The Great Minnesota Car Wash Bubble

Have you noticed it too? Drive down almost any commercial strip in the Twin Cities suburbs these days and you'll pass not one, not two, but three or four brand-new car washes—all with the same glassy tunnel design, the same bright signage, the same promise of an "unlimited monthly membership." It's hard not to wonder: how can a metro area possibly need this many car washes? Are that many of us really that obsessed with clean cars?

As it turns out, the answer has almost nothing to do with how dirty our cars are. What we're actually watching play out on Cedar Avenue, on County Road 42, on every other suburban corridor in the state, is a financial story—one written not in Eagan or Apple Valley, but in the boardrooms of private equity firms in New York and Chicago who, until recently, probably couldn't have found Minnesota on a map.

It's Not a Car Wash. It's a Subscription Business.

The trick to understanding the boom is to stop thinking of these places as car washes at all. The modern express tunnel wash is really a subscription business that happens to involve water and soap. Customers sign up for a flat monthly fee—often somewhere around twenty to thirty dollars—and wash as often as they like. A single busy location can sign up several thousand members.

To an investor, that kind of predictable cash flow is irresistible. It behaves less like a car-cleaning service and more like a gym membership or a streaming subscription—the kind of steady, lock-in revenue that private equity firms love to build a portfolio around.

The Pandemic Gold Rush

The current wave traces back to roughly 2020 through 2022, when interest rates were sitting near zero and private equity firms had enormous piles of cheap money that needed somewhere to go. Car washes checked a lot of boxes: they're essentially immune to e-commerce disruption (nobody is washing their car over the internet), demand has been climbing steadily for years as more drivers pay for a professional wash instead of doing it themselves in the driveway, and the subscription model offered the kind of recurring revenue Wall Street craves.

So the firms piled in—buying up small regional chains, building new locations, and racing each other for the best real estate. And that's the part that explains what you're seeing out your windshield: this was never really about washing cars efficiently. It was a land grab. Every firm wanted the same handful of high-traffic corner lots in every growing suburb, so they built fast and built everywhere, before a competitor could plant a flag first.

What Happens When the Music Stops

Here's the catch. A lot of these sites were bought or built at the top of the market, at inflated prices, financed with debt. That math only works if interest rates stay low and subscriber growth keeps climbing forever. Neither happened. As the Federal Reserve raised rates aggressively, the cost of servicing all that debt shot up, squeezing the very cash flow the whole strategy depended on. Industry-wide deal-making slowed sharply, and some of the most aggressively leveraged car wash chains nationally have been carrying interest payments that eat up a startling share of their operating income.

None of this means anything illegal happened, or that anyone running these businesses is doing something dishonest. It's simpler than that: a wave of cheap money convinced a lot of smart people that suburban car washes were the next great asset class, and they built far more capacity than the market could realistically support—especially once borrowing got expensive again.

The View From the Driver's Seat

So the next time you pass yet another brand-new tunnel wash going up where a strip mall or a vacant lot used to be, you're not imagining the oversaturation—you're looking directly at the tail end of a private equity bubble, built on cheap debt and a bet on subscriber growth, playing out in real time in your own neighborhood. Some of these locations will thrive. Others, the ones that were never really about washing cars in the first place, may not be around in five years.

It's a small, oddly perfect example of something bigger: how decisions made by people who will never set foot in Minnesota end up reshaping the corner lots we drive past every single day.