If a newly clean car puts an extra bounce in one’s step, imagine the carom from taking over about 380 locations to become the global leader of car washes.
That’s the feeling Jose Costa enjoyed after his private-equity-backed Express Wash Operations agreed to buy the U.S. car wash business of Charlotte’s Driven Brands for $385 million in February. The combined firm will have 530 units and about 5,200 workers in 23 states, covering much of the Sunbelt and Michigan and Ohio in the Midwest.
“It’s one of the few times in the history of an industry that you see an opportunity like this when a very large platform goes to market,” says Costa, who joined Magnolia Wash Holdings as CEO in 2022 when the business had about 60 units. The transaction took about eight months to consummate. Final approval is expected by June 30.
With backing from Los Angeles-based Oaktree Capital Management since 2023, Costa rebranded Magnolia to the Whistle Express chain and formed a management team with new leaders in finance, marketing, operations and technology. Striking the Driven Brands deal after eight months of pursuit followed acquisitions of about a dozen smaller companies over the past two years.
Costa is confident that Whistle Express can achieve success that wasn’t in the cards for Driven Brands. It has been the second-largest operator of conveyor-style car washes, while also owning auto-service brands including Take 5 Oil Change, Meineke and Maaco.
But the car wash industry has been in a two-year rut after various private-equity groups stormed into the industry, leading to a glut of locations as interest rates picked up and labor costs increased.
In February, Plano, Texas-based Zips Car Wash filed for bankruptcy protection, seeking to slice $279 million in debt. It is one of the largest car wash operators with about 260 units under the Zips, Jet Brite and Rocket Express brands.
“The whole industry in the last 12 to 24 months has seen pressure from the competitive intrusion,” Costa says. He predicts “a few more bankruptcies” because of high interest rates and high rents.Unpredictable weather conditions also can reduce traffic for lengthy periods, putting pressures on profits, he adds.
The 382 car car washes owned by Driven Brands posted revenue of $368 million in 2024, while the 720 independently owned locations contributed $212 million. That represented less than 10% of the company’s $6.9 billion in system-side sales last year. Company revenue totaled $2.3 billion, with the other $4.6 billion going to the franchise owners at Maaco, Take 5 Oil Change and other shops nationally.
Profit margins declined at the car washes last year, while the company took a $325 million impairment charge, according to its annual report.
The good news, Costa says, is that the industry appears to be stabilizing, providing “a great opportunity to buy assets.”
His confidence stems from an insider’s edge. Costa worked at Driven for five years, leading the Maaco business. He appeared on the CNBC network’s “Undercover Boss” in 2015 while leading the paint chain. Maaco reported 61 consecutive months of revenue growth during his tenure.
“We know the [car wash] assets better than anybody else,” he says, which helped during the bidding process conducted by Driven Brands. “We know the opportunities and how to fix the problems. It becomes a capital allocation game in terms of where you put your money, which ones you rebrand, and how to improve the team and get the right technology.”
Costa is a native of Venezuela, where his father once led a leading ad agency. Amid that nation’s political turmoil, he moved to the U.S. in 2003 to attend graduate school in Chicago. Costa earned a master’s degree in integrated marketing communications from Northwestern University, then added an MBA at the University of Chicago. He met his wife, Cindy, at Northwestern, and the couple have three children.
Like many marketing executives, Costa has moved around. After stints at Burger King and Yum Brands, he moved to Maaco in 2013. Starting in 2017, he spent a year and a half as a senior North American executive at the French owner of the Luxottica and Ray-Ban eyewear brands. Then, in 2019, he joined Charlotte-based Bojangles as chief development officer and later, chief growth officer, after private-equity groups had acquired the publicly traded chain.
In May 2022 he moved from biscuits back to cars, seeing opportunity in the fragmented car wash industry.
Keys to making Whistle Express thrive are increasing the number of monthly memberships, which Costa says boosts visits by customers from perhaps four or six times a year to two or three stops per month. The car wash industry’s loyalty programs are behind airlines and other customer-facing industries, and Costa says he wants Whistle Express to catch up promptly.
Last fall, Driven Brands CEO Jonathan Fitzpatrick told investors the company had passed the 1 million mark in U.S. car wash memberships. He called it a “remarkable milestone.”
More washes means more wear and tear on the store equipment, of course. “The number one priority is keeping the washes going, so that’s the number one investment, making sure you are up and running as much as possible.”
New locations require $5 million to $6 million of initial investment. “You need a lot of money to invest in equipment and infrastructure,” he says. The combined companies will have about 150 mechanics with necessary plumbing and mechanical skills.
One attraction of automated car washes is the relatively slim payroll. A site with $2 million in annual revenue can work with about five staffers, versus 20 or 30 at a fast-food restaurant, Costa says. Stores can open and close with two staffers, then add more folks as business picks up during the day. “We’re always recruiting the best, and we’re competing against Target, Best Buy, McDonalds and others,” he says.
Costa’s 20-year career since leaving grad school has been marked by lots of challenges, none bigger than the current opportunity. “It’s the most fun I’ve had in my career. We have the right board and right team.” ■
