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Wednesday, February 8, 2023

Magnolia Wash’s Costa hopes to clean up in industry consolidation

Charlotte is known for its banks, pro sports teams, Billy Graham, tearing down old buildings, and, increasingly, its car wash companies.

Three of the industry’s 12 largest companies are based in the Queen City, according to the Carwash.com newsletter. Jose Costa expects his No. 11 Magnolia Wash Holdings to become an increasingly big industry force. It’s not as well known as No. 2 Take 5 Car Wash, which is owned by Charlotte’s publicly traded Driven Brands, or No. 12 Autobell Car Wash, owned by the Queen City’s Howard family.

But Costa has ambitions to create a company much larger than its 100 existing locations and 1,200 employees. Magnolia is adding about five or 10 locations a month as it expands beyond its eight-state footprint.

Jose Costa

The Venezuelan native left South American in 2003 to enter grad school, part of the diaspora sparked by a leftist government takeover of much of the private sector. His father, who ran Venezuela’s largest advertising firm before the Chavez regime, now lives in Florida, he says.

Costa earned a master’s in integrated marketing communications at Northwestern University, then an MBA at the University of Chicago. The Second City is where he met his wife, who was also earning a MBA.

After working for Yum Brands and Burger King, he moved to Charlotte in 2013 to join Driven Brands, where his jobs included leading the Maaco paint division. (He appeared on CBS Network’s “Undercover Boss” show during his Maaco stint.) He left to work at an optical company and then Bojangles, where he was chief growth officer for three years.

Earlier this year, Connecticut private-equity company A&M Capital Opportunities, or Amco, recruited him to lead Magnolia, which it bought in 2020 from founders Brooks Moye of Burlington and Frank Bennett of Marietta, Georgia. Moye and Bennett are still involved in the company, which had 17 locations when Amco invested.

Amco marks the seventh private-equity group that Costa has worked for in 13 years. “Private equity is a fantastic business model because it is focused, concentrated and enables companies to get the capital resources to grow their businesses,” he says. “You don’t have quarterly earnings to report publicly, so you can be more strategic. I thrive in that environment.”

Washing cars is good potential for a variety of reasons, Costa says:

  • It is highly fragmented with small operators still dominating the industry.
  • Many owners are in their 50s and 60s and want to sell.
  • People are holding onto cars longer and prioritizing making them look sharp.
  • Half of Magnolia’s revenue comes from memberships, creating recurring revenue.

Magnolia’s units are company owned and the plan is to gradually reduce the number of brand names from the current 10. It focuses on exterior washing and doesn’t provide interior cleaning such as Autobell. That enables stores to run with about 15 to 20 employees, including about five working at any given time.

“Over the next five years, you’ll see more public companies in the industry and there will be a lot more consolidation among the 50 platforms that have 50 to 200 units,” Costa says. For now, Tucson, Arizona-based Mister Car Wash is the sole public company with a singular focus, owning more than 400 units nationally.

Costa and his family, which includes kids ages 6, 8 and 11, are huge advocates for their community. “We love North Carolina and we’re going to be here for the rest of our lives.”

 

David Mildenberg
David Mildenberg
David Mildenberg is editor of Business North Carolina. Reach him at dmildenberg@businessnc.com.

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