Driven Brands, the automotive service powerhouse, recently released their Q1 2024 earnings transcript [1], and while analysts dissected the challenges in the U.S. Car Wash and Glass sectors, something curious flew under the radar – the persistent strength of the International Car Wash business.

The transcript subtly hints at this strength, with CEO Jonathan Fitzpatrick mentioning "nice trends in April" for the international segment. COO Danny Rivera echoes this sentiment, highlighting the positive "year-over-year financial growth" of the international business. This consistent success, even amidst domestic struggles, raises a compelling question: is the international Car Wash business quietly staging a coup within Driven Brands, becoming a silent powerhouse propelling the company forward?

Delving into the Numbers

While Driven Brands doesn't explicitly break down individual segment performance, we can glean insights from the available data. In Q1 2024, the overall Car Wash segment, encompassing both domestic and international operations, reported an 8% decline in revenue and a 29% decline in adjusted EBITDA. However, this aggregated picture masks the potential outperformance of the international business.

Consider this: if the international segment were experiencing a similar decline as the domestic operations, the overall segment results would likely be far worse. The fact that the decline is relatively contained suggests that the international segment is not only holding steady but potentially even growing.

Strategic Focus on International Expansion

This hypothesis is further bolstered by the company's strategic focus on international expansion. Despite halting U.S. Car Wash growth, Driven Brands is actively investing in the international segment, projecting 5-10 new store openings in 2024. This targeted growth strategy indicates a strong belief in the long-term profitability and potential of the international Car Wash business.

Factors Driving International Success

The success of the international segment likely stems from several factors:

- **Less Saturated Market:** The competitive landscape in Europe, where Driven Brands primarily operates its international car wash business, is less saturated than the U.S. market. This allows for greater market share capture and potentially higher margins.

- **Membership Model:** Consumer behavior and preferences in Europe may be more conducive to the membership model that is central to Driven Brands' strategy. A higher penetration of membership subscriptions provides a stable revenue stream and mitigates the volatility often experienced in the retail-driven U.S. market.

- **Knowledge Sharing:** Driven Brands' international operations benefit from the company's vast network and knowledge base. As Fitzpatrick noted, the international and domestic teams regularly share best practices, leveraging insights on pricing, promotions, equipment, and chemistry. This cross-pollination of knowledge fosters operational efficiency and enhances the overall performance of the Car Wash segment.

Financial Performance Comparison: U.S. vs. International Car Wash

To visualize the potential outperformance of the international Car Wash business, let's compare the Q1 2024 performance of the overall Car Wash segment with hypothetical figures for the U.S. and International segments.

**Note:** The figures for the U.S. and International Car Wash segments are hypothetical and based on the assumption that the international business is outperforming the domestic operations. Driven Brands does not publicly disclose individual segment performance.

Charting the Divergence

Let's graphically represent this hypothetical divergence in performance between the U.S. and International Car Wash businesses using the assumed data from the previous table.

Implications for Driven Brands

The potential emergence of the international Car Wash business as a silent powerhouse carries significant implications for Driven Brands:

- **Counterbalance to Domestic Challenges:** It could provide a crucial counterbalance to the domestic challenges, bolstering overall revenue and profitability.

- **Increased Investor Interest:** This strength could also attract greater investor interest, driving up the company's valuation and creating a positive feedback loop for future growth.

Conclusion

While the current transcript only offers subtle hints, the continued strength and strategic focus on the international Car Wash business warrant closer examination. This under-the-radar segment may be quietly shaping Driven Brands' future, poised to become a significant driver of the company's long-term success. As analysts and investors delve deeper into the upcoming earnings reports, it will be fascinating to see if this silent coup culminates in a full-fledged takeover of Driven Brands' narrative.

"The world's first automatic car wash was opened in Detroit, Michigan, in 1940. Quite a long way from the express tunnel washes of today!"