Driven Brands Holdings Inc. (DRVN) Earnings Call Transcript & Summary

Hi, everyone. Good afternoon. This is, I think, the closing session, and we're going to close on a high note with Driven Brands. I'm Simeon Gutman, Morgan Stanley's, hardline, broadline and food retail analyst. My pleasure to welcome Driven Brands to this event. I think an attendee for 2 years, maybe 3, I forget if we've had 3 of these already, represented by Jonathan Fitzpatrick, President and CEO; and Danny Rivera, EVP and COO. I have -- I don't -- I'm going to say some disclosures, quick intro, and then we'll sit down. Disclosures is for important research disclosures, please go to www.morganstanley.com/researchdisclosures. As for Driven, it's been -- it's one of the more exciting stories in our coverage in the, call it, automotive and service space, some high growing, highly profitable businesses that as a portfolio has been doing fine. Some parts of it are kind of work in progress. As we've pivoted, we've hoped for faster growth in some of the underperforming segments, but this is a partly franchised automotive service, diversified behemoth that has pretty decent growth prospects. So with that, I'm going to sit down and stop talking.

Start with the big picture, is that if we look at where we were a year ago, when we talked about 2023, what were sales plans, margin plans and what's been surprising good or bad?

Thanks for having us. What's been surprising good or bad. Our Quick Lube business is a juggernaut and continues to perform at exceptionally high levels. We're about to celebrate our 1,000th opening in the next couple of weeks. Just to give people a perspective, that's from a base of less than 50 stores back in 2016. We celebrated our 300th franchise opening. So the Quick Lube business has been amazing. We have a portfolio of businesses. So it's like I've got multiple children. They're all talented, but I love some more than others at certain times. U.S. Car Wash business has been a challenge this year. I'm sure we'll get into that in more detail. And then our most nascent platform is our U.S. Glass business, which we combined 12 different acquisitions on. We've gone through some integration pain, I would say, in 2023 look forward to having all that behind us by the end of Q1 and get back to sort of growing big revenue and profits in that Glass segment. So overall, I would say U.S. Car Wash has been the biggest headwind in 2023, offset by some other businesses that are performing exceptionally well, and we're almost through the integration pain on the Glass.

Great summary. I think we have to start with carwash.

Good, let's get it out of the way.

So right to the jugular. So I guess, how do you diagnose what's happened in car wash industry, self-inflicted? And how do you fix it? I'll keep asking about it until we're done.

Yes. Look, we got into the car wash space in the U.S. about 4 years ago. And I think as an industry it has changed over the last 4 years. We today have about 20 platforms that have institutional capital behind them. We've seen unit growth added in this industry over the last 4 years, at least 1,500 new units have opened over the last 3 to 4 years, with most of that in the last 2 years. That's on a base of 3000 -- 3,500 units. So you've seen 1,500 new units added on a base of like 3,000. We think that we'll see 500 to 700 units added this year and likely sort of the same amount next year. So you've had some massive influx of capital and in certain markets, overbuilding. So I think we're hitting in certain markets, some saturation. For us, as we analyze our performance in U.S. Car Wash, I think, there's both macro factors in terms of competitive intrusion. We closed 29 stores in Q3 this year. Those 29 stores, average age was about 15 years. They were unprofitable stores, and they all had a competitor open up within a 1-mile radius of their locations. So I think that's sort of macro. Internally, we have to hold ourselves accountable for not executing at the top of our game in terms of operations, 4-wall operations. I think we can do better with marketing, brand positioning, some pricing and then obviously sort of margin control in the business. So I think there's a combination of external factors that have hurt the business, but we hold ourselves accountable that we haven't performed to the best of our game in '23.

Do you think the corporate enterprise growing too quick was a contributor to the Car Wash performance.

Look, it's hard to say it wasn't, but I also think it's important to look at driven since we've gone public. If you look at our IPO model from when we've gone public, we've significantly outperformed our IPO projections when we went public in early 2021. Importantly, strategically, we did 2 large platform entries over the last couple of years. One was Car Wash. And obviously, we're talking about the challenges that we've had there. The second was Glass. Both of those are long-term strategic in nature because we're looking at the slowly evolving car park and having businesses that are non -- EV neutral, let's say, is a good thing for us strategically. So I would say that -- we still believe that they were the right strategic decisions. In terms of U.S. Car Wash, our focus now is stabilizing that business. getting the top line velocity of revenue more predictable, more stable. And our focus is to try and get that resolved in 2024. Our U.S. Glass underwriting thesis is completely intact. We acquired 12 different businesses in a relatively short period of time. I look to have all those businesses fully integrated onto the driven platform. And with hindsight, we probably -- I was probably a little bit too aggressive in having that all done at one time. But the underlying opportunity in the U.S. Glass business medium term is very much intact.

The competitive -- I think you said the word incursion.

Yes, intrusion, incursion intrusion.

Intrusion. Has the pace of -- it feels like it may be slowing, but there could still be a lag effect, meaning the number of openings, but may slow going forward or may slow, but there's still more competition out there? Or does that level off and '24 is better because the macro -- I'm using that as an example as the macro because the macro gets better or you're doing something differently.

I think '24 will still see a lot of new openings in U.S. Car Wash, partly because you have to commit to those openings, both equipment, inventory, real estate multiple years in advance. So I think we'll start to see towards the end of 2024 moderation in terms of the number of new units. So I would say -- our focus in 2024 is getting the middle of the P&L tight. So we've got margins increasing from a low point hopefully in Q3 and then really doing everything in our power to make sure that we drive top line velocity in terms of new customers. New customers are the lifeblood of that business because they're highly profitable, single-use customers. And then there are also the customers that we have a chance to explain and hopefully sell memberships, too. So I think that's our focus there next year.

And the Take 5 brand leveraging it to Car Wash seems to be a pretty valid solution to driving the business. What should we expect from that? And is that is a true top line driver as these conversions complete?

So to your point, when we look at what brand we'll ultimately put over the Car Wash business, right? The Take 5 brands kind of stood out. It's a really powerful brand, Jonathan mentioned it a second ago in terms of how strong it is in the Oil Change segment. So we also looked at what does that brand stand for, ultimately, right? So it's fast, friendly and simple and can we deliver on those promises within the Car Wash business as it turns out, you can, right? So fast, friendly and simple very much fits into that Car Wash business. So it made a ton of sense from that standpoint. We're about north of 80%, about 85% done with the rebranding right now. We have seen our internal data would suggest that the shops or the car washes that are rebranded do perform better than the ones that are not. So we hope to continue to see that happening now in 2024.

Maybe talk about your -- platform that you're launching.

Take 5 Rewards, sure. So I mentioned this at the Investor Day. So we're launching Take 5 Rewards here in a few weeks. So super excited about that. So look, at the end of the day, we're big believers that once a customer steps into the Driven Brands ecosystem, we should keep them within the Driven Brands ecosystem, right? So whether that's -- you started with a car wash and we're going to get you over to our Oil Change business, maybe you need your glass replaced, so let's get you over to the Glass. So this is our first formal foray into getting customers to spend kind of across all of our businesses. So we're going to start with 2 of them initially. So it's the Take 5 Oil Change business, the Take 5 Car Wash business. There's a rewards program that's basically incentivizing frequency across one or both of those platforms. The benefits of the customers is they get cost savings. The benefits to us is we're driving incremental visits, not just to the individual one business where you originated, right? So let's say, customer originates in car wash. You're going to get more frequency in car wash, but we're also going to successfully hopefully convert them over to do oil changes as well. Second part of that program, so to speak, is the subscriptions, right? So we've had subscriptions in our Car Wash business for some time now. We're introducing 2 new subscriptions. So number one is an oil change only subscription. So customers can now come in, take care of their -- basically their oil changes and their maintenance needs with 1 subscription and a combo subscription in markets where we have both car wash and oil change, can take care of all those needs with one simple subscription. So this is literally going live in a couple of weeks.

One of the changes has been your role overseeing some of the Glass acquisition and then still focusing on car to Car Wash. Can you talk about how you're spending your time managing both? And then does Car Wash actually operate seamlessly by next -- by 2024.

Seamlessly is a strong word. But -- so look, my priorities are basically -- the 2 biggest ones by far are the Glass business and then the Car Wash business. On the Glass business, we have a great leader there named Nick Ouimet. Nick was my #2 when I was running Take 5 Oil Change back -- last year. So really, number one, was let's put the right leader in place. Number two, let's help Nick with strategy and tactics and make sure that he's clear on what are we executing against and let's really get this kind of integration behind us by the end of Q1. So we're on track to do that. We've done a lot of the heavy lifting at this point. Coming out of Q1, the integration work is behind us, 100% of our energy, which we've been dedicating at integrating these businesses, can now go to growing this business, both top line and bottom line. From a Car Wash perspective, that's a disproportionate amount of my time. I'm currently running that business. In the meantime, we're looking for a President to run that business. My plan is -- and we've been executing against this right now. Jonathan has kind of mentioned it is twofold, right? So number one is we have to get the margin profile of the business, right? The variable cost of the business has to get in line because at the end of the day, when we fix the revenue side of the business, which will come as kind of a second step, we want that dollar to flow through at the right rate to the bottom, right? So there's 3 main elements that we're focused on. Number one is labor. Number two is chemicals or detergent. Number three is water. We have activities going in each of those, and I feel really good about the idea that coming out of Q1, we're going to make significant progress there. Then the second part of the equation is the revenue side of things, right? So think of revenue in the Car Wash business kind of twofold, right? Number one, is retail business, which Jonathan talked about. That's individuals that are coming in and they're buying a car wash. That's the top of the funnel, though, right? So not only is that customer important because it's a profitable customer, it's a new customer, but they're also at the top of the funnel now to get members. So the second step is we've got to get better at conversion, at explaining the benefits of membership and getting folks to buy those memberships at a bigger clip. So that's the second piece. And then the third piece is, once you've converted somebody and they're a member, a subscriber, how do you keep them as a subscriber longer, right? So really managing that subscription base. So again, we have initiatives across all 3 of those that we'll start to see fruits in 2024.

These variable expenses you're referring to in Car Wash, whether you compare it to the Take 5 business or not, is it they just got out of control or they just weren't managed?

So I think it was probably just not managed, right? So Jonathan mentioned there's some internal -- we have to hold ourselves accountable to being better operators, right? At the end of the day, there's a lot of activity going on with Car Wash. We also went through a large rebranding. So with all of the activity, I think, happening in 2023, we mentioned converting over to Take 5 which was not just signage and paint. You're talking about new point-of-sale systems. I mean a lot of heavy lifting to happen there, maybe took our eye off the ball around the day-to-day management of the business, right? You've got to manage your costs, you got to manage them within a threshold and you got to do the boring things every day that makes the business ultimately successful.

Part of the driven story has been -- is and has been growth, using your scale to your advantage to consolidate a lot of these industries or sub industries. So how do you balance that? You put yourself in the penalty box for a bit. You have to watch opportunities go. Or do you still take risks to keep some of that flywheel going?

I think the penalty box that we've experienced this year is quite mildly put, Simeon, but anyway, we'll go with penalty box. I wouldn't change anything on our U.S. Glass business. I think medium to long term, that's a fabulous opportunity for us. We've clearly got some macro changes in the U.S. Car Wash business, and we've got a bunch of work to do there. We're going to spend 2024 and making sure that we get that business back to where it should be. That being said, from a capital deployment perspective, we have committed not to deploy any incremental capital into the U.S. Car Wash business until we get the business back to where it should be, predictable and more profitable. We will be continuing to deploy capital into our company Quick Lube stores. We'll open about 60 units of company Quick Lube this year. We'll have about 120 franchise locations for a total of 180 locations this year. As we look at 2024, you could see the sort of the same velocity of openings and associated capital. Our U.S. Glass business, we will have de minimis capital in that business next year because as we focused on growing the revenue, we won't be adding a lot of new stores next year. And then the balance of our capital will be on store maintenance capital and then some IT projects. So as we look at 2024, it's about executing against the base business, growing organically same-store sales. Our long-term guidance is 5% to 7%, driven consolidated same-store sales adding 180 units in our Quick Lube business and ultimately supporting all investment out of operating cash flow from the business for 2024.

Fair enough. I am going to pivot to Take 5. Thanks for the color on Car Wash. And again, a reminder to everyone if you'd like to ask a question, feel free. Take 5 crown jewel of the portfolio as of now. Good brand, good momentum. How do you ensure that, that continues? I'll leave at that -- how do you ensure that momentum continues?

Look, the history is we entered this category in 2016 with less than 50 units and less than $10 million of EBITDA, all company stores. We're about to open our 1,000th location this month. We've now got over 600 company stores, we've got 300 franchise stores and growing. Today, we have a pipeline -- a franchise pipeline of 750 units those are signed, paid for development agreements, which will likely yield over the next 3 to 4 years on franchise locations. We see our ability to open 50 to 60 company stores per year for the next 3 to 4 years based on existing markets where we have white space. The reason this business does so well, it starts with the unit level economics. Our build cost of a new unit, ex real estate, it's about $1 million. These stores ramp over a 3-year basis. Typically, year 1 is $750 to $850 top line AUV. Year 2 is $850 to $950. Year 3 of maturity is north of $1.1 million. These stores are making money in year 1. We're generating mid-20% 4-wall EBITDA margins even on a $750 AUV base. And at maturity, we're generating 35% plus 4-wall EBITDA margins all for company stores. Our franchisees are investing $1 million in the building and generating very similar returns just ex the royalty that they're paying us. So the reason we're growing our stores is ultimately because the unit level economics are so powerful. And then if you look at the business model, we are maniacally focused on having a competitively differentiated business model, which is a drive-through stay in your car business model. We sell Oil Changes and 5 ancillary products that are associated with the whole change. So again, the business is built on speed of service, no upselling, educational selling to our customers. And we have continually yielded a 78% top-2-box Net Promoter Score, which drives repeat and referral business to our business. So we feel really good if you look at our 2026 long-term outlook. We believe that we can very comfortably add about $200 million of EBITDA to just that Quick Lube segment over the next 3 years, supported by same-store sales growth and then the unit count that I talked about earlier.

Where do you think the market share is coming from and then in markets in which you compete against your next best competitor, how is the sales performance there versus other markets?

So I think we're definitely taking market share from the 80% of the industry that's still fragmented. There's a lot of places that consumers can get their oil change that aren't all change specific locations. We have a handful of large regional or national competitors. We respect our competitors, but we know when we look at the unit level economics and the investment return profile, we would say that we're the best in that industry. So we think we've got the ability to go from 1,000 locations to 2,000 locations over the next 3 to 5 years. And we're very comfortable that the unit level economics will only continue to expand as we deliver that sort of high single-digit same-store sales growth. We're not overly concerned when we go to a market if we see a recognizable name and that will not mean we won't go into a market if there's a recognizable name in that marketplace already.

How do you think of the EV threat, Apparently, 750 other investors thought about it and made the decision. So how do you think about it?

And these are franchisees who are looking at a 15-year commitment to this business, and we're signing franchise agreements in California, in Washington state. So these are folks that are in the sort of hot bed of EV land. We believe, and we've modeled sort of the EV adoption rates in the most conservative fashion that we possibly could, which is essentially saying, every new vehicle today will be an EV vehicle, and we know that's not the case. There's 280 million vehicles on the road today. We're selling about 16 million, 17 million new vehicles a year. We know how many of them are actually pure EVs. When we model our business in the most conservative manner, our Quick Lube business will continue to grow into the mid- to late 2030s. Even when we do reach an inflection point, there will be hundreds of millions of dollars of cash coming out of this business for decades to come. So again, we think the business will grow for at least another decade. We can double the size of the business. And then from a driven overall perspective, we did look at Glass and Car Wash as long-term hedges, if you like, to the shift in the car part.

Good transition to Glass. Can we talk about the business case and we'll start there.

Yes. So we have a phenomenal dominant competitor in the U.S. Glass base, and I give them all the credit in the world for building a phenomenal business over the last 30 years. So we'll start there. They're privately held, but they're a fabulous competitor. We look at the glass space as, number one, as EV positive over time because it doesn't matter what type of engine you have glass breaks, chips need to be replaced and repaired. There's a second great tailwind in the glass industry, which is calibration. So now most vehicles that have a windshield replaced need to have their car recalibrated, which is a sort of tailwind to check and also a tailwind to more sophisticated providers that have the training, the technology and the equipment actually to perform the calibration. When we underwrote this business, we leaned on our decades of experience with our insurance partners in our collision repair space. So today, we do about $2 billion of insurance collision repair. We deal with all the top insurance partners. And with conversations and diligence with them before we got into this space, we knew there was a large appetite to have a #2 player in this space. So today, we're focused on 3 buckets of revenue, what we would call retail cash out-of-pocket pay in our business today on an LTM basis, about 1/3 of our revenue is coming from those customers. Average check for those customers is going to be in that $300 to $350 range for a windshield replacement. The second bucket of revenue that we have is our commercial partners and fleet partners driven today across our platform. We do almost $0.5 billion of commercial business. So we have deep, long-lasting relationships with these same large owners of fleet. So we're doing 1/3 of our revenue with those partners today. Average check for those customers is more in the $450 range versus $300 because they're typically doing calibration. And then 1/3 of our revenue on an LTM basis is coming from the insurance category. Within the insurance category, there's really 3 layers. There's large national insurers, there's regional or state-based insurers and then there's the local insurance agent. So again, about 1/3 of our business is coming from insurance. And as we've gotten through all these integration challenges, built a platform. We believe that there's significant upside across all 3 revenue buckets as we look at the sort of medium term.

And where are you in the integration process? Talk about some of the speed bumps that you hit in '23 and then when do these smooth out?

Yes. So integration challenges will be basically behind us by the end of Q1. So let me try to explain a little bit because we get the question often of integration challenges and what does that mean? So to Jonathan's point, we grew this business from nothing to the second largest player in the country in about 18 months through acquisition, 12 different businesses, right? So these are 12 different mom-and-pop businesses that have been operating for 10, 15, 20 years. They have their own brands. They have their own processes, their own people. They have their own compensation plans. So income through the brands and we can't operate 12 different businesses, right? We need to ultimately get this out to 1 business, 1 operating playbook, 1 way of growing this business. So you have to go and change all these things. So something as simple as compensation plans, right? Well, I can't have 12 different comp plans throughout the country. So we're going to move to 1 comp plan. When you do that and you have a technician that's been being paid a certain way for 15 years, maybe they don't like that, right? Maybe they don't like that enough that they leave and they go somewhere else to an independent or something like that. So when we say integration challenges early on in an integration, when you're making moves like that, you will lose people, right? So let's say, for the sake of argument that you buy 1 of these 12 businesses and you lose 10% of your technicians that way. That's 10% less capacity that you have, right? And these technicians are in the car wash equivalent that tunnel, like, these are the folks that produce the work and they produce the revenue. We changed out the point-of-sale system. So that's completely rolled out at this point. We are operationalizing that right now, which is my way of saying, it's one thing, you put the point-of-sale system in place. It's another thing that the folks are proficient and know exactly how to use that point-of-sale system. So the rollout is done. We're operationalizing it now. Again, to bring that to life a little bit. If you take a person that's been using a point-of-sale system for 15 years and now you switch it out, that is a huge difference to this person, right? And when I say point-of-sale system, like, substitute in point-of-sale system equals every process within the shop. A person calls, how do you answer that phone? Where do you track that information? Where do you generate a quote? Where do you buy the glass? How do you schedule that work out? All of that is the "point-of-sale system." So you switch all of that out, and you're going to have process and efficiencies, and you're also going to have some folks that maybe don't want to do that anymore. So the good news is this work had to happen. This is a bit of an unlock to Jonathan mentioned a second ago. Ultimately, we do want to be in contention for that national insurance work. It's one thing to participate in RFPs to try to get that work. Once you are awarded that work, you need to keep that work. And the way you keep that work is you have consistent execution, and we need to have this operations playbook to be able to do that. So the good news is by the end of Q1, it should be behind us, but it's been [indiscernible].

There's an old saying in private equities, Simeon, where if you buy 10 $5 million EBITDA companies, you don't have a great $50 million EBITDA company, right? So we bought 12 companies and in order to compete long term with large fleets, large insurance providers, we had to get everyone on a standardized platform. So that pain and suffering is almost done. And by the end of Q1, all the major components will be complete, and we'll be able to focus and grow on the top line.

I assume Q1 can't come soon enough, but it would strike me some of this work would seemingly take even longer than what you've been able to do? Or no, these are small-scale businesses and relatively swift changes.

So we feel good about end of Q1. I'm not sure -- end of Q1, feel confident.

Done. This house -- oh please. If we have the mic, sorry.

Just on the Glass business, can you talk a little bit about the recalibration opportunity? And what sort of tailwind that could be and it seems like it's an emerging opportunity, but what they could do to the same-store sales and the productivity of those units?

Yes. In most of the businesses that we bought, they did not have calibration capabilities in those businesses. And what that means is do you have a $15,000 piece of equipment, which provides the calibration along with the training for the employees. So we now have all of our locations with the equipment and the training to perform calibrations. Our retail out-of-pocket customer will typically be very cost conscious and will, in many cases, waive the calibration. Obviously, we get a full waiver and disclaimer from them for doing that. What we're seeing is that our insurance customers -- insurance companies are really looking for that calibration to be complete. We're operating at about a 10% of vehicle repair right now with calibration that's growing literally every month. If you think about the deconstruct of an average check for glass, you could be thinking that calibration as a line item is typically about $300 per check. What's interesting is the calibration takes about -- static calibration takes about 45 minutes to complete, most of the time the machine is doing the work. If you look at our average labor rate of about $20, you can sort of do the margin profile and what a $300 charge actually costs us. So we think it's a really good long-term tailwind for that business. Does that answer your question?

Yes.

Driven being a house of brands and an integrated entity. Is that necessary for future growth do you debate that? Or it is part of the formula for this -- for the future of this business?

I think having a strong brand in whatever category you're operating in matters. I think brand matters to consumers, brand matters to vendors, brand matters to franchisees when we've got franchisees. So we do believe in the power of brands. Our 2 oldest brands are Meineke and Maaco, both found in 1972 and they have massive unaided brand awareness, and that happens from millions of customers and tens of millions of media dollars being spent. So we are big believers in brands matter. One of the opportunities that Danny referred to earlier is getting customers from one brand to use another brand. And that sort of cross-branding cross promotion is something that we're pretty excited about. The Take 5 digital loyalty platform will be the first step in really formalizing that journey or that opportunity, but we do believe brands matter. I did mention earlier, though, at our Investor Day that I do plan on being a very active portfolio manager in 2024 of our brands. And I think this year has been a good time for us to stop, pause and evaluate the various brands within our total portfolio and understand, do we have the right composition of brands today and as we look at our growth plans for the next 3 to 5 years. So I do think it's likely we will continue to be -- evaluate an active portfolio managers within our various brands and segments.

Driven advantage, maybe a little newer to investors. Can you size it selling or selling products to franchisees for their benefit, but also help the company. Can you talk about it, size it up? And what kind of opportunity does it kind of represent?

It's an amazing opportunity, and it's sort of incredibly under -- misunderstood, and I think undervalued in terms of an opportunity with Driven. Simeon, in 2023, Driven will, on a consolidated basis, make about $50 million of EBITDA from our procurement efforts today. And that's where we pool our purchasing. We get our franchisees best price, but we make a spread on that purchasing. Today, at Driven brands, we capture or address about 2/3 of the total spending power within Driven. This new technology platform, which is an SAP platform which is an online marketplace for automotive aftermarket has now been launched and fully up and running in Driven. We are literally every week, grabbing more market share from our franchisee spend. We have affiliate groups, which are not franchisees, but are associated with Driven who are buying in the automotive aftermarket, and we're now introducing those affiliate partners to the marketplace opportunity. So incredibly excited about it, very high margin. The capital has been invested in it. And this is one of these rare things where our franchisees benefit from better pricing. Our company stores, we can manage their procurement because we have a curated set of SKUs that they can buy from. Our vendor is appreciated because it's centralized purchasing and obviously driven benefits from incremental margins. So I think we've been quite conservative in our 3-year guidance that we believe we can grow that sort of $50 million of purchasing EBITDA today to north of $80 million or add $30 million over the next 3 years. a very, very powerful platform that we've built.

A question. Yes, please?

Can I ask 2 maybe longer-term questions. One, how do you guys think about -- how does it right -- like one of the ride share [indiscernible] is that you're moving from private car ownership to kind of public car ownership. Two, car households is like kind of a community-driven kind of model. How does that change, does that change the customer profile, the type of the velocity of those consuming those types of services that impact kind of how you guys might think about subscription programs and stuff like that.

Well, why don't I answer that first? Because that was a mouthful, right? That same thesis was a bound when I joined Driven Brands 12 years ago. And I don't think we've seen a massive shift in that sort of shift from personal ownership to use of fleet of vehicles. Quite frankly, if it does happen or when it does happen, we think it's an opportunity for us because the average car does not have a very high utilization rate. So if you have these fleets of vehicles that are utilizing the car more, we do believe the demand for service and maintenance will increase. We've not seen in the 12 years that I've been here, any seismic shift in terms of car ownership profile. So maybe it will come, but we haven't seen it yet.

Well, the only thing I'd add to that is in a world where that happens, right? And to Jonathan's point, we haven't necessarily seen it happen. But somebody owns that vehicle. And is that entity going to want to negotiate with thousands of independents across the country to figure out how to get their car serviced across the multitude of ways that it has to get service? Or are they more likely to go to somebody like Driven that can handle all of their needs under one roof.

Next question maybe along the lines of the independent space, again, also something that hasn't come to pass yet. [indiscernible]. If CarMax or Carvana really is able to start to consolidate and really grow share of -- take more share of the used car market and build the dealership profile that starts to look bigger and bigger and bigger. What do you guys see as the risk that services -- aftermarket services started to migrate and stay within where they purchase the car.

One of our largest fleet customers today is Carvana because who do they outsource the work to refresh their vehicles to people like us. So again, in the 12 years that I've been doing this, we've not seen a sustained capability of the dealership enterprise to really execute consistently on the service model. Immediately, we'll gravitate back to new and used car sales, which is more interesting, maybe more profit -- it's actually not more profitable. So I'm not overly concerned about that. The other thing that's very key to our customers, our average consumer has a household income of about $70,000. They drive a vehicle that's 4 to 6 years of age. It has higher mileage on it. They use their vehicles every day to live their lives. The last place in the planet they're going to go to, to get service or maintenance is likely a dealership. So again, I haven't seen it happen to this point.

Please. I think this will be the last one. Thank you.

Just one more for me. Can you talk about why Car Wash to be a good business in the medium term? You basically had a supply shock, a whole bunch of new entrants, a whole new units -- bunch of units, well relatively cost of capital to enter and demand is relatively stable, maybe growing GDP. So can you talk about how the business recovers and turns back into a good business before the supply shock happens?

The underlying characteristics of the business are still there. It's a very efficient labor model. The machines do the work. The margin profile is very good. It is one of the few categories in automotive aftermarket that I see are customers smiling when they leave the shop because the car looks clean and they're backing a bit stuff like that. So I think inherently, the carwash business model is still a very good business model. The question is, is it the same business model from 4 years ago that had less competition and 35% 4-wall EBITDA margins, will it still be a very good business at 25% 4-wall EBITDA margins as a proxy. So I don't think inherently, it's a worse business model. There's just simply more folks trying to do the same thing right now. So our focus in 2024, clean up the middle of the P&L, get those margins stable and then figure out how we get more top line velocity on the revenue.

Thank you for presenting. Good luck in '24 and achieving $850 million of EBITDA in '26.

Awesome. Thank you all.

Thanks appreciate it.

Thank you.