The Baker House Newsletter Issue IX
Rinse and Repeat
Private equity spent a decade buying car washes, minted fortunes, and broke a few of them. The full cycle, boom to reset, holds a lesson for every asset class this series has covered.
THE LEAD
The Subscription That Repriced an Industry
In February, Leonard Green and Partners agreed to take Mister Car Wash private at 7 dollars a share, an enterprise value near 3.1 billion dollars and a 29 percent premium to where the stock had traded. The company operates about 550 washes. The buyer paid for the income behind the tunnels: subscriptions now produce 79 percent of Mister’s wash sales, up from 72 percent only six quarters earlier.
The unlimited membership is the engine. A wash was once a sunny-day cash purchase, skipped in the rain and forgotten in winter. The subscription changed the revenue: 20 to 40 dollars a month, wash whenever you like, billed whether the car comes or not. Across the industry, mature express tunnels now run 40 to 60 percent membership revenue, and the best operators reach 75. Predictable dollars are worth more than sunny-day dollars, and the entire asset class repriced around that fact.
The repricing brought a stampede, and the stampede ran a full cycle. Roughly 10 billion dollars of private equity entered the industry between 2019 and 2022. Deal volume peaked at 211 transactions in 2022, with platform multiples reaching 20 times cash flow. By 2024, volume had fallen to 70 deals and multiples to about 9, and the most leveraged roll-up, Zips, went through Chapter 11. Boom, correction, and maturity, inside five years. The lessons are the subject of this issue.
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CHART
U.S. car wash M&A transactions and prevailing platform EBITDA multiples. Source: Neo Advisory, 2026 car wash sector overview.
THE TURN
What the cycle proves for this series: overlooked categories get repriced when someone changes the revenue model, and the repricing runs on a clock. The subscription did for car washes what filling pads did for communities and assembly did for storage yards. It converted a local cash business into an income stream institutions could underwrite, and once they could underwrite it, the buying ran ahead of the discipline.
The second lesson sits in the wreckage. The platform that failed grew on debt and sale-leasebacks, selling its real estate to fund the next acquisition, and when volumes softened, the rent obligations stayed. An operator who owns the dirt can survive a slow year. In a series about businesses sitting on real estate, the failure proves the point from the other side: the real estate was the safety.
Predictable dollars are worth more than sunny-day dollars.
THE FRAME
One Property, Two Ways to See It
| WHAT THE MARKET SEES | WHAT A DISCIPLINED BUYER SEES |
|---|---|
| A weather-dependent cash business | Membership income billed rain or shine |
| A metal tunnel on a busy road | A high-traffic corner with the business attached |
| A retiring single-site operator | A seller priced at half the platform multiple |
The gap between those last two prices is the map of this market. Single-location washes trade around 4.5 to 7 times cash flow, while platforms drew up to 20 times at the peak and still command a premium, because a fund can buy fifty washes in one signature and cannot buy them one at a time. That distance is what this series keeps calling assembly, and the raw material of every assembly is a single site changing hands from a local owner.
WHAT TO LOOK FOR
The membership base is the asset. Ask for the member count, the monthly price, the share of revenue on subscription, and the churn. Industry churn runs near 7.6 percent a month, so a base that is not being replenished is melting. A wash with no membership program at all is priced off retail cash flow, which is the below-market signal this series keeps finding.
The corridor. Traffic counts and competition density decide more than the equipment does. The industry added 600 to 700 new washes a year through the boom and some corridors are saturated, so count the competing tunnels within a short drive before believing any revenue projection.
The equipment and the water. Tunnel systems age expensively, and water handling is regulated: reclamation systems, discharge permits, and proposed federal permit rules that add monitoring requirements. Price the next five years of equipment, and ask when the tunnel was last rebuilt.
The dirt. Own the real estate where possible. Where a lease or sale-leaseback exists, model the rent against a bad year’s revenue. The industry’s biggest bankruptcy taught that lesson at scale, and it works the same at one location.
HOW THE MATH WORKS
A single express wash produces 250,000 dollars a year of cash flow with no membership program, using round numbers. At the 5 to 6 times multiples prevailing for single sites, it trades near 1.4 million, real estate included. A buyer who builds a membership program converts sunny-Saturday customers into monthly billing. The early gain is modest, but the quality of the dollars changes: revenue stops swinging with the weather, and a lender, a partner, or an eventual platform buyer can finally underwrite it. The assemblers building 5 to 30 site regional groups pay up for exactly that predictability, so the chain this series traced through yards and marinas runs through the tunnel too: bought at a single-site price, professionalized, sold into an assembly at a portfolio price. The cycle adds the warning label. The buyer who paid 20 times in 2022 told the same story, and the multiple went to 9.
THE RISKS, TOLD STRAIGHT
Saturation leads the list. Years of 600-plus new openings crowded the best corridors, industry analysts now describe a roughly flat market with site counts near their peak, and a new tunnel across the street can cut a wash’s volume badly. Churn is second: memberships cancel at nearly 8 percent a month industry-wide, so the recurring revenue is only as durable as the service behind it. Leverage is third, and it has a body: the most aggressive roll-up restructured in bankruptcy after its sale-leaseback rents outran its revenue. A wash is also an operating business with labor, equipment failure, and discretionary customers. Above all, the cycle itself is the caution. Multiples fell from 20 times to about 9 in two years, and the buyers at the top learned the difference between a mispriced market and a fashionable trade. The category is real, and the individual deal is earned through diligence.
THE WIRE
Where the Cycle Stands Now
The top of the chain, priced. Leonard Green had held roughly two thirds of Mister Car Wash since 2014 and took the rest private in February at about 3.1 billion dollars. With the industry’s public benchmark gone, private valuations lose the comparable that had been dragging them down, and any regional divestitures from the Mister portfolio would hand mid-market platforms ready-made acquisitions.
The cautionary tale, resolved. Zips emerged from Chapter 11 in April 2025 with 279 million dollars less debt, and Driven Brands, the diversified auto-services company, sold its U.S. car wash unit to Whistle Express for 385 million. The tourists are leaving and the overleveraged have restructured. What remains are operators with regional density and member bases that behave like annuities.
The middle is forming. Mid-market and emerging firms now compete for regional acquisitions in the 5 to 30 site range, while single locations trade at 4.5 to 7 times cash flow. The bottom rung of this chain is the retiring single-site owner, the same seller this series meets in every category, and the assemblers are paying whoever reaches them first.
This category is past its early days, and that is why it earns an issue. It shows the whole arc the younger categories in this series are still climbing: where the money was made, where it was lost, and where, at the bottom of the market, it is still available to someone willing to run a business on a good corner.
OFFICE HOURS
How to read a membership base, when a saturated corridor is a pass, what a single wash is actually worth, and where the assembly chain is still open: Richard takes questions on all of it every Wednesday at 2pm ET in his free office hours. He answers whatever attendees ask, live, for an hour. If this issue raised a question for you, bring it.
SOURCES
- Mister Car Wash and Leonard Green & Partners announcement, February 18, 2026: $7.00 per share, approximately $3.1 billion enterprise value, 29 percent premium; company disclosures on subscription share of wash sales, Q4 2025.
- Neo Advisory, 2026 car wash sector overview: roughly $10 billion of private equity entering 2019 to 2022; 211 transactions in 2022 at multiples to 20x; 70 transactions in 2024 near 9x; Zips Chapter 11 and April 2025 emergence with $279 million debt reduction; mid-market competition for 5 to 30 site platforms.
- Rinsed quarterly car wash industry reports: membership revenue growth near 10 percent year over year; monthly membership churn near 7.6 percent.
- International Carwash Association counts of roughly 62,750 U.S. locations and 600 to 700 new openings per year, via WashUp industry analysis, 2026. Industry M&A aggregates: single-site transactions at 4.5 to 7.0 times cash flow. Driven Brands sale of its U.S. car wash unit to Whistle Express for $385 million.