that makes sense. It's almost like an in house reads. The best way to put it, yep, that's right,
16:08
gentlemen, when you say you can purchase it back, and again, you have to bear with me, with the naivety. But that's not a, oh, it's possible. That's a you have the first right to do it correct? That's that's outlined in our ppm, okay, because we are the DSD manager. So can I ask you, is this so I imagine, and Anthony, you're alluding to this, and I'm sure both of you know a lot as to what the correct answer to this is. But does it have an implication at all on in terms of your underwriting criteria. And whereas a different group that, let's say, was planning to use sale leasebacks and maybe Junior debt versus a DST type structure that you're implementing when you're looking at the same wash, do you ever find that the disparity in capital structure or funding model changes the way you're looking at a potential underwriting correct? And so for us, we actually run dual funds. So we have DST fund, and then we have our links Opportunity Fund. This is actually the second one this year. Opportunity Fund two, which is going to operate more like a traditional car wash fund. So that's more of a cash flow. It's not a real property interest. I don't speak incorrectly, but you know the joke, correct me, but for us, it allows us, you know, to raise a fund for sites, and say, more mature assets that have goodwill value. You know, they're a better fit for opportunity fund because it still allows through, pass through depreciation, and it creates cash flow distributions to our investors. So if it's a more mature, stabilized site, they go to our up fund. And then if it's a grower site that's more of a real estate property purchase with, you know, minimal business value, then they can go into our DST fund. It allows us to kind of purchase, you know, in place our assets in the particular fund based on, you know, what the asset is, you know, sometimes it might be a repo with improvements. It might be a site that just CO that has, has not operated as a car wash. Or it might be a site that's six months into operating an open that we buy it, you know, very much like a real estate property, you know, asset, and that's how we do the, you know, the valuation on it and the transaction, yeah, we've, we've, we're raising money in two different vehicles, Harry one, as Anthony says, fund two, which is an opportunity fund that is that gives that pool of investors someone who's looking for a little bit of a distribution check and A big accelerated depreciation write off, right and then, and then, you know, a decent exit, at least get their capital back, plus a little return the DST, then is a completely different investor market who really is trying to complete a 1031, exchange, and is not concerned about depreciation.
18:57
So it gives us two, two vehicles to attract two different investor pools and and maintain control the real estate
19:08
in both scenarios, presuming the opportunity fund does not perform sale lease packs. Yeah, yeah, correct. Thanks. So our opportunity fund so far has not performed sale leasebacks because we do a depreciation pass through, and so with, you know, the big, beautiful bill coming through, 100% bonus depreciation, you know, it allows for us to get up to, you know, one and a half times, you know, levered depreciation multiple for investors, so they can take a substantial write off, you know, from The depreciation on the assets so and then it allows for ongoing distributions from the cash flow to stabilized asset. That's right, do you guys, and this is a very pointed question. I don't mean to put you on the spot with it, but it's something that I'm personally very curious about. And mathematically, there's an answer, but I'm wondering if that.
20:00
Answer does not exactly jive with practicality.
20:04
The bonus depreciation does that directly impact your underwriting in terms of ability and willingness to pay for assets all else equal? Yes, it's, it's a big part of how we structure our deals. Purchase Price allocation is, you know, one of always make a joke that, you know, whenever you do a deal, it's always like, how much, how quick. And then for us, it's, how is it allocated, you know. So it's always, you know, if you triage it, it's they always want to know, what is the purchase price, followed by, how quick am I going to get the money? And then for us, you know, our big point on it is the purchase price allocation, you know, so to take a look at an asset, and depending on the age of the asset, you know, is it something that's, you know, a 15 year old car wash building that's going to need capex money that we're going to put into it, which then would allow for more depreciation, or is it a New site that we can, you know, capture the depreciation on the equipment in the facility, because, you know, and it allows for it. The big picture for us is it allows us to buy across all different types of car washes when we're out there, where a lot of our competitors are on their fund structures they're looking for, mature, stabilized, cash flowing assets they're buying on an EBIT, on multiple nothing else, you know, where for us, we can buy everything from a, you know, 15 year old remodel that we need to go in and blow it out and, you know, spend $2 million improving the site to, you know, sites that are Greenfield, that Just open CEO Ed, to sites that are mature and stabilized, you know, that are 234, years old, that, you know, already have the cash flow, where a lot of our competitors have to target kind of one acquisition strategy they want, you know, the cash flow and the EBITDA multiple. Or there's guys out there that do a lot of brownfield purchases, you know, they buy them, and they improve them, and then they build the business. Well, for us, we can buy any type of car wash asset, you know, in the
22:09
from an express Car Wash perspective, if that makes sense, it's on point five acres and it's a full serve with an 80 foot tunnel. Unfortunately, I can't make more land, but you know, if it's got enough, where we can, we can get the same customer experience through that facility, and it meets our demographic and competition density, you know, densification strategy, then we can buy a car wash, kind of from A to Z, and so that's what allows us to do it a little more uniquely than a lot of our competitors. Is
22:38
anybody else doing this? I don't know of anybody, and it's pretty hard to get things past me in this space, because I'm have no life, and this is all I do. But does that do you guys know of any other group doing this? I do not. DST, yeah, no, our tax attorneys at safe Hart, and he is kind of the premier DST person United States as far as legal goes, and he is not aware of another car wash. DST, that's been done.
23:06
This is even Harry. Our our op fund is also very unique as well, because we raise an annual op fund, you know, because we don't do one single blind fund, you know, and then do sale, lease backs to return, you know, capital back to continue to repurchase. Where for us, we ran an annual fund, you know, with a target of how many units and then a return for those investors. So we're able to go year by year, you know, where for us, you know, last year, bonus depreciation was at 60% now we're back to 100 you know. So it allows for us to pivot, whether it's based on current market conditions, IRS tax codes, you know, it allows for us to kind of, across the board, you know, be able to buy car washes, whether it's, you know, a 20 year old full serve, you know that we go in and get and do you know a, you know, $2 million remodel and re and go through and, you know, revamp it, remodel it to sites that are stabilized and mature, that a lot of our competitors buy. So it allows us to not, you know, limit our options from an acquisition perspective, yeah. And I think our op fund is unique. Carrie, I think Nancy, correct me from wrong, but our op fund is buying the operations as well and then paying management fee to Link's car wash. So if you're an investor in our op fund, you're participating in potential upside in the cash flow. Yeah, help me with that more. Yeah. So how does that differ from being an LP and a close just normal private equity fund investment, but I think it's different than a fund that's just by this, just serving as the landlord. So if your fund is just buying car washes to triple net lease them to an operator, you have no upside. Your rent payment is what it is, right? So in our structure.
25:00
If you knock it out of the park, you're going to, you're going to participate in the upside in that fund, yeah. And so it allows, compared to two, yeah, it allows, like, for a lot of them, it's three, you know, like, a lot of these REITs out here, have investors that invest just in being a landlord. You know, within their our car wash competitors raise a fund for the Opco. You know, our opportunity fund blends them together, and so they get the upside on the real estate, and they get the upside also on the operating company, because our safety net, that's a little bit different. If you look at what the cost was to develop a Express Car Wash five years ago versus currently. You know, there's the cost to develop an express car wash over the last five years, conservatively, has probably gone up 50% if not higher, you know. And so for us, it's the appreciation and the asset that we don't let go, if that makes sense. So for like our op fund investors, when they invest in our op fund five years from now, look at the replacement cost for 100 foot Express tunnel on one acre with 20 vacuum spaces. You know, what is it going to take to build a facility like that? You know? And so that's something that the REITs get to benefit from. But you know, the our our competitors out there that raise an Opco fund. It's tied solely to the operations performance of that particular asset, you know? And so, you know, that's where it's we're able to kind of mesh them together into something that is backed by a real estate asset that we don't let go. And so, you know, that's, that's, you know, Madison capital as a whole is a real estate equity group, you know, a little bit different approach to how we do this than the traditional private equity. It's not private equity, is it? Because a realist, it's more real estate focused. And I'll tell you, I've gotten time and time again, I've talked to investors who are LPs and funds that say, Well, when I first invested, my first invested, we were going to keep all the land, and now we're not, and now I'm no longer privy to any of that. We basically sold it all up at a predetermined cap rate, at market, prevailing rates, and that's it. No more land upside, right? But the OP Fund and the DST fund are very intentional in in their structure, yeah,
27:23
correct, correct. And that's that's for us as an organization, you know, whether it's storage, multi family, our C store group, you know, we are a real estate equity firm, first and foremost, you know, we're a real estate developer, everything from, you know, we've got an in house contracting group. We built these things in house ourselves, you know, we've got Benco that does our construction and development in house, you know, we've got property management folks. It's also just bolting on Car Wash operations team. And so for us, you know, it's utilizing the vertical integration that Madison capital already had in place, you know. And so it's not just simply, we're doing M A and acquisitions in the car wash, Car Wash space. We can also, you know, develop it Greenfield, you know, because there's times in the market no different than, you know, Harry, where, three years ago, the guys that could build them, you know, were doing extremely well. They're tough to build and develop. And so there's times where you should be more acquisition heavy, there's times you should be more development heavy, depending on the market. And it allows us, we're doing both. And so we can, you know, right now, and say, probably 80% acquisition with 20% development. But when the if the market turns, you know, interest rates drop, you know, then we have the ability to spend, you know, and do more development and less acquisitions. Because, you know, the Ryan Hanks had built a group, you know, that from A to Z everything from the real estate acquisition, the construction development entitlement, all the way through the operations, you know, and so we basically bolt an operations company onto car wash, you know, asset that we could build and develop in house or acquire, depending on the market. Right now. Are they expected? And goodness knows, I'm not trying to get into the territory of predicted returns or anything like that, but is the return profile tremendously different or differentiated, given all the tax deferment, any of that, or is it just different risk profile? I think ours is probably a little bit more conservative, because we the big value prop for our
29:36
our investors, is the tax savings. Whether you're an upfront investor and you get the depreciation pass through, you know. Or you are a DST investor, and you have 1031, funds that you need to place, you know. So for us, a lot of our a lot of our competitors out there, the ratio fund, you know, it's not backstopped by anything. It's not backstopped by a real estate asset. But then at the same time, it.
30:00
Has to be pure return, IRR, you know, and so for us, it allows us to be a little more conservative. But then, if you look at it from a fund investment perspective, it's what's your depreciation, and how much are you going to save on your taxes, you know, from a depreciation write off, and then the return, or for our DST in particular, you know, allows for them to place 1031 funds no different than they would on like a net lease purchase, but they could buy a portion of or a real estate interest of, and they don't have to take down the whole thing.
30:35
What is the most misunderstood? Because I get yelled at all the time for making these two long gentlemen. So let me ask you, I guess, my big, my big finale question here is what is probably in each of your minds the most misunderstood part as to what links and Madison capital is doing in the car wash space that you wish you could get out to more people. Maybe it's just that you exist. Maybe it's just this differentiated approach. But what is it, if given your opportunity to speak to the masses like us? What? What should people know?
31:09
I think the biggest thing for you know from the business and acquisition side is that, you know, we purchase and we structure it like a real estate asset purchase, whether it's for fun or whether it's for, you know, a, you know, our DST fund, you know. And so for us, it's the the biggest piece is we don't have, we can't get into a bidding war at 1213, 15 million per unit, like a lot of our competitors do, you know, and that's because, you know, we have to backstop it with the real estate equity and the real estate value. So the difference is, is that, you know, because we're not spinning the real estate off, and we're not running an Opco fund, you know, it kind of puts a top on it for us, you know. But at the same time, you know, because we purchase it like a real estate asset, we do, you know, real estate contracts is how we structure them, with some business provisions. It allows for us to simplify the transaction process. You know, we're cash buyers with limited contingencies. We've got working capital internally. But then it allows for us, you know, not to involve a bunch of investment bankers on each side in real estate teams of 10 to 15 people. No offense, Harry. Now I always make a joke. The only thing worse than a real estate broker is a banker. That's being a real estate broker, you know. And so that's where these comp, you know, especially for you know, the single or, you know, few unit acquisitions, it's very intimidating, you know, for a lot of these groups, when, you know, a big institutional group or private equity group rolls in with a, you know, an acquisition team of 15 people, and you know 10 different attorneys, and they're using their family attorney, you know, that's not done a lot of transactions. It allows for us to line it a lot closer to what they know on buying real estate or buying a real, you know, a building or whatever have you not as much of a business acquisition with, you know, a binding loi and the provisions behind it. You don't, you're not a fan of the 200 page purchase agreements. I'm not, believe it or not, how many deals we killed because of that. Okay, let me just make note of that. Yeah.
33:27
Here, I think what differentiates us is we're trying to, it's the old saying of, you know, all rising boats, right? And for our investors, we want them to participate in the upside of the ops and the real estate valuation creation, and I think that may make us unique as we keep that very that's very focused part of what we're trying to
33:50
do. So and gentlemen, just to, just to re summarize here, both and this would constitute the entirety of Madison capitals Car Wash related ventures, both funds, the Opportunity Fund and the DST fund, both, no matter what, have full real estate exposure. One just has the OPT co added on, all right.
34:12
Well, the DST has the real estate real estate exposure, but it is master lease back to links car wash,
34:21
but under none of the offerings are you only isolating and exposing people to the Opco without that real estate backstop, both of them happen, correct? That's right. Okay, that makes sense to me. And gentlemen, I actually cannot thank you enough for putting up with my sort of stupidity, with this kind of stuff, and naive as it comes to all these structures. I can't believe that you guys are the only ones doing this. It makes a tremendous amount of sense to me. Where can investors potential targets that maybe want to sell? Where can everybody
34:53
find you? Yeah, we I mean, definitely just call me directly or Anthony. That's fine. Yeah. And.
35:00
And but, yeah, we actually are in the process, and hopefully it'll launch the next week or so. We're doing a website for links that will list all the offerings we have outstanding that would probably be the best place to get an introduction to what we have, and glad to share that with you. Yep, and they can follow us on links, Car Wash investing on social So, Facebook, social media, etc. And then they will get in touch with our capital markets folks. They can provide, you know, 10 times more detail, as much detail as they would like.
35:35
Last question, right? How many people does Madison capital employ? You guys are quite an operation
35:40
of Madison capital, the larger holding company, has about 650 employees, outside of links and fresh stop. And I think links, I think we're at 90 employees. Anthony, is that right? Yeah, that sounds correct. Yep. Fresh Stop has about the same as about 90 so all in
36:03
850
36:04
Wow.
36:06
That's guys. This is tremendously impressive. I can't thank you enough. Again, both of you for joining us. This has been one that I've been looking forward to for a long time. What I will be sure to do, and we'll be sure to do, is we'll link all the information in the description, or whatever it is, however you're listening to this, and we look forward to people tuning in next week, Anthony and Joe, thank you so much for being on the show. Harry. Appreciate it. Thank you so much, Harry. Thank you. Thank you, gentlemen. You.
Harry 0:00
Hello, listeners. Thank you so much for joining us. I’m Harry Caruso, founder of Car Wash Advisory, and today we have the pleasure of being joined by Mehdi, founder of Hello Wash. Thanks for joining us.
Mehdi 0:13
Of course—thank you for having me, Harry.
Harry 0:16
This is going to be an exciting one, because Mehdi and I met each other, I don’t know, maybe close to a year ago now, and what you’ve done has changed. You’ve grown so much in that amount of time—it’s wild. Do you want to start by telling the audience a little bit about yourself, what Hello Wash is, and the whole story here?
Mehdi 0:37
Yeah, absolutely. We’ve been in the car‑wash industry for a little over a year now, so we met a few months into our venture—which I’m pleased and happy that we did—and in that time we’ve built a lot. We started out with phone answering using AI, really a customer‑service tool that makes customer‑service teams more efficient. What we’re turning into now is a suite of tools for customer service and beyond, because we’re finding a lot of opportunity in the car‑wash space, specifically in building technology to make operators’ lives a little easier and more efficient.
We now work with about 30 % of the top operators in the industry, and by the end of the year we’ll be with about 60 % of them. We’ve seen wildfire growth on our side and hope it continues, but we’re really doing it for the passion and the love of helping operators. I come from a family that has operated small‑chain restaurants, and we’ve seen how poor the technology is in that space and how much it’s needed—similar to what we’re doing now for the car‑wash industry.
Harry 2:03
Where did the genesis of this come from? Obviously no one could refute the need for what you’re providing and how far behind these brick‑and‑mortar industries are in basic technologies—or what’s become basic. But where’s the genesis? Where did this come from?
Mehdi 2:21
This was born out of restaurants. I was working for my dad in his restaurant every weekend—he paid me in food, which was good enough—and about two and a half years ago I was working alone in a small deli. I would get calls while I was helping customers or cooking, and it came to a point where I was so busy I literally smashed the phone on the ground because I was angry it wouldn’t stop ringing. To me, that was fine, but to my dad it was missed revenue.
I thought, I have to create—or find—something that can answer the phone and take orders. When I looked, nobody wanted to work with a small guy. Those companies either charged exorbitant amounts—while turning around and charging their big enterprise clients a third of that—or they said we were too small. So I decided to build it for the restaurant industry.
I teamed up with my best friend, Henry—he’s a Bill Gates Scholar; only about 0.03 % of applicants become one. His whole education is paid for, and he’s earning a master’s in computer science. We built this together and started selling it to restaurants, but, surprisingly, our first three customers were car washes. I looked into the industry and saw that car washes needed this—no one else was doing it. Some copycats came along, but we built every single line of code ourselves. So it all started in restaurants, but we realized car washes needed it more.
Harry 4:18
I’ve got to say, Mehdi—for anyone listening—it’s remarkable to know that Bill Gates Scholars are now working on software for individual car‑wash owners. The level of talent in this space today—at least the more formalized educational talent—is astounding. Car‑wash owners have always been some of the smartest people out there, with or without formal education, but no one would have believed this five years ago.
Mehdi 4:50
Absolutely—100 %. Even beyond Henry, we have some of the smartest machine‑learning engineers in the industry. The problem is that, in the car‑wash space, AI tools are popping up now, but no one else has machine‑learning engineers on their team. How are you going to build something without the expertise? I think we’re changing that.
Harry 5:22
I don’t know, Mehdi—that’s worked pretty well for the operating side to date! All joking aside, I couldn’t agree more, and I love nothing more than hearing that something was created from a pull dynamic rather than a push dynamic. It sounds like you didn’t even intend to target car washes—similar to when we started Car Wash Advisory, I hadn’t set my sights on the car‑wash industry. You saw an overwhelming need that had to be satisfied. It wasn’t forcing a square peg into a round hole—far from it.
Mehdi 5:53
Exactly. At the time Henry asked, Why would we go into a small industry when we could serve so many general businesses? I said, Henry, look at these numbers, look at the pain. Our first three customers are car washes asking if they’re open at 8 p.m. It was ridiculous.
Harry 6:23
It’s a clear need and an awesome place to start. To touch on the machine‑learning topic—that’s how we initially became acquainted and friends. I have a small background in ML and NLP, and you understand it too—perhaps not at Henry’s level, but enough. If I hear one more company use “big data” or “machine learning” without understanding what they’re really doing, I wish I could short that part of the space.
Mehdi 6:57
Exactly. We have great vendors in this industry who do good work because they’re experts. But we also have vendors selling things they don’t understand, which can hurt operators. For AI specifically, we’re the vendor that understands it better than anyone else in the industry. The car‑wash industry is getting more advanced—people just have to catch up.
Harry 7:43
This industry has pervasively sat five to ten years behind, but the gap is closing. Talk to the audience and me about Hello Wash’s current clientele—and the ideal clientele. Is it single‑site owners, a specific model, national chains? Who do you serve?
Mehdi 8:05
Great question. It depends on where we are now and where we’re headed, because customer service isn’t the only tool we’re building; we’re also building sales, operations, and finance tools. Currently we see three customer types:
Harry 10:18
Tell me if you disagree. I was taught you should focus on your core value add—your unique super‑power—and do that as well as possible. If you’re a car‑wash owner, whether you own one site or 500, your core competency isn’t answering customer‑service calls. It’s not a differentiator or revenue driver; at best it can drain revenue if handled poorly.
Mehdi 11:10
I agree, though some operators disagree. They say, Unless it makes me a perfect customer‑service machine, I don’t want it. The alternative is doing nothing and not answering calls. Why not add something that handles 60–80 % of calls and makes you efficient? Some operators think, I need to be perfect or nothing. But perfectionism isn’t realistic.
Harry 11:58
It’s cognitive bias—perfectionism, all‑or‑nothing thinking. I do it too. If I’m going to do something, I want 110 %, or nothing. That’s foolish. This applies to a one‑site operator just as much as a 500‑site operator.
I wasn’t planning on this, but there’s so much misconception about what AI really is—AI call centers especially. Some people think it’s a robot voice saying “press 1.” Can you explain?
Mehdi 13:06
We hear that fear a lot. Some say, “I don’t want my customers talking to a robot,” or they think it’s just an IVR system, press 1, press 2. Others wonder if AI will replace all their people or ruin the customer experience. Our motto is creating AI to make people more efficient—not replace them.
There are callers who love AI because it’s fast: “I want to cancel,” and it’s done. Some callers hate automation; we make it easy to reach a human or leave a message for a callback. Our goal is to answer 100 % of calls and eliminate 50–70 % of the workload, saving money and time, not solving every single problem—at least not yet.
Harry 15:10
Exactly. AI’s purpose is to get the low‑hanging fruit that’s not the unique strength of your staff. Let your people focus on what really needs them.
Mehdi 15:46
Right. Operators sometimes say, “I don’t want AI handling damage claims.” Fine—AI handles the simple things so your people can handle damage claims. We see calls where a customer just asks if you accept dually trucks. Do you want a human spending six minutes on that?
Harry 16:31
The best example is a wrong number. That’s what we’re trying to eliminate. So when does the rubber meet the road? Is Hello Wash a cost‑saving mechanism, a quality booster, a churn reducer?
Mehdi 17:01
It depends. If you have 50 people in a call center or pay a third party for that, you’ll see an immediate 50 % reduction in call volume—clear cost savings. If you’re only answering 40 % of calls now, you can’t “save” money yet, but you improve service. Think of three ROI categories: now, in a year, or in three years.
We have a 26‑site client with three phone reps. Before us, they answered 30 % of calls; after us, 88 %. They didn’t save on staff—because they still need three people—but they massively improved service.
Harry 18:56
And we’re not talking about a huge cost. One, two, or ten customers retained more than pays for Hello Wash. For some operators it’s cost savings; for others it’s service quality and employee satisfaction.
Mehdi 19:54
Exactly. Some reps told me, “Before your AI, I couldn’t even go to the bathroom because calls were nonstop.” Now they get 15‑minute windows. No one wants to handle wrong numbers all day.
AI isn’t perfect; it’s only as good as its data. Some operators worry: What if the AI says something wrong? Out of 1,000 callers, maybe 10 have a poor experience. Are you going to ignore the other 990? Humans make mistakes too. If AI errs, we retrain it—you don’t throw it out.
Harry 22:35
Agreed. Adoption of AI forces us to admit we’re not perfect either. These are probabilistic models; they will be wrong sometimes.
Mehdi 23:16
Exactly. The AI has confidence scores. If it’s 100 % sure it’s a cancellation, great. If the caller uses odd wording, it might miss it—just like a human. We catch those edge cases and improve.
Harry 23:52
We all have to become more comfortable with that. One more topic: from our sell‑side advisory perspective, what really drives incremental value at exit? More than ever, systems, infrastructure, repeatability—the bona‑fide company element—matter. Hello Wash is a Lego piece in that foundation.
Mehdi 24:56
Exactly. Large operators build to sell. When a buyer asks, “How’s your customer service?” you can say, “We answer 100 % of calls with Hello Wash and a lean team.” Instead of spending $5 million on a big call center, you spend a fraction with Hello Wash—that adds value.
Harry 26:28
In quality‑of‑earnings diligence, “Who answers your phone?” is a checklist item. Saying “We answer when we can” is not compelling; Hello Wash is a systematic, transferable backstop.
Mehdi 27:07
We have a client with four reps and many sites. Over Christmas—peak time—they were 5,000 tickets behind. It took four months to catch up. Imagine callers waiting three weeks for a callback—that hurts reputation. If you reduce site call volume by 70 % with AI and track missed callbacks, you hold managers accountable.
Harry 29:01
It’s a mechanism for accountability and core roles.
Mehdi 29:01
Exactly. For operators without a 20‑person call center, why not reduce calls by 70 % and give managers a tool that shows the transcript, customer number, and whether they returned the call?
Harry 29:37
This all makes tremendous sense. For listeners who doubt that car washes get many calls, Car Wash Advisory somehow has its number attached to several Google listings—we get about 120 calls a day, 30‑40 from people thinking we’re a car wash.
Mehdi 30:06
Right. On your side, when you sell a portfolio, buyers ask about operations all the time, right?
Harry 30:39
All the time. Google scores go in our confidential info memoranda. In today’s world, how can you call it a real business if you’re not picking up the phone?
Mehdi 31:18
Have you seen deals where revenue looks great but operations are a mess and it kills the deal?
Harry 31:37
Yes—though it’s rare because bad operations usually hurt numbers too. But in underserved markets with no competition, it can happen. Conversely, platforms that got premium valuations almost always had buttoned‑up systems and operations.
Mehdi 32:42
Makes complete sense—you don’t want to buy a business that’s on fire.
Harry 33:03
Exactly. Before we wrap up, please share the best way for people to reach you.
Mehdi 33:24
Sure. Call me at 612‑380‑5205 or visit HelloWash.ai (or HelloWash.io—we own both). Email me at mehdi@hellowash.ai. We take very good care of our operators; our support turns things around the same day, if not sooner. People sometimes ask why we don’t charge more, but we care about building a great product first. You can find us online—just search Hello Wash.
Harry 34:23
Perfect. For all listeners, we’ll link Mehdi’s info and the company website below. Mehdi, I can’t thank you enough for joining us today—this has been a pleasure. I’m Harry Caruso, founder of Car Wash Advisory. Thanks for listening, and please reach out with topics you’d like us to cover. Mehdi, thank you!
Mehdi 34:53
Thank you.
0:01
Hello everybody. This is Harry Caruso, founder of car wash advisory. And thank you so much for joining another episode of our podcast today. We have a very special guest that of Pete Manny, CEO of zips car washes, and we are going to have a lot of fun here today. So Pete, thank you so much for joining us. Thanks, Harry, newly minted CEO.
0:24
One last point before we jump right in. Dennis zimberoff, managing director here at Car Wash advisory, is also joining us, and with that, Pete, talk to us more about this newly minted position. Sure glad to be at zips. It's very exciting part
0:41
coming out of chapter 11. So post emergence,
0:46
lots of momentum, lots of wind in our sails, right side of the balance sheet. So all those things are very positive, having had some experience in this previously through when wash depot went through this back in 2000 2001
1:04
was a it was a great experience, as hard as that sounds, or has you know, different as that might sound, it was one of the best experiences I've ever had in my business career. A couple things happened there.
1:20
First of all, nothing galvanizes a team like going through a crisis situation like that, and it absolutely did, but to come out on the other side positive
1:34
really gives you an appreciation for everything that you have right, and everything that you had to fight for, and wash depot was was better for it, and ever since, is probably one of the strongest, financially balanced companies in our industry that you don't hear much about,
1:53
but they are fantastic company. Hope to do the same thing here at zips. So coming out,
2:02
money in the bank balance sheets been restructured,
2:07
learning about the team here and everything that they've done in their battle for survival, which was really extraordinary. But the people that are here are a good team, and we're going to work with them and get them organizationally prepared, through operations, through training, through facilities maintenance, kind of that the key parts there, and take them to the next level.
2:36
And Pete, we have so much to discuss today, and I want to make sure that we focus most of all on what lies ahead, because that's the exciting part. But with that being said, I mean, you did it in terms of zips coming out in the timeframe proposed. I have to be honest, I am shocked.
2:53
Well, in speaking with the lenders, and I started speaking with them, probably the
3:00
towards the end of January, they were pretty
3:04
on top of everything, and they they enlisted some good companies, Alex partners, Hilco, Evercore,
3:11
and they had a plan, and they stuck to the plan, and really worked, worked it out well with the REITs and unsecured creditors. And, you know, hats off to them. I had very little to do with that process, for sure, but they they took some experienced people and through the new lenders, HPs, Brightwood pennant Park and some others,
3:36
had some really strong departmental people that guided the process. So they're happy to be out.
3:48
They're looking forward to the next chapter. For sure, we're in close contact often, as you might imagine.
3:57
So Pete, let's talk about that next chapter. Give us give us the story here. Give us the scoop. What does the next chapter for zips look like? Well, really, the next chapter is centered around people and making this a people development company, right?
4:13
This company is going to wash 2025, hopefully 30 million cars, and that that's not done with people in an office, right? That's done with boots on the ground. Where's the excitement? Where are the great people that are going to provide a great customer experience every day, consistently? Right? Everything we do at the site level
4:36
is it's 100 different tasks, and none of them by themselves, are difficult, but to do it day in and day out, consistently,
4:44
from site to site consistently, there's the trick, and that's where operations comes in and training and proper maintenance. So one of the first things we're going to do is stand up a robust training platform, an LMS learning management system. We're.
5:00
That will encompass not only technical training, but culture, expectations, how to work with each other, how to work with customers, things of that nature that will make the experience at each one of our sites better.
5:20
That counters into operations. It will also come into play with with preventative maintenance and what's expected at the site level versus the facilities maintenance department. They have a great facilities maintenance department here. These guys have really done a good job and without a lot of resources to do it.
5:39
So now deferred maintenance, right? That'll be taken care of here. It's being taken care of right now, but over the next 12 months, the properties will be
5:52
presentable to all customers 100% of the time, right? We're looking for zero downtime, which is great.
6:03
Previously at True Blue, we had gotten to a consistent 99.7%
6:09
uptime,
6:13
which is fantastic, right? And every time. And we did that because every time that we
6:19
came across a problem, whether it was a conveyor down problem. How long was that conveyor down? It was down for two or three hours. Well, what was the root cause of that problem? We would go back and try to incorporate that into training, to train out that problem, right? And we weren't always 99.7%
6:36
we started at 90 and we got to 92 and then 95 and we train those things out.
6:43
That's why all those things have to work hand in hand. Because when you do find that problem, who's handling that? Is that an ops problem? Is that an operational issue, or is that a facilities maintenance issue? Right? Do I have welds breaking? We don't really have our site managers welding, nor will we add zips? Right? That's a Facilities Maintenance job, but it's the ops job to make sure the track, you know, is greased, air pressure is correct. Do we take the link out of the chain? Are my rollers wearing properly? All those simple things that that preventative maintenance and ongoing maintenance need to be so that is part of the that is the plan, right, to get a consistent quality consumer experience every time at every site. It
7:32
sounds like a lot of accountability on the site level. Which people have this idea that accountability is a negative, it's somebody coming down on them, but I'll be honest, I think it, I think it enhances, actually, the culture to an extent otherwise impossible. Harry, I love accountability. It's sight, yeah, because think about this, you come to work, you wash cars, you go home. You come to work, you wash cars, you go home. How exciting is that? Right? But if I'm teaching you a little bit about chemistry, a little bit about grassroots marketing, about your P and L, how to operate a business, how to take care of consumers. Now you're not only having fun at work, but we're building a career. So we want to have a defined career path and a formalized training program.
8:18
We're exceeding beyond with anyone coming into the car wash industry is going to think is a job. The last thing I want is somebody to be here until they think they're going to find the next best job. We are not as car washing 20 years ago, might have been a stepping stone industry or stepping stone job to the next best thing. It's no longer that. And you don't need a college degree to make six figures in the car wash industry.
8:45
Talk to me more about the culture. So I think that this is fantastically exciting. Here we are with and I'm no sort of offense or disrespect whatsoever, and everything that's done to date, because it has been fantastic. But coming into a situation where you have a company of this size and scale that is almost a blank canvas in terms of culture, what's the goal? In terms of what is the pro forma culture of zip supposed to be? I wish it was a blank canvas. It's a heavy lift right now, because while I can come in with these great ideas and concepts and even execute them.
9:25
The folks that have been here have that have been through this, and I we saw this at Wash depot as well. Show me the money. Show me what you're going to do, right? They're not going to believe it until they see it. They've had some promises made that weren't followed through. So right now, all eyes are on myself and the executive team and the ops team and the facilities team to see if we're going to carry forward with our promises, you know. And one thing I can tell you that I learned.
10:00
And
10:01
from Greg Anderson, who's the CEO of wash depot, is you keep every promise you ever make. That being said, we're going to make very few promises. I
10:12
think that's the right way to do it, right? That's the only way to do it. It is. So we're going to look for some quick wins, some things to build back culture, some employee perks that that we can do
10:24
that don't cost a lot. Focus groups, for example, how about we just ask the employees, the team members at site level, what do they think would make this company better?
10:38
It goes a long way to correcting what's wrong. It also goes a long way into building the culture like, hey, someone's actually going to listen
10:47
to me. Now, whether that happened before or not, I can't tell you, because I wasn't here. But
10:52
as a side note for our listeners, because I just cannot not say this, we were interviewing a candidate for a financial analyst position today, I kid you not the words that came out of their mouth. What did you not like about your last role? I'd like to work somewhere where people care that I work there. That's what they said.
11:12
I thought it was simple yet resoundingly clear. And it's funny how quickly that can become. Not so the case. It's huge, and it goes into retention. You know, it's 22% of people
11:25
leave their job because of money. It's typically not because of money. It's because of who your direct supervisor is, or the culture of the company, or no one's listening to me. Or I don't feel like it can develop here.
11:41
Those are huge.
11:43
So how do you, and I don't mean to harp on this, but just because, goodness knows, what an interesting topic for listeners, how do you provide a upward verticality for site level employees at a car wash company? So it's actually a tree,
11:59
because the tree is operations. It could be maintenance, it could be training, it could
12:06
be sales, it could be to the corporate office. So there's this, there's this career development tree, okay, now, traditionally, people are going to move up. They're going to come in as a team member. They're going to move into sales supervisor, Assistant Manager, manager, district manager, traditional, okay, but then you have that person that every time the maintenance guy is there, the maintenance tech is there, he's following them around, going, Hey, what you what are you doing?
12:33
That guy gets identified. That person could be a girl. That person gets identified as an apprentice. So we have our apprentice program, right? So you have an apprentice, tech one, tech two, tech three, Maintenance Manager, divisional Maintenance Manager.
12:49
There's that branch. Then you have people that are just very good, that maybe are a site manager or district manager, but they love to train, and that person moves into the training field as you build a good learning management system. And I know people refer to an LMS as an online tool. That's only part of it when you're training to be effective in our industry and probably every other industry, it is. It's not only online training, but it's it's workbooks, it is hands on training. It's shoulder to shoulder training to be comprehensive and be very good at what you want to do.
13:33
It's wild,
13:34
and it sounds like from an organizational standpoint. I mean, it makes sense to have people cross trained in different elements as well, because it makes them more robust as as employees. And they're also your biggest advocates from the recruitment side, which I would imagine you guys are looking at doing right now. We are. Yep, that's a great point. So cross training people once again, we'll, let's start with if I'm, if I'm the person that's guiding cars into the tunnel all day, and I do that eight hours a day or six hours a day, you know, six days a week or five days a week. How fun is that?
14:11
Right? Where, if I can teach you sales and tunnel operation and possibly some management, how to schedule or how to work in the back room,
14:23
you're just adding value to that person's career.
14:27
As far as recruitment goes,
14:30
we're going to be looking for the best and brightest people with car wash experience, people without Car Wash experience, people that are looking to develop that maybe aren't happy where they're at
14:42
or don't feel like they're developing, sure that's going to be a great a great place for us to find good people. And Pete, would you go ahead and say that zips truthfully, wants to be offering long term careers for these people. Yeah, that's the goal.
15:00
Right? So, yes, that is the goal, and that's how you scale a business. Which let me head into that, because we are looking to scale a business
15:09
through the restructuring. Zips will drop down from 277
15:13
stores to somewhere between 202
15:16
20
15:19
but within the next year, we expect to have Greenfield possible M and A
15:27
opportunities and selective obviously, we want to grow in the areas that we're strong in, in the regions that we're strong in,
15:36
and get some bolt ons there, but also some Greenfield opportunities.
15:42
So with that, once again, you need people, and those people, you want to have them trained, indoctrinated into your culture, right? So going back to training like we'll talk about the interview process the every time you hire somebody, you change the fabric of your company, the DNA changes right for the better, or possibly for the worse. So the interview process, the hiring process, is huge, and laying out the expectations and
16:18
how we treat people, and making sure that in the interview process, what we tell somebody is exactly what we live up to,
16:28
yeah, yeah. That's integrity, right? And that shines through in terms of you're mentioning all these strategies, which is, again, fantastically exciting, and I think something that everybody and every listener is going to be very much looking forward to seeing.
16:42
I just want to sort of explicitly state this zip is not going to stay at the at the site count that the starting point is going to be, is it no business? Yeah, the new owners, the lenders, which are now the new owners,
16:58
have believed in growing the business
17:02
and holding it. So
17:05
this will be an exciting venture going forward.
17:10
They understand where the investment has to be, investment in training, investment in facilities, maintenance, deferred maintenance,
17:18
investment in in staffing the properties properly
17:23
and making sure that that customer experience is consistent along the way at every store.
17:30
So Pete, do you have aspirations or a vision for zips as far as being more of a national player, or do you feel like it would be more of like a super regional focusing, say, as an example, southeast or what? What's kind of your feel for that? Dennis, great question.
17:52
I think the sweet spot in our industry itself is for Super Regionals, right? Agreed. Mr. Is a great company, 550
18:02
ish stores.
18:05
They're getting close to being a national brand, but still,
18:09
still not right. I would rather be the best car wash in every neighborhood
18:16
then try to be a national player. So Super Regional is where I see us best fit, and with that building out areas that we're currently in. So yes, I would love to be a super regional. We'll take North Carolina, for example. We're in Asheville, Winston, Salem, Raleigh, Charlotte.
18:37
That that kind of concentration gets us good play,
18:43
you know. So maybe expanding between Raleigh and Winston, Salem, there's Greensboro, Burlington, that whole area, that whole i 40 corridor, we'll call it. I can see it's building out there,
18:55
where we're in Myrtle Beach, Hilton Head,
19:00
I can see is building out South Carolina.
19:03
You know, for example, we're pretty decent in Southern Virginia, possibly expanding to mid Virginia. And so that cluster, that southeastern cluster, I think would be good. Am I
19:19
going to go try to go try to build 100 car washes in Atlanta, probably
19:24
not, or huge, or something like that. You know, we've, we've talked about in generalities, not with zips, but take a, take a MSA or
19:36
like Houston,
19:38
right? It's very hard to own a market like Houston, but you could own a quadrant.
19:46
So,
19:48
yeah, no, it makes sense, especially from brand synergies, basically getting that spider web effect. I think North Carolina and South Carolina are great examples, because essentially, you have, you know.
20:00
Towns, what, 45 minutes from each other. And if you consistently see the brand, it's, it's a home run, right,
20:08
right? But being that, that center, that synergistic player in a local market where you live, work, play, shop,
20:17
that's, that's where it's at.
20:20
Let me ask you on that note, so so very often, one of the conversations that gets brought up in the industry is the benefit of being exactly what you're saying the neighborhood. Wash, your local in the community you're entrenched in that community. Question I have for you that I'd love, and I think most listeners would love to get your opinion on is, is it possible to get all that benefit of being the community wash while still flying the banner of a zips or a mister, if done properly, can you still have that benefit? Absolutely. I think it's disassociative.
20:56
Okay? I think people will.
20:59
They're still looking at as the local car wash, if it happens to be a mister or zips, or a quick collect, or whatever it is, even though it's a bigger brand. And
21:10
I think then what happens is, you're in Raleigh, North Carolina, and you wash your car to zips, and then you happen to vacation down to Myrtle Beach and you see a zips. Well, you already have that confidence, right? I think there's very little overlap in that.
21:26
As far as nobody's buying a membership, because I can use it in Myrtle Beach, even though I live in Raleigh. Okay,
21:37
it's a nicety. It's a nice to have,
21:40
yeah, well, and especially with the
21:43
training that you're looking to implement, if they come on site and have that great experience, customer experience, they're guided on, well, the properties are well maintained, etc. That's only going to increase your credibility. I mean, I think you and I would both agree that Mr. Best in class with that triple you really are, yeah. I mean,
22:06
yep, they've done a fantastic job with that. So Pete, you bring such a unique perspective. How long have you been in the industry, all in all?
22:15
Well, I just tell people, north of 30 years at this
22:20
point. I grew up in the industry. Yes. So this question that seems to become, you know, almost perennial, if you will. Of are we oversaturated? Is there white space? Is there room to grow? Are there too many car washes in the country coming with the background and the perspective that you have given wash depot and everything before and in between? What's the answer to that question? You missed my great ICA panel discussion, Harry, that's because you were you were doing your own session, which I heard went very well. Thank you.
22:54
There's room for everybody. There are some markets that are saturated, but what you're starting to see now are the better operators coming out and really concentrating on improving their operations, shoring up what they already have, as opposed to trying to build 20 or 30 more.
23:15
I think that with the cost of capital right now, people are reassessing ROI before they jump in and build five at a time, right? Or just reassessing if they build one.
23:26
So there's that.
23:28
What I think you're not going to see for the next five years are the people that came in just to build and turn
23:36
because those people are sitting on some properties right now. They're trying to sell. And they're getting
23:46
a realistic approach to what the multiples are, right? The 1516, 18 multiples are not going to happen. No, no, I don't think so. I don't think so. You don't think so either.
24:01
I think they're 10s, you know, and you're really good properties are going to be 12, maybe, maybe a little north, depending on how bad somebody needs it, if it, if it really complements their already existing footprint.
24:17
Yeah. In that vein, Pete, one of the questions that that we get asked pretty frequently from from different operators, is, what are your thoughts on horse trading from the perspective of, you know, let's say, you know, zips has a single site in Tucson, and Mr. Has, you know, a single site in North Carolina, and it makes sense for for the properties to be swapped. Do you see a future for that, or do you think that's that availability would be there? What are your thoughts? Actually, I do because right now,
24:51
and I think that's going to happen over the next two years,
24:55
okay,
24:58
I see players looking.
25:00
To really shore up their regions and make sure that they're the one or two player. And if I can do that and we can benefit each other, then yeah, absolutely.
25:12
And not to mention a lot of these locales, their portfolios are becoming more mature, which I think makes that trade more palpable for both sides, at least. And let's jump back a couple of years when when M and A was strong and people were building, and I think a lot of people were just trying to gain store count without really thinking of geographic presence,
25:38
and they scattered themselves without thinking about how hard it is to operate these things, right? And I can remember, you know, having a conversation with Greg Anderson. We had 84 stores at watch depot,
25:53
and we were looking to sell 27 of them. Now, as an operator, I'm like, I don't want to sell anything
26:00
ever.
26:02
And Greg said, You're beating your head up against the wall for no reason. We can make as much money with 57 as we can with 84
26:11
and he was right,
26:13
well, and especially because it's close to the, you know, the nucleus of the operation, you know, department, because the farther you you get spread, and also the dilution of operational talent in the industry is, is definitely, you know, there, because you bring up a fantastic point,
26:32
right? We've seen with with the entrance of private equity in our industry, and it just exploded.
26:40
You know, there was no school of car washing. So you took people that in in companies that had this multitude of talent, and now they're off in 12 different companies. So dilution of talent, and then as we grow, those people get elevated. They're away from the customer. They're not facing the customer anymore, and you're bringing in this talent which doesn't have the tenure.
27:06
Hence the real need for knowledge and learning management systems. So what's happened is the the knowledge that we used to pass down to each other,
27:18
right is is now into a learning management system, because we have to train 100 people in 100 different locations.
27:28
So systems have changed to help us with the growth in our industry, which is fantastic look. I was telling somebody yesterday, like
27:41
15 years ago,
27:44
this wouldn't be the conversation. The conversation would be, how do we promote professional car washing versus at home car washing? We don't have to do that anymore, because we have educated the consumer through the growth in our industry that washing your cars become the fabric of America,
28:05
right? So it's pretty commonplace, and the next generation growing up that hopefully buys a car will will already have that kind of ingrained
28:17
crazy to think about. It really is
28:20
so Pete to turn to a more maybe topical discussion. We get approached constantly about whether or not zips is spinning off sites, spinning off sites, spinning off sites. So maybe we could take a quick second to address whether or not that is or isn't the case, and to what extent there's some truth there. Sure. I think that was all really in conjunction with the with the chapter 11, right? And I think that's all been negotiated back through the REITs, and it's all a done deal. I don't see anything occurring in the future, in the near future, as far as trading stores or selling stores
29:02
for the foreseeable future. If anything, we're going to look to add store count.
29:09
That sounds exciting. It is. It is first. We got to make sure the wheels are on the train the right way, and then before we go out and add
29:18
because once again, there have been several platforms out there that we've seen that have grown too fast without the proper organizational structure
29:28
and
29:31
their their EBITDA isn't what it should be, their operations aren't what it should be, their consumer experience isn't what it should be, probably their employee retention isn't what it should be. We want to get those things right, build a strong foundation.
29:48
Yeah, go ahead. Oh, I'm sorry, Harry, I was just going to ask Pete from just a super high level. We don't have to get in the weeds, but obviously, you know, from a CapEx perspective, and.
30:00
Rebranding the stores, any plans for that, or, you know, giving them, you know, face lifts, you know, that sort of thing we do. We have a pretty extensive budget for refresh, remodel and refresh, which we are starting. We have
30:21
46 sites in permitting for remodeling and refresh already, so we're going to come out of the gate strong. And then as far as deferred maintenance goes, we have a budget to take care of that, and then we have a pretty robust ongoing repairs and maintenance budget
30:37
aside from normal capex.
30:40
So we're going to be enhancing our chemical distribution program to be more efficient. There we're looking at point of sale systems
30:50
and data collection,
30:53
so just as a few things. And then, as always, you know quality of the car revolves around water quality and equipment quality. So yeah, well, thank you for answering that.
31:06
So Pete, pretty excited about the future. That's what I was going to ask. So as a last note here and again, we cannot thank you enough for having or for being willing to come on. What? What do you want to leave? Listeners, watchers, this whole thing? What should everybody know about zips? Moving forward from here that zips is a good company with good sites and good footprints, good site layouts, good bones, and we're a good company looking to become a great company. And how's the CEO
31:38
overwhelmed currently,
31:41
but super happy to be here and about what we're about to do to our 1800 team members. Hopefully we're going to make them very happy. I can't wait to watch all this come come forth. Pete can't thank you enough for having you or for, you know, joining us here today. For listeners, stay tuned for our upcoming episodes and thank you so much for tuning in. Harry Dennis, thank you very much. Thanks. Thanks, Pete. All the best to you. Thanks. Bye.
Transcribed by https://otter.ai
495 Brickell Ave #707
Miami, FL 33131
Hours of Operation
Mon - Fri: 9am - 5pm ET
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