Jed Gold: Yes Randy, when we look at the last – when you go back and you look at this over the last five, even 10 years, our goal is to trade our retail customers into the Unlimited Wash Club program. And so historically, that has run negative mid-single digits. Retail has run negative mid-single digits, and perhaps we really haven’t been framing this like we should, but essentially its mix shift, trading that retail customer into the higher-priced predictive reoccurring UWC offering. But the price of that, and we’re willingly accepting it, is you lose a retail customer. So it’s been – historically it’s been down about mid-single digits, and I think that’s a fair assumption as we think about on a baseline for go forward.
Randy Konik: Understood. And then just how should we be thinking about over the next couple of years, when you’re thinking about Titanium mixing in and just how you’re thinking about core pricing? I’m just trying to get a sense of how we should be thinking about over a multiyear period of how pricing should shift. What should it actually grow at on a multiyear basis for the next few years? Like should we be thinking low single-digit price growth, because of mix plus some taking of the core up? Just give us a little sense of how we should be thinking about that for framing it up. Thanks.
Jed Gold: Yes Randy, that’s a trickier one. It’s still what I would consider relatively early days as we look at Titanium and how it’s testing. We are very encouraged and optimistic in being able to put emphasis on that at least 10% mix. And so by the end of year one – but it’s really hard to say how that plays out in 2024 and then into 2025 as well. But we believe internally that it’s going to continue to provide a natural tailwind, because just the consumer – educating the consumer on the benefits of Titanium, it’s not just going to happen on the first visit. This is going to continue to happen over time. I do think, and it’s worth pointing out is, you’ve got the UWC side of it that we talk about and the at least 10%, but also the Titanium retail side as well, which we’re seeing encouraging results.
We’re not doing any discounting or promotions there, just natural customers wanting to try on a retail basis and seeing the retail ticket mix in the mid-teens from a mix perspective.
John Lai: Yes Randy, I’d just add, what gives us great confidence and why we’re so excited about Titanium is that when we look at pre-Titanium, what our member mix looked like, and where we were more heavily weighted towards our premium Platinum package naturally without a concerted effort internally to drive premium membership. It was really a natural – customers gravitating towards the value that we had put into that program, and now with this additional value stack that’s in the Titanium program, we’re very optimistic that we’re going to continue to enjoy a stronger premium member mix over time. But we’re going to do it again in a way that is not trying to spike member mix. We want folks to naturally gravitate towards it, because they see the value in it. And that’s how we’ve had such a sticky and strong member base throughout the years.
Randy Konik: Very helpful. Thanks guys.
Operator: Thank you. [Operator Instructions] And the next question comes from Chris O’Cull with Stifel.
Chris O’Cull: Yeah, hey. Good afternoon guys. I was wondering how the company is thinking about capital allocation for next year. Is the plan to develop a kind of a similar number of washes or do you think there’s opportunities for more acquisitions? And I’m just wondering Jed, is there a similar level of gross CapEx? Is that a reasonable expectation for next year as you have this year?
Jed Gold: Yes, right now, I mean we’ll provide more specifics on 2024 as we get into our next call. But what I would say, kind of at a high level from a capital allocation perspective, the current plan right now is to self-fund our growth into our investments that we plan to make next year. But it’s really kind of four main variables as we think about that capital allocation. Just what happens on the acquisition front, what happens in the broader interest rate environment where our existing debt load is 100% floating at this point. That’s a variable in the capital allocation strategy. Sale leasebacks and cap rates and what happens there, but then also just the existing human capital within this team and what we’re able to bite off. I would say that as we think about 2024 greenfields, so this year we feel good about the approximate 35, that we’ll develop more greenfields in 2024 than what we plan to do here in 2023.
John Lai: Yes. And Chris, if I can add to that, we are committed to not sweating the assets if you will. And when we look at our core portfolio, again, we’re very proud of the year-over-year investments that we’ve been making in those stores. That said, given the size of our portfolio, there are a number of stores that we’ve identified that are in need of some additional love, if you will, in reinvestment. And so we’re going to be chipping away at that pile too. So while Jed is famous, he’s the – capital allocations are internally and wields a lot of power as a result. But if we use as our sole measure, the highest return of invested capital, obviously greenfields is a really strong case. That said, if we neglect some of those older stores over time, that’s going to ultimately show up in reduced AUVs. So we’re going to be chipping away at that pile as well, again at a pace that we can handle.
But I’m happy to report that it’s a very small sliver of our overall store count, because the bulk of our stores are in great shape.
Chris O’Cull: That’s helpful. Jed, are you seeing any changes in the cap rate given the falloff in bonus depreciation and just overall yield environment?
Jed Gold: Not at this point, Chris. I mean we’re still getting deals done. We’ve got another number of stores that are at market – that are out to market right now, and we’re signing LOIs and getting good favorable cap rates on those. Part of the analysis that we do, when we’re looking at sale leaseback versus funding through external debt, is we’ll look at what is most accretive to EPS and calculating cap breakeven from a sale leaseback cap rate perspective relative to what the interest rate is, prevailing interest rate is at the time. So we believe there’s still a lot of cushion there, but we continue to see very favorable economics. I think it’s a testament to having been doing sale leasebacks for longer than anybody in this space.
