Red Dog Equity LLC is an Atlanta-based PE firm executing a roll-up play in an industry, car washes, that escaped private equity consolidators’ notice until about a decade ago. Now Red Dog is rolling up car wash businesses across a broad swath of the country through their platform company Mammoth Holdings LLC.
They buy one company in each regional market to function as the brand name for that market, then bolt additional smaller and often less efficient and cheaper acquisitions onto it, integrating them all into Mammoth’s business model, which emphasizes selling subscription memberships with which customers can get unlimited car washes (and the company can create a steady revenue stream).
Another interesting aspect of Red Dog’s roll-up strategy is sale-leasebacks, in which an acquired car wash’s real estate is sold, then immediately leased back from the new owners. The effect is to make the acquisition significantly cheaper upfront. This strategy seems to be working well and is likely to attract imitators, though Mammoth is fast entrenching itself in a strong position.
According to the article, it now operates 107 car washes and is aiming for 500 by 2025, a goal made possible by the fact that it is also building entirely new locations. In the article, Jeff Leko of Hanley Investment Group sums up the financial allure of this industry for investors, “There is no other operation on a 1-acre site that can do $1 million to $2.5 million in sales and pocket half of that.”