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

Good morning, everyone. I hope you're good. My name is Simeon Gutman. I'm Morgan Stanley's hardline, broadline and food retail analyst. Welcome to day 2 and to the Driven Brands presentation represented by Mike Diamond, EVP and CFO; and Danny Rivera, EVP and COO. Going to read disclosure, a quick intro, and then we'll start the fireside. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. For those that don't know Driven Brands, it is a stable of automotive service companies, high returning, pretty good growth. And there's a lot of companies at this conference, I would say not many are going through inflections. This story is on the cusp of some inflections because of some strategic decisions that they're making. The fundamentals of each of the businesses really haven't changed much, meaning they're still solid, good. The one of them that's been less than good, there could be some strategic outcome. And then we'll talk about the light that may be shined on one of their best businesses, the Oil Change business.

So with that, I'll start. I'll open with -- there's a focus on simplification of the business and the story in the way that you're communicating to investors and internally. Can you help us what are the key areas of simplification and how they can help the business grow?

Yes, absolutely. And I'll take that and thank you for having us here. Good to see all of you. I think Jonathan probably summarized it best in the last earnings call. But as you kind of described this company, it comes down to 2 things in our minds. One is we have this incredible growth engine in the Take 5 Oil Change business, and making sure we continue to drive awareness externally and execution internally around making sure that we deliver on that, but just highlight the tremendous growth potential that business has. We then have this stable of strong cash flow brands among our franchise brands, whether that's Meineke or Maaco or 1-800 Radiator that give us not only stability, strong cash flow, low CapEx, a very predictable profile. And so as we think about simplification, it's really about making sure that message comes out with this audience, but also internally that they recognize what each of those components is. We've got the Take 5 growth; it's really going to deliver a lot of growth over the next several years and the stable cash flow profile of the rest of our franchise businesses.

And I know you weren't there at IPO. Can you -- a little more context on juxtaposing what the investment case was IPO to what the investment case should be looking like today and then going forward?

I mean, look, I'll take that. I think the biggest difference right now, if you look at a pre-IPO or IPO and now, it's exactly what Michael -- it's about focus. We've really crystallized what Driven Brands is, right, and Driven Brands is growth and cash. So it's this Take 5 Oil Change business, which is an amazing business. We bought the business back in 2016. It was about 40 units, mostly in New Orleans. We've grown it to over 1,100 locations. If you look at it from a store count or from a revenue or EBITDA perspective, on a CAGR basis since 2017, we've grown at 22%, 32% and 48%, respectively. So it's just this great business. And then it's this collection of iconic asset-light franchise businesses that -- they're going to grow low single digits and they're going to have EBITDA margins in the high 50%, right, or above 50%. So the biggest shift for us, I think, is just we've really crystallized who Driven in this growth in cash.

Two of the businesses where you've grown and you could have argued, you've grown maybe a little too fast, car wash and glass. I can leave it open ended to how you want to frame that back to us. I'll leave it open ended and maybe open it up. So how should we think about those 2 businesses and then the evolution of what's happened with glass?

I mean, look, first off, what a great problem to have, right? You're growing too fast. So those are very kind of first world problems. So as I think about the glass industry, let's talk about that one, and let's start with why did we get into the industry, right? So the glass industry has a lot of characteristics very similar to the Quick Lube industry, right? And we've just talked about what a great business we think we have with Take 5 Oil Change. So this is a highly fragmented industry, needs-based industry. There's a great roll-up opportunity here, great unit level economics and a relatively simple operating model. So it checked a lot of boxes for us and a pattern that we've already developed with Take 5 Oil Change. So number one, we got into the space because we really, really like the space. From there, what we're looking at is we really want to -- and some of the key learnings for us has been, you really have to focus at the beginning, right? So focus on the basics. Every industry that we've gotten into is a little bit different. There's uniqueness, there's nuances. And so you really have to lean in and understand this industry, this business, the operating model, make sure you put the right people in the right places. So we've done a lot of those things. And then from there, it's really about growing this business and staying the course, right? So I think one of the key learnings for us also as far as the glass industry in particular, is we have to stay the course. So we got into the industry because we liked it. I was around when we bought Take 5 back in 2016 pre-IPO days. It's an amazing business today, and we rattle off some really cool numbers, and it's done a great job, but it wasn't always perfectly up and to the right, and that's not how life works, right? So we look at glass, for example, as an industry where we like the industry. We got into it because it's a great business, and we think there's a future potential here. And we see it as we're in the first inning of a long game here, but we like the momentum that we're building in the business.

If you look at -- we'll talk about car wash separately, but there was car wash, and we might be stepping back from that or we talked about potential options. Glass still committed to the category, may have gone too quick. But this is growth in cash. So as you continue to grow, what are these -- one of the learnings from both of these examples, so that we don't have stumbling blocks or learning curve or it's a portfolio business, and we're going to have this. Is that the way we should think about it?

Yes. Look, I think that the 2 learnings are, like I said, stick to the basics and make sure you get the basics right, especially early on, like I mentioned. So we got onto the glass business through a series of 13 acquisitions almost overnight. I mean it took a little bit over 12 months, but almost overnight, we went from no presence in glass to the second biggest player in the country, right? So it's a completely new industry for us. And when you're new to something, you really just have to take the time to understand the nuances and do all the right things from a people perspective and putting the right people in the right places. And I already mentioned that, I mean, the second learning is just you have to stay the course. For us, this is a mid- to long-term opportunity. We're in the first inning. We are a real second -- or #2 right now in the space. And just a few years ago, we weren't even in the glass space. So we like what we've done. We like the momentum in the business, and we're just going to stay the course.

So back to the growth element. Does this make you gun shy about growing inorganically? How do you think about the balance between organic and inorganic growth going forward?

I mean I think we are a growth company. We have the cash -- we have the growth part. We will always be focused on areas where we can continue to grow. I think for us, it has to be thoughtful. It has to be shareholder accretive as we think through it. So I think right now, I feel good about our portfolio, what we have in terms of the balance of growth and cash. There are always opportunities we get. I think some of those opportunities are probably more infill of things we're already in versus new platforms. And so I think for us right now, our main focus is on we -- again, I'm going to repeat myself, but we've got this great growth engine in and Take 5. And so I want to make sure that the capital we do choose to deploy is as focused as we can on really driving what we think is a strong competitive advantage there. And then leveraging that cash that we do have for some of the other things we've talked about, bringing our leverage down, et cetera, that that's really where our focus is at the moment.

Other verticals. It sounds like you're not as interested and they're not out of the question because they probably never are, but it sounds like its core, you'll grow the core businesses that are working, but not venture outside of. I think this is where you get into -- I don't want to speak in broad hypotheticals, but I think right now, our focus is on making sure we deliver the best returns we can with the portfolio we have.

Okay. Maybe tackle each -- we'll tackle each sub business, Take 5. Probably the easiest one to talk about is the crown...

Take a lot of about Take 5.

Crown jewel of the portfolio. So how do you ensure the momentum continues?

Yes, it's a great question. I think there's a few things that come to mind, right? I think number one, it's a differentiated business, just the way it's been designed, right? So the reality is there is no national player of scale that can deliver 10 minutes stay-in-your-car oil change with NPS scores in the high 70s, right? So that's unique to us and a differentiated business. And I think that's easy to rattle off and to say, but it's really hard to do and it's really hard to scale across 1,100-plus locations, right? So that's a great momentum builder for us. Number 2 is we've developed an amazing team, right? So on the corporate side of things, we've built that business from the ground up. Again, when we bought it, it was 40 units. So when we look at our above shop leadership, 80% of those folks have been promoted from within. We have an amazing group of talent, a really deep bench of above shop retail leaders that we think are some of the best multi-unit leaders in the country. And again, those are things that are easy to say, but that's hard to do. And then the third thing is it's just we have really nice tailwinds built into the industry, right? So if we look at, for example, our pipeline, we have pipeline of 1,000 locations. That's a real an existing pipeline today. So we have visibility to 1,000 locations, everything from at the very early onset of franchisees that have paid us money upfront for the rights to develop stores all the way through sites in construction or that we locked down real estate. And if you look at that pipeline of 1,000 locations, a little bit more than 30% of those are in site secured or further along. So that's another really nice tailwind that we've built into this business that's going to continue to grow for some time.

If you separate like the cyclical outlook for growth, some of the puts and takes versus secular primarily EV. I wanted to mention that at some point. So can you parse through near-term growth drivers, it's new units, transactions and then long-term puts and takes on the opportunity?

Sure. Sure. So I think start with just the industry, right? So you've got -- it's an enormous industry, $3.9 billion TAM as far as all of automotive aftermarket. If you look at miles driven, North Americans are driving 3 trillion miles a year. That's been growing pretty steadily for 20 years now. Average car and the car park is 12.5 years. So these are all like really good natural tailwinds into the business, right? If you -- sorry, the second part of your question was?

Well, the near term, and that's -- and so that's a secular driver, but also the EV, the risk side of it. Yes.

Yes. So EV -- it's interesting, right? So EV, we are getting the question when we IPO-ed the EV question would come up a lot. I think folks have seen the demand for EVs is not maybe what people thought it was going to be. We've looked at this question 1,000 different ways, even in the most aggressive models that we've seen with the most aggressive EV penetration, we still think Take 5 is an amazing business well into the 2030s, right? And those really aggressive EV penetration models is not the demand that we're seeing right now with EVs, right? So I think, we continue to feel really bullish about Take 5. Obviously, if you look at all of Driven, we've got some diversification there that hedges against EV with some services that really are EV independent. But even within Take 5, we think that we have an amazing business for some time.

And the ability to be durable and withstand whatever EV threat will look like, that's based on the productivity today and the market share that you're taking in the future, you'll take more market share from the industry? Or do you think industry number of oil changes may not be as impacted as we think.

Yes. We believe, generally speaking, that the country doesn't need more Quick Lubes, right? So the number of boxes is not necessarily a thing that needs to go up over time. I think what you're going to see is some consolidation in the space, and you're starting to see that right with some of the bigger players that are eating up more and more of the market share. So I don't know that there's this huge need for plus 20% more Quick Lubes in the country throughout the next few years.

And I'll just add on, and its why Danny starts all these conversations with the 10 minutes stay in your car with the high NPS, while it's a nice little statement for us, it's actually a consumer value proposition that like we don't need the number of oil changes to grow because we have such a good operating model like that stands on its own. And so it really does help deliver a customer experience that they're not currently getting.

Do you have markets -- I'm sure there's markets that have a more mature set of stores where you've operated for a longer period of time. Sense of where that -- like the market share is in that market versus national market share.

Yes. I mean we have some markets, for example, New Orleans is a great example. Take 5 originated in New Orleans, Take 5 is ubiquitous in New Orleans. I'd say we have extremely high market penetration there. And then you've got some newer markets, for example, Miami. I mean, we've opened up our first 4 locations in the last 12 months. Miami is a nice big market. We think we can grow north of 30 locations in Miami, but that's really early innings for us with Take 5.

Yes. To the near term, demand drivers or demand outlook for '25. And if you can't speak to '25, just medium-term demand drivers to speak about it generically?

Yes. As I think about the Take 5 business, so there's a couple of really nice tailwinds, let's say, in the short to medium term. And even in the near term, historically, it's been working for us, right? So for example, the premiumization of oil is a nice tailwind into the business, right? So for us, we sell premium oil, let's keep it simple premium oil and non-premium oil. Premium oil we would define as either a fully synthetic product or a synthetic blend. So we've said publicly before our -- what we would call premium mix is 90%. So 90% of the time, we'll sell one of those 2 types of oils. Now that may sound like, wow, that's kind of about a ceiling, right? Well, within that mix, though, we know that we can continue to skew into the fully synthetic product, right? And this is as much our sales process and how we go-to-market and how we educate customers. And part of it is also just the way the cards are being built today, right? So the fact of the matter is that newer cars require fully synthetic product, and so that's a nice tailwind into the industry, right? The other really nice tailwind for Take 5 is not Oil Change revenue, right? So second part of our services, we have 5 services today that we offer. We've said publicly, our attachment rate on those services is in the mid-40s. We have both corporate locations and franchise locations that are attached -- their attachment rates are in the 60s, right? So not only do we think that when we look at non-oil change services, we can grow the attachment rate, and we know we can because we have stores that are doing it. The second thing is we could always grow services, right? So had we had this conversation, let's say, 3 years ago, we would have been talking about for attachment services. We only had -- we call them big 4. We had 4 services 3 years ago. Today, we have 5 services. There's no reason that with our model can't be 6, 7 or 8 services in the future. And so there's a couple of different ways that we can continue to grow this business.

On oil changes per day or per location, one of the competitors has a slightly higher average. And I don't know what defines that it could be real estate, you have a higher return on capital on a 4-wall basis. So just the philosophy of you probably have higher productive stores. Is real estate the defining factor? Is it not? And then the stores need to get to these higher levels to justify these returns.

Yes. I think the biggest part of that story is just the maturity of stores, right? So we've been growing 150-plus locations for the last 3 years or so. So if you look at our portfolio of stores, we just have more immature stores that are still in their ramping phases. If you compare mature to mature, I think it starts to line up a little differently. But look, we're really focused. As far as the spirit of the question, car count is the lifeblood of the business, right? So everything that we do at Take 5, it's all about where the stay in your car 10 Minute Oil Change. So even in a world where we're going to add more services over time, like I mentioned, it still has to be in the spirit of we go-to-market as a 10 Minute Oil Change, and that's front and center for what we do.

And you said it, so I'll just repeat it. Like we feel good about the operating model as it stands today. There's no catalyst we need to change that. The economics of our 4 walls are incredibly strong. We make a lot of good money both for ourselves and for our franchisees based on the car counts we see today from a mature store perspective. And so -- when we talk about a crown jewel, it's not only the footprint expansion that we have, but it's just -- this is a fundamentally really strong operating model. And the ability for us and our franchisees to invest behind it is something that gets us excited going forward.

So if we can move from oil change to car wash, the business is stabilizing. Comparisons easy, but the business looks like it's stabilizing. Can you talk about the drivers of stabilization and to what extent this is something sustainable versus just lapping easier comparisons?

Sure, halfway. The business has been stabilizing. It's been on a consecutive basis; it's been getting better throughout the year. So it's probably worth taking a step back. So when you talk about the car wash industry, the first thing that you have to understand is that the industry is very dependent on the weather, right? So I don't care how good of an operator you are, if it's raining outside, people are not going to wash their cars. So there's a natural hedge in the business to counter that, right? And that's really our membership base, right? So membership plays a crucial role in the car wash industry to make sure that you have this monthly annuity coming in that it's going to offset any kind of weather implications for whatever is happening in that given month, right? So when you look at driven, we got into the car wash space through an acquisition with ICWG. If you look at that business that we acquired, the membership rates were just never really strong, certainly compared against some of the other folks that are out there in the industry. So I think we are so more in a defensive position to begin with. If you look at the strategy that we deployed this year and it started in January, so we deployed a strategy we call it MPOR membership for the price of retail. Basically, what we do is -- and the way the industry works is, say you come in and you buy a car wash and let's say, it's a onetime wash and it costs you $25. The way the industry generally works is the unlimited monthly membership, you just double the price, right? So for $50, you can wash it as many times as you want, for $25, you wash it one time. We really leaned into value and said, you know what, we're just going to sell the unlimited monthly membership for the same price of retail. So for the same $25 you're going to give me today, you can get the unlimited membership. Now the beauty of that is, again, we were starting from a position of weakness, and it's really important to build this membership base, so that you have this hedge against weather. So it made a ton of sense strategically. Ever since we've done that, we've tripled our conversion rates, our churn rates are materially down and we've been able to replicate that since January, all the way through December, right? We've maintained those rates. All of that's finally culminated. We talked about it last earnings, right? We have more than 1 million members right now. So that's been the cornerstone of stabilizing that business. And once you understand the industry and how it works, it makes sense strategically. And that's going to be the strategy for the foreseeable future. It's been working quite well for us.

And that has been geographically broad-based?

Yes.

Capacity in the car wash industry, it's arguably a factor that has made the backdrop a little less attractive, a lot of money or private money chasing the phenomenal returns. And you could see it when you go-to-markets where there's several premier membership models with nice-looking facilities. Can you characterize the capacity? We've focused on the rate of change getting less bad, but it still seems like there's capacity coming in, but it's happening at a lower rate. What's your take on it? I think there's 25%, 30% less incremental growth, I don't know how you'd look at it?

I don't think I disagree with anything that you said. I mean -- so we're still seeing stores opening. It's definitely not at the rate that we were seeing 2 to 3 years ago. And I don't know that it's going to get back to that rate, frankly, right? So I see it diminishing. We still see it happening. It seems a little bit more opportunistic in certain markets, but it's certainly not what it was 3 years ago.

And can you share with us anything about the strategic review process pros and cons of what you're thinking of different scenarios?

Yes. I think in general; we reiterate what we said during the Q3 call, we're still going through that process. I expect to have an answer by the time we announced earnings in early -- I guess, late February or early Q1. Ultimately, what we want to do is come up with a decision that gives us the best expected value going forward. And so as we go through that review, obviously, Danny talked about some of the benefits from the MPOR from the operational changes in what we're seeing there. You've highlighted some of the macro trends, and that's all the things that we've kind of put into the pot to make sure we come up with the right decision.

Okay. We won't speak on it for the next 17 minutes. Back to Glass. What's -- can you talk through the business case for driven to become the leader in this segment after the #1 player?

Yes. So look, I mentioned it a little while ago, but first off, we got into the industry for all the right reasons. We just really like the industry. And again, it's very similar in characteristics to the Take 5 to the Quick Lube industry. I think there's 2 reasons that come to mind to me why Driven has a right to win in this space. I think number one is capital, right? So if you're going to go after the Big Boy and they've done a really nice job. We think that they're nice competitors. You have to have the capital to have scale in this business because scale matters. And we've already -- I mean, the good news is we've deployed that capital. This isn't a future statement. This is a historical statement. So we've deployed the capital necessary. We bought 13 different businesses. And like I said, seemingly overnight, we went from no presence in the glass space to we're the #2 player. So number one is you have to have the capital and we've deployed that capital. The second reason why I think we have a right to win is our insurance relationships, right? And it's not just the relationships, but it's knowing how to execute against the expectations that carriers have. So Driven through our collision businesses, I mean, we do over $3 trillion in sales in the collision space, and we have now for a decade, and we've been growing that business quite consistently with the collision businesses that we have. So whether it's the State Farm's, the GEICO's, the Allstate's, we've worked with those folks. We have relationships with those folks. So that's not easy to replicate. And we know how to service those accounts. We know what those insurance carriers want, what they need, what they expect, and we know how to build the operational playbook to make sure that you're delivering consistently. Because the way that insurance world works, it's very meritocratic, right? So especially in the collision space, and we suspect that the glass space will get there over time. But if you're not performing against their SLAs, you're not winning business. And the reality is we've won business in that space for a decade. So I think those are 2 things that come to mind for me as to why driven, in particular, has a right to win in this space.

What percentage of the industry of your business you'll be like a customer pay versus insurance?

I don't know that we've disclosed that before.

It's a mix. I mean, as I'd say, there are benefits to being customer -- even if it's not customer pay, there is an advantage to making sure you're front of mind for the customer because it drives awareness and helps them steer. Our job is to make sure we're both relevant to the customer, but have these great relationships that we're working on so that we get the business as the insurers get to make that decision as well.

And stepping back. So the integration of the 13 businesses, you're on one singular platform. All of that is behind you.

Correct.

And then the criteria that you said we need to get the relationships. It sounds like building the relationships with the providers, the carriers and then executing against that. The relationships are in place.

We've been working with these carriers, again, through the collision side for a decade, right? So the relationships are in place. And so when we look at the glass business and I think about next steps, opportunities, where do we take it from here, to your point, historically, bought 13 businesses, integrated them, let's move forward. What we've really talked about is right now, it's a revenue story for us, right? So we put all the people in the right places. We have the operational playbook; I think our variable cost structure is where we need it to be. So now it's all about revenue. And then there's 2 components that we've really leaned into. So there's commercial revenue and then insurance revenue. On the commercial side, momentum in that side of the business. We've announced several deals with national rental car companies can't name them, but you all know who they are. We've announced several deals this year, and that's beginning to bear fruit. So that's good. Those are nice chunky big deals that we landed in 2024. And then we've also announced several regional carriers that we've landed throughout 2024, and that's an important part of the playbook as we continue to grow credibility in insurance and hopefully, when they start to take on kind of the big top 10 carriers, right? And all of that culminated the most recent win that we had in the regional insurance space. Not only did we win the right to be a part of the network and service the cars, but we're also taking on the third-party administration, which is huge. And we bought businesses that were TPAs or third-party administrators for carriers. But this is the first time that Driven has won the -- sorry, I hit the microphone -- has won an account, and it's an important win for the team.

And you've built and given the experience in Take 5, a business in the service space and gain traction. The investment case for glass. As far as the profitability and sales growth, you see that same potential now with glass.

We see the same potential and that's why we're saying this is a long-term game. We like the space. We think we made the right decision getting into this space, but it's early, right? First inning, but we do like the prospects of the business.

Okay. The -- this idea of Driven being one brand, there was some a few years ago, strategy around connecting the dots between the different brands and service, is that -- does that -- is that still a business on a use case or given portfolio changes that's not top of mind anymore?

So I'd say the vision, right? So the idea -- the way I usually worded it was 1 plus 1 equals 3, right? This idea that -- if a customer comes into Quick Lube and they needed an Oil Change, but they have a crack on their glass and they have their glass repaired, gosh, we should be able to figure out a way to say, hey, you should go to our sister business and do business over there. So that vision is still in the background, data is still a really important part of that vision. We have a really nice database of customers. We have over 10 million addressable records. We continue to mature and develop our digital strategies. And frankly, we generate a lot of revenue on a yearly basis through our digital capabilities. But I'd kind of go back to what Mike said at the very beginning. Well, that's in the background, and we're going to continue to work methodically against that, driven as growth in cash, right? It's this Take 5 business, which is a juggernaut and is doing really well, and it needs to continue to do well. And then it's just really nice iconic set of businesses that are asset-light, that are generating nice cash returns for us.

And I'd probably chime in, this is one where I'm not sure I appreciated this as an advantage when I joined about 4 months ago. I was trying to anchor on Take 5 and some of the various components. And as I've been here over the last 4 months, I've grown to appreciate some of the elements of this branded house, house of brands, however you want to frame it. For me, there's 2 big advantages. Sourcing is big. Our ability to go to our suppliers, whether it's across Take 5 or our collision providers, the advantage to leverage our scale beyond just Take 5 across those, gives us a scale, gives us an ability to get those advantages that are easier because we are buying for a much broader group than if we were just one of our each independent brands. I think the second, and it came out a little bit in what Danny was talking about on the glass side is there are some big, sticky relationships more on the B2B side that are not as easy as just going to convince you to come in to get your oil change. On the oil change part, that actually still is relevant. Rental car companies need to get their oil change. Fleet companies need to get their oil change. But if you think about going to an insurance company, the types of things you need to work through with the TPA, build the relationship, pitch, think about pricing multi-location. You can do it. If you have a repair and maintenance and a collision and the glass, but the fact that we have and are continuing to build that expertise, gives us an ability to go-to-market, even if not from our level that we see it, but like in the piping, it's an advantage that we have that I think speaks to why Driven is stronger together than it is apart.

Driven Advantage may not be familiar to everyone. Can you talk about what it is selling product to franchisees? I never asked about this, but is there any selling into car wash that you lose or there isn't much business going that way. But talk about the size of the opportunity broadly, how fast it's growing, how much piece of the business it can get to over time?

Before he answers that, I just want to make sure we're still in the midst of our strategic review. And so we have not decided yet if we're going to lose car wash or not, but you can explain that Driven Advantage.

So let's talk about Driven Advantage to your point, maybe some folks who know. So we've basically built an online marketplace. I'm going to say this somewhat tongue in cheek. Think Amazon, it's certainly not Amazon, right? I'm not pretending to be Amazon. But it's this online marketplace where we did it intentionally for ourselves and for our franchisees where any widget that you need to buy to run your store, you can go on to the marketplace and buy it, right? And so the sales pitch to franchisees is actually really simple. It's you're going to save time and money. It's as simple as that. On the time side of the equation, number one, it's a one-stop shop. So whether you needed to buy a 4-post lift, you need to buy oil, you need to buy paper toner, you can go on to this marketplace and you can buy it. The second thing is, in this marketplace are all the tools and reporting you need as a business owner to manage your spend, which is critical because we want our franchisees and obviously our corporate stores to be profitable. Things, for example, like you can create a curated list of SKUs. So for corporate stores, we do this in all of our Take 5 stores across the country. Let's say you need 30 widgets to run a Take 5. And one of those widgets happens to be a pen. Well, actually, at Take 5 in a corporate store, there's one SKU of pen that you can buy, right? Because you run to Take 5, you can do it with a $0.50 pen. You don't need a $4 pen. So there's so many tools that are built into this platform that lets you manage your business and have visibility to your cost, which is hugely important. And then the second piece is it's saving you time and saving you money. So the Driven Advantage, this online marketplace is the manifestation of what Mike was saying, right? This has Driven scale brought to you through an e-commerce platform, right? So Driven has pulled all of the procurement power of 5,000 locations across a portfolio of different businesses, and we've scaled all that spend together so that we know if our franchisees or our corporate stores, for example, go on to this platform, they just cannot buy these widgets cheaper on their own. So it's a really simple business proposition as far as getting franchisees to do it. And we've seen really, really nice growth on the platform. And frankly, we think the benefits of saving time and money, I don't think that's unique to our ecosystem. So as we think about the future, maybe there are some other folks in the automotive aftermarket world that would benefit from that as well.

Can you size it and then how fast it's growing?

We haven't broken that out yet. We're still -- right now, we're focused on making sure we're serving our customers, but we think, obviously, there's a big TAM in both with our franchisees and then in the broader automotive aftermarket, and we're excited to continue to incubate this to see it grow.

Okay. Capital intensity of the business. I think it was -- had been quite less capital intense earlier on, it got a little capital intense. Is there an optimal mix as you think about it? And you assess the use of incremental dollars. We talked about cash flow use a little bit earlier. Thinking about growth opportunities versus balance sheet enhancement?

Yes. Like I think this is probably the most fundamental question a CFO faces kind of regardless of what the business is, is how you think about capital structure, deploying capital, making sure you're finding that balance between growth and investing in high return growth that we have with our Take 5 assets and making sure you're being prudent and protective of your capital structure. As I think about it, we've got to make sure we continue to invest behind the Take 5 growth. It is, as you may have heard this already. It's a crown jewel of our portfolio. It has tremendous growth opportunity. It has fantastic 4-wall economics. I and we are not doing our job if we find a way -- if we don't find a way to deploy capital to that given the returns we're seeing. We also have a balance sheet that has some debt on it, and we need to make sure we keep that -- keep that front and center, and we continue to pay down debt. And you've seen that this year as we have continued to find ways to delever, we're below 4.5x. We have a commitment to get below 3x net leverage by the end of 2026. And so it was probably calls back to the conversation we had a little bit earlier. Part of why M&A is not necessarily top of mind for me is because right now, as I think about how we deploy capital, it's making sure we continue to feed that growth engine that is Take 5, and then also make sure we are deploying our free cash flow to continue to bring down our leverage such that we can get to a reasonable number, whatever that may be, and also deliver on the objective to get below 3x by the end of 2026.

At one point, there was a comfort with operating with higher debt leverage then some of the businesses slowed down and some missteps. And so now it's sub-3. Whether it's a mix of franchise or whether you get all these businesses growing again. Does it -- could it ever make sense to take the leverage back up?

I mean that is -- I could -- we could spend the next 30 minutes debating corporate finance policy. And obviously, in my past life, I've worked at companies that have both accordioned up and down. I think for us, right now our focus is on making sure we get it below the 3x, make sure we continue to fund the growth that we have. And hypothetically if conditions change, we'd evaluate it when we need to. But again, as CFO, my job is to make sure we manage that capital accordingly. We drive good capital returns. We return it to all of our stakeholders, both debt and equity. And that's really, I think, what you see as we recognize right now the ability to deliver capital returns back to both our debt insurer and equity holders is beneficial because we'll get the leverage down, and we understand that's important for our equity shareholders at the moment.

Was there a prevailing mix between franchise and corporate, I was curious what you -- Mike, now you've had some time to look at the business, where your head is on that. Yes, feel free.

Yes. I think -- I mean, what I would say is, and I think, fundamentally, this is a Take 5 question because the rest of our business is largely. Glass is still small. We'll have to make that decision as we get bigger. The rest of our business is largely franchised. This is largely a Take 5 question. And I think the good news is we are already evolving Take 5 towards more of a franchise business. If we're 2/3, 1/3 today corporate to franchise, we're opening stores that are more franchised than corporate. So we will naturally get to a 50-50 balance here over the next several years as we execute on the pipeline that Danny has mentioned. Beyond that, I think we'll take it where the franchise interest is, where the capital returns are. The amazing part of Take 5 is the 4-wall economics are so strong. We make a lot of money if we open the stores ourselves. And the franchisees make a lot of money when they want to open them. And so that gives us the flexibility and the optionality to be able to execute that how we see fit to drive growth forward.

As a final question, the former goal, $850 million of EBITDA. I don't know if you've reiterated in any way. I think one of the businesses being under strategic review, makes it more complicated. Are there any other goalposts, whether margin, EBITDA targets that we can talk about?

I mean I have 2 other -- I don't know if I call them goalpost, but things we're focused on. And again, you have heard this word several times today. One is growth, like making sure we continue to feed the growth engine that is Take 5. I don't want to be here 3 years from now and have you asking me, yes, you grew, but you didn't grow enough. Like why did you miss -- why did you fall off that pitch? Why didn't you hit it out of the park? I think the second is getting our capital structure to where we've committed that below 3x by 2026 that will influence decisions we make on capital deployment, capital allocation. Obviously, that can become a self-fulfilling prophecy because you pay down debt, you pay the lower interest, you give more cash flow that helps you fund both growth and additional capital allocation. Right now, that's our focus, is how do we continue to invest behind the growth engine that is Take 5 and how do we deploy what is some really strong cash flow towards both funding that growth and getting our capital structure to the levels that we've committed to.

Great. Well, I appreciate the commentary, both being here. Best of luck rest of '24 and into '25.

Great. Thank you.

Great. Thank you for having us.

Thank you, all.

Thank you.