Latest / Scaling Up with Fexingo: How Small Businesses Become Mid-Market Companies / How a Car Wash Hit 50 Million by Fixing Memberships
Transcript
- Lucas: So last week I drove past a car wash in my neighborhood that had a line of about fifteen cars at nine in the morning. And I thought, that's just water and soap and a bit of labor. But then I looked into the company behind it — it's a chain called Splash & Dash out of Omaha that quietly crossed $50 million in revenue last year. Luna: Fifty million from car washes? That's wild. How many locations are we talking? Lucas: Thirteen. That's less than four million per location on average, but the story is really about the membership model. They went from a pay per wash business to a subscription business in 2021, and that changed everything. Luna: Right, because car washes are seasonal, weather-dependent, low-margin if you're just doing basic exterior washes. So the subscription smooths out revenue. Lucas: Exactly. But what's interesting is how they structured it. Most car wash memberships are flat monthly fees for unlimited basic washes. Splash & Dash added tiers — a $19.99 plan for exterior only, $29.99 for exterior plus undercarriage and tire shine, and a $39.99 plan that includes one interior detailing per month. Luna: Interior detailing is a high-margin add-on. That's smart bundling. How many people go for the top tier? Lucas: About thirty-eight percent of their members. And that's the key insight — they didn't just sell convenience, they sold an upgrade that feels like a deal because a standalone interior detail costs $50 to $70. So the customer thinks they're saving money, and Splash & Dash gets a higher average revenue per user and much better unit economics. Luna: What does their churn look like? Because subscription businesses live or die on retention. Lucas: They publish some numbers on their investor page. After six months, retention is about eighty-two percent. After twelve months, it drops to seventy-two percent. That's pretty good for a service that people can cancel anytime with a text message. And the lifetime value of a retained member is about $850 over the average eighteen-month membership. Luna: Eight hundred fifty dollars from a customer who might have spent $10 per visit twice a month otherwise? That's more than double. Lucas: Yeah, and the gross margins are better too. pay per wash margins sit around twenty-five to thirty percent after labor, water, chemicals, and electricity. Memberships push that to forty percent because you have predictable volume and can schedule labor more efficiently. You know you're going to wash 500 cars a day, not hoping for it. Luna: So the operational side is a big part of the story. How did they handle the shift from one location to thirteen? That's not just about memberships — that's real estate, hiring, management. Lucas: The founder, a guy named Mark Delaney, started with one location in 2015. He told a local business journal that he didn't open a second location until 2018, and only after he had a general manager who could run the first one without him. That's a common mistake — people expand before they have the management depth. Luna: Right, and then the owner gets stretched thin, quality drops, and the new location struggles. So they waited, built systems, then replicated. Lucas: Exactly. By 2020 they had four locations, all in Omaha. Then in 2021 they launched the membership model, and that gave them the cash flow to expand more aggressively — they opened nine more locations over the next four years, mostly in smaller midwestern cities like Lincoln, Des Moines, and Sioux Falls. Luna: So the membership didn't just smooth revenue — it funded growth. That's a nice feedback loop. Lucas: And they kept the economics simple. Each new location cost about $1.2 million to build out — equipment, land, construction. With membership revenue, they could recoup that investment in about 18 months. After that, each location is generating healthy cash flow. Luna: What about the technology side? You need a good app or website to manage memberships, handle billing, track visits. Lucas: They built a custom system in-house — license plate recognition cameras at the entrance, so members just drive up, get scanned, and the wash starts automatically. No fumbling for a card or code. That frictionless experience is a big part of why retention is high. Members report that it feels like a VIP service. Luna: That's a great detail. And I bet the non-members see that smooth experience and want to sign up. Lucas: Exactly. They have a sign at the entrance: 'Members drive right in. Want to join? Scan this QR code.' It's a constant conversion funnel. About fifteen percent of pay per wash customers become members within sixty days. Luna: That's a solid conversion rate. I imagine pricing psychology plays a role too — $19.99 feels like a small commitment compared to, say, $49.99. Lucas: Yeah, they tested a $24.99 base tier initially and got lower conversion. Dropping to $19.99 increased signups by forty percent with only a small hit to average revenue. That's a classic price anchoring move — the $29.99 and $39.99 tiers look more reasonable next to the cheap one. Luna: And speaking of testing and iterating — a lot of this comes from listening to the customer base, right? Did they do anything unusual to gather feedback? Lucas: They actually hired a part-time 'member experience manager' at each location — someone whose only job is to talk to members, handle complaints, and suggest improvements. That person reports directly to the regional manager, not the location manager, so feedback isn't filtered. Luna: That's smart — avoids the local manager sweeping complaints under the rug. And it probably surfaces ideas that wouldn't come up in a survey. Lucas: One example: members kept asking for a way to gift washes to friends or family. So they added a 'gift wash' feature in the app — you can send a one-time wash code to someone. It costs the company almost nothing, but members love it, and it introduces new people to the service. Luna: That's a low-cost acquisition channel. And it builds goodwill. Alright, I'm sold on the model. But what's the catch? What could go wrong? Lucas: The biggest risk is that a competitor opens a newer, fancier wash nearby. Car washes are a local business — you can't outrun location. Splash & Dash's advantage is that their membership creates switching costs. If you're paying $30 a month and you've got the license plate thing down, you're less likely to switch for a dollar off per wash somewhere else. Luna: But if a competitor offers a similar membership at a lower price, you've got a price war. How defensible is their position? Lucas: They're banking on operational excellence — cleaner facilities, faster service, better technology. And they've got a twelve-month head start in each market. But yeah, it's not a moat like a software company has. They have to keep innovating. Luna: That makes sense. And I guess one thing that helps is that they're in smaller cities where the barrier to entry for a new car wash is higher — you need real estate, permits, construction. It's not like opening a food truck. Lucas: Yeah, the capital requirements are a natural barrier. A new competitor needs at least a million dollars to start. That keeps out mom and pops, though chains like Mister Car Wash could enter. But Mister Car Wash is more focused on larger markets, so there's room. Luna: You know, it's funny — we talk a lot on this show about tech companies and software subscriptions. But this is a real-world, brick and mortar business applying the same principles and getting real results. Lucas: And that's what scaling is about — taking a smart idea, executing it consistently, and building systems that let you replicate. Splash & Dash isn't reinventing the wheel. They're just doing the basics really well and adding a layer of subscription thinking. Luna: If these conversations have moved your work forward in some small way, a couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Lucas: Yeah, we keep the show ad-free and that's only possible because of listeners who chip in. It makes a real difference. Luna: Alright, back to the car wash — what's the next frontier for Splash & Dash? Are they going national? Lucas: They've hinted at moving into larger markets like Kansas City and Indianapolis, but Mark Delaney said in a recent interview that he wants to keep the culture intact. He doesn't want to grow so fast that quality slips. So they're aiming for maybe three new locations per year, funded by existing cash flow. Luna: That's disciplined. A lot of founders would try to raise venture capital and go from 13 to 130 overnight. Lucas: Right, and then they'd lose control of the customer experience. Delaney seems to understand that the membership model only works if the service is consistently excellent. If a member has a bad experience — say, the wash doesn't get a spot off — they might cancel. And once they cancel, it's hard to get them back. Luna: So it's a flywheel: good experience drives retention, retention drives predictable revenue, predictable revenue funds measured growth, and measured growth preserves the experience. Lucas: Exactly. And I think that's the lesson for any small business thinking about scaling. Don't just copy the subscription model. Build the operational backbone first, then add the membership on top. Otherwise you're just adding recurring billing to a broken process. Luna: Well said. I'm actually considering trying that $39.99 tier now — even though I don't drive a car, I feel like I want the membership just for the psychological satisfaction. Lucas: That's the power of good pricing. You've internalized the value before you even use the service.