“Working at the Car Wash”
Mammoth Holdings was founded by Gary Dennis and Richard “Chip” Hackett in 2002. Over the first decade they grew steadily to reach eight express, self-serve car wash locations. But in 2013 the Company’s six Georgia locations began to perform poorly due to a combination of increased rainfall, over building of car washes in the trade area, and challenging economic conditions all of which occurred in rapid succession.
Seeking to find a way to breakout Chip and Gary began to study customer data more closely and noticed that many of its customers were infrequent users, often only washing their car once or twice per year. Given this insight, they decided to try a new all-you-can-wash subscription priced at $9.99 per month. Other industry players thought the idea was crazy and wouldn’t work. At the time, many other car wash operators had an all-you-can-wash plan, but it was priced at $50+ per month. The rationale was those interested in such a plan would be high frequency users and a key financial metric was average ticket price per wash, which operators strove to keep as high as possible. None-the-less, Gary and Chip decided to give the low pricing plan a try at one of their own locations. Well, the new pricing plan turned out to be a big success and customer counts soared as did predictable cash flow – rain or shine.
Mammoth then rolled out the pricing plan to all its locations and grew its monthly club plan members from 2,445 to over 15,000 in 12 months and cash flows (or EBITDA) increased almost 3x for its existing locations. Once Chip and Gary had identified the new, more profitable business model, they added fuel to the fire by securing growth capital and acquiring other operators and implementing their pricing plan and business processes into those companies. Along the way Lantern helped them develop a business plan and buyout an investment partner. Fast forward another decade later, Mammoth has grown from 8 locations to 150 locations with 1,000+ employees.
Enlightening Insights
Chip and Gary’s experience highlights a few enlightening insights that are always good to keep in mind:
- Continually look for ways to improve existing operations. For companies focused on growth, it’s easy to focus only on expansion strategies while overlooking opportunities to optimize current operations which can have an increasing impact as the business expands.
- Better strategies can emerge from challenging situations – Stressful challenges can liberate companies to try new approaches they may not attempt otherwise. This experience is common enough Charles Duhigg. author of The Power of Habit, dedicated a chapter to it in his follow-up book, Smarter, Faster, Better. The Transformative Power of Real Productivity.
- Actively search for solutions – While this short story may read like a eureka moment, Chip and Gary were active in their search for better processes. They participated in industry organizations, shared insights with other operators and actively experimented with new ideas. Their active involvement also led to key relationships with other operators who would later consolidate their businesses into Chip and Gary’s company. This same approach has led to consolidations in many other industries like home health, orthodontics, business services, pest control and furniture rental to name just a few.
Gary’s Quote about Lantern:
“Lantern’s help was really beneficial. It was a worthwhile and valuable exercise to get their insight on our financing options in the capital markets using their connections and expertise. It gave us a lot of things to think about and put us on a path that that led to a successful outcome.”