Most writing about car wash investing describes a sector going straight up. Memberships, recurring revenue, private equity money, drivers who no longer wash their own cars. All of that is real, and we covered it in our piece on why car wash real estate in Southern California is drawing capital.
What gets written about far less is the part in the middle, where a lot of that capital lost money.
Between 2021 and 2023 the car wash sector attracted an enormous amount of institutional money, built a great many new tunnels, and paid prices that assumed the growth would continue at the same rate. It did not. The result was a genuine correction, and anyone evaluating a car wash deal today is buying into the aftermath of it. That is not a reason to avoid the sector. It is a reason to understand what the last three years actually taught, because the deals available now are priced by it.
What the boom looked like
The logic that drew capital in was sound. An express tunnel with a large monthly membership base behaves less like a retail business and more like a subscription one. Revenue becomes predictable. Labor is modest because the equipment does the work. The underlying real estate is a small, well-located commercial parcel with good visibility and access, which has value independent of the operator.
Put those together and you get something that looks like infrastructure with a consumer brand attached. Institutional buyers underwrote it accordingly. Acquisition multiples for car wash platforms reached roughly twenty times EBITDA at the 2022 peak, according to sector advisors who track these transactions. That is a price that requires growth to continue more or less indefinitely.
Capital also went into new construction. Developers built tunnels at a pace the sector had never seen, concentrated in Sun Belt markets where land was cheap, entitlement was fast, and traffic counts were growing.
What broke
Three things happened at roughly the same time.
Markets got crowded. In corridors across Phoenix, Dallas–Fort Worth, Houston, Atlanta and central Florida, operators built more tunnels than the traffic could support. When four express washes sit within a few miles of each other, the competition does not usually show up as lower sticker prices. It shows up as membership discounting, promotional pricing, and higher churn, all of which erode the recurring revenue the whole thesis depended on.
Construction costs rose sharply. Industry estimates put the cost of a new express tunnel at roughly $5 million per site in 2022, rising to somewhere between $7 million and $8 million or more by 2025 and 2026. Those figures come from feasibility consultants rather than audited data, so treat the precise numbers with care, but the direction is not in dispute, and people building in the sector describe costs as having roughly doubled. A deal underwritten at the old build cost does not work at the new one.
Debt got more expensive. A lot of the expansion was financed. When rates moved, operators carrying heavy construction debt against sites that had not yet matured found themselves with a timing problem rather than a demand problem, which is a distinction that matters less when a loan comes due.
Three transactions that tell the story
You can see the correction clearly in what happened to three of the sector’s largest names.
Zips Car Wash filed for Chapter 11
Zips, one of the largest express operators in the country, filed for Chapter 11 bankruptcy protection in February 2025 carrying roughly $653.9 million in funded debt. It emerged on 30 April 2025 with approximately 230 locations after reducing debt by about $279 million.
Zips did not fail because people stopped buying car washes. It failed because it had borrowed heavily to grow quickly, and the sites did not mature fast enough to carry the debt. That is a capital structure failure, not a demand failure, and the distinction matters a great deal for how you read the sector now.
Driven Brands sold its car wash business
In February 2025 Driven Brands, a publicly traded automotive services company, agreed to sell 380 US car wash locations to Whistle Express for $385 million, structured as roughly $255 million in cash and a $130 million seller note. The transaction took Whistle to something in the region of 530 sites.
A seller note of that size is worth noticing. It usually means the seller was willing to finance part of its own exit to get the deal done, which is not what a seller does in a market with abundant buyers at attractive prices.
Mister Car Wash went private
In February 2026 Mister Car Wash, the largest operator in the country and a public company since 2021, agreed to be taken private by Leonard Green & Partners at $7.00 per share, an enterprise value of roughly $3.1 billion.
Taking a business private is not a verdict on the business. It is often a judgment that the work ahead is easier to do without quarterly reporting. But a company that went public near the top of the cycle agreeing to a take-private several years later tells you something about where public market enthusiasm landed.
Where that leaves pricing
Acquisition multiples compressed. From a peak of roughly twenty times EBITDA in 2022, sector advisors now describe platform transactions in a band somewhere around ten to twelve times, and single sites lower, in the high single digits to low teens.
We would flag that these figures are not consistent across sources. Different advisors publish different bands, and at least one experienced broker argues that multiples for established multi-site operators are roughly in line with their long-term average rather than depressed. The direction of travel since 2022 is not disputed. The current level is. Anyone quoting you a single precise multiple for “the car wash sector” is simplifying something that varies enormously by site count, market, membership base and lease structure.
New development slowed as well. Estimates of annual tunnel openings vary widely by source and definition, but every account describes a sharp decline from the 2023 peak.
Why a corrected sector is more interesting than a booming one
This is the part that tends to read as contrarian and is really just arithmetic.
In 2022 you were competing for car wash assets against buyers with a great deal of capital, a short deployment window, and a growth assumption that justified almost any price. You were unlikely to buy anything well.
Today the picture is different. Some operators are over-levered and need to sell. Some developers built into markets that will not support what they built. Some sites were constructed at costs that will never be recovered by the builder, which means the next owner acquires them below replacement cost. That is the condition in which a disciplined buyer can actually transact.
It is also why the geography matters more than it used to. The overbuilding was heavily concentrated in fast-growing, easy-to-build Sun Belt corridors. Southern California was largely not one of them, for reasons we examine in our piece on what makes a car wash site work in Southern California. Hard entitlement and expensive land kept supply constrained here, which is frustrating when you want to build and useful when you already own.
What we take from it
The correction reinforced a few things we already believed about this sector, and taught one we did not weight heavily enough.
It confirmed that the membership model is durable. Memberships did not collapse. What collapsed were capital structures built on the assumption that memberships would compound forever in a market filling up with competitors.
It confirmed that site quality is not a tiebreaker but the whole question. In a market with one tunnel, a mediocre site performs. In a market with five, only the best corners hold their membership base.
And it taught, more sharply than we would have liked, that the operating business and the real estate underneath it are two different investments with two different risk profiles. That distinction did not matter much while everything was going up. It mattered enormously once it stopped, and it is the subject of a separate piece on the difference between owning car wash real estate and owning the car wash business.
Frequently asked questions
Did the car wash industry crash?
No. Demand for professional car washing held up. What corrected was pricing and development. Acquisition multiples compressed from their 2022 peak, new construction slowed sharply, and several heavily indebted operators restructured or sold. That is a capital correction rather than a demand collapse.
Why did Zips Car Wash file for bankruptcy?
Zips filed for Chapter 11 in February 2025 carrying roughly $653.9 million in funded debt. The company had expanded quickly using debt, and the new sites did not mature fast enough to service it. It emerged in April 2025 with about 230 locations after reducing debt by approximately $279 million.
Are car wash valuations still falling?
Published figures disagree. Most sector advisors describe multiples as having compressed from the 2022 peak and then stabilised, rather than continuing to fall. Some argue that pricing for established multi-site operators is close to its long-term average. Treat any single published multiple as one firm’s estimate rather than a market price.
Is now a good time to invest in car washes?
It depends entirely on the specific site, the market it sits in and the price paid. A corrected sector creates better entry points than a booming one, but it also contains assets that were built in the wrong place and will not improve. The correction widened the gap between good and bad deals rather than making everything cheap.
What caused car wash construction costs to rise?
General construction cost inflation, equipment costs, and in some jurisdictions the cost of meeting water reclamation and site requirements. Industry estimates place a new express tunnel at roughly $5 million in 2022 and $7 million to $8 million or more by 2025 to 2026, though these figures come from consultants rather than audited sources.
Was Southern California overbuilt like the Sun Belt?
Generally not to the same degree. The overbuilding was concentrated in markets where land was inexpensive and entitlement was fast. Southern California is neither, which limited the pace of new supply.
Related reading
- Car Wash Investing in Southern California: Why Now
- The Three Numbers That Decide Whether a Car Wash Works
- What Makes a Car Wash Site Work in Southern California
- Car Wash Real Estate vs the Car Wash Business
How Quest Capital Partners reads it
Quest Capital Partners underwrites car wash real estate in Southern California with exactly this correction as the backdrop. A sector that has repriced, where some owners are over-levered and some sites were built at costs that will never be recovered, is the condition in which a disciplined buyer can actually transact. That is the same logic we apply across every asset class we operate in.
If you are looking at car wash assets in this market
The useful conversations about this sector are happening now, while pricing is still unsettled and sellers are more realistic than they were two years ago. Quest Capital Partners works with accredited investors who want to understand Southern California real estate properly before committing to anything.
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Figures in this article are drawn from public company announcements, bankruptcy filings and sector advisory commentary, and are attributed where the source matters. Estimates published by feasibility consultants and brokers are identified as such; they are not audited data. This article is provided for educational purposes only and is not an offer to sell or a solicitation of an offer to buy any security. It does not describe any specific Quest Capital Partners investment. Nothing here is tax or investment advice. Real estate investments involve substantial risk, including the potential loss of principal.
