Hi, and a question

[Ben]

Hello Everyone ,

Brand new hear. Looks like a great place to be a part of.
Quick question, I’m about to potentially purchase a few Express washes around the country and would like to talk to an absentee owner about proper wash level staff and also offsite level staffing and methods needed for a mini portfolio of washes .

We are portfolio owners and would like to discuss the absentee model with regional Managment of the portfolio with anyone else who has built the systems and methods for this type setup.

Happy to pay consulting fee as well if needed for about 1-2 hours of someone’s time who has the same setup and can give advice from the perspective of doing it themselves.

Thanks for any help here.

Ben,

 

[jfmoran]

Hey Ben- if you intend to be absentee, then it will be imperative that you have someone in charge of operations, who is very experienced in all aspects of the car wash business. Will these sites be close in proximity or in multiple states? If, they are spread around the country, then you will need very strong local site management, especially if you can't take advantage of economies of scale with a regional or general manager overseeing 2-3 sites in a market. Maintenance and service is another issue, if you are spread out. You will either need staff that is well versed in preventative maintenance, troubleshooting and repairs with regard to the equipment, plumbing, pneumatics, hydraulics, etc... or you will need a strong relationship with a local equipment distributor who also services car washes. Staffing for EE's can be accomplished with 6-10 employees, with a combination of full and part-time. You will need 1 site manager and at least 1 or 2 assistant managers, along with a combination of shift leaders and customer service attendants. Depending on how many sites you have, you may need a full-time mechanic as well.

Structure wise, I would setup a management company and have al the sites pay a management fee to it on a monthly basis. In addition, each site should have dual LLC's, one that owns the business and one that owns the real estate and the business should pay rent to the real estate LLC monthly. You will obviously need a bookkeeper or controller to manage and audit the store financials.

This is just a rough overview of where to begin, without knowing more specifics.

 

[Ben]

Hello Jf, great info, thanks for being transparent and helpful. Sounds about about like what I was planning. Salary range for the experienced regional ?

 

[Ben]

And why the Managment company with fee ? Tax purposes ? And why split land and business with lease ? Also tax purposes or exit strategy?

 

[jfmoran]

Hello Jf, great info, thanks for being transparent and helpful. Sounds about about like what I was planning. Salary range for the experienced regional ?

Hey Ben- dependent on area of country and level of responsibility, an experienced Regional Mgr would be in the neighborhood of $75-$100K.

 

[Ben]

How often do express washes go bankrupt from competition moving in, if they are managed well. Do they fall fast and hard? Worst case what do you guys see ? Abs how often?

 

[jfmoran]

And why the Managment company with fee ? Tax purposes ? And why split land and business with lease ? Also tax purposes or exit strategy?

Tax purposes, mitigation of risk and allows you to account for actual overhead expenses for day to day management expenses incurred for multiple locations.

 

[jfmoran]

How often do express washes go bankrupt from competition moving in, if they are managed well. Do they fall fast and hard? Worst case what do you guys see ? Abs how often?

I can't speak to any specific case, but things that would be problematic are building in a saturated market, a poor location (low traffic, population density, poor visibility, poor ingress/egress), overspending your Proforma (building a Taj Mahal when the proforma calls for a Motel 6), poor management, not paying attention to the market, not reinvesting in the business, just to name a few.

 

[Earl Weiss]

Structure wise, I would setup a management company and have al the sites pay a management fee to it on a monthly basis. In addition, each site should have dual LLC's, one that owns the business and one that owns the real estate and the business should pay rent to the real estate LLC monthly.

This is what I do except Operations and Management company are S corps. Land is LLC. Management company allows payment of expenses such as auto and Salary which might be difficult to allocate exactly between locations.

 

[MC3033]

How often do express washes go bankrupt from competition moving in, if they are managed well. Do they fall fast and hard? Worst case what do you guys see ? Abs how often?

Expresses washes in a good location, were bought/paid for at the right level and managed well pretty much never go bankrupt from competition. It may be at a level where it was a poor investment but you should be able to keep the lights on.

How much of a hit you take from competition fully depends on the operator and the competition. I’ve seen new express washes build within a half mile of another wash and they are both successful/growing. I personally don’t know any examples of a modern express wash getting built on by another express and taking a large hit.

It will all come down to your ability to manage. Even as a passive owner you need to assemble the right team and give your manager tools to succeed. Express washes are full of constant capex and repairs that cost thousands/tens of thousands (especially if you are buying existing). You need to be prepared to make tough decisions in a timely manner.

 

[Axxlrod]

I know of express washes that closed due to over-saturation. But they are owned by large chains, so they can take the financial hit, which would be deadly to a mom/pop operator. But be warned; It def can and does happen.

I think it would be rather difficult for an investor to buy multiple express washes sprinkled around the country, and run them successfully and properly as absentee-owners, without over-paying for local management.

What happens if the site manager up and quits one day or gets covid? Who will literally be there to open the doors? A white-collar absentee-owner on the other side of the country isn't going to be of much help.

The chains that are successful and growing are all staffed top to bottom with experienced car wash people. Caveat Emptor to the investor who just wants to throw some money at a wash and not have a clue how to operate it, especially from across the country.

 

[Earl Weiss]

It will all come down to your ability to manage. .

The consumer pie is only so big, the more slices you make the smaller each piece. Although there were other factors at work a case study can be made of big chain appliance stores. History is littered with the likes of Highland. Fretter, Silo, Circuit City etc.

 

[MC3033]

The consumer pie is only so big, the more slices you make the smaller each piece. Although there were other factors at work a case study can be made of big chain appliance stores. History is littered with the likes of Highland. Fretter, Silo, Circuit City etc.

As more modern car washes have popped up and different washing options have come out (unlimited, $3) people started washing there car more then ever. The market has never been fully tapped. Long established operators are crushing car counts that are insane despite having more washes around them then ever.

A case study can also be made of fast food restaurants. As more have been built over the years the consumer ate more fast food as it was more convenient and became a bigger part of their lives (habit). The fast food restaurants that fade away are typically the ones that aren’t managed as well.

All that being said competition is still my biggest fear. I believe it can really hurt a business and change the dynamics. I just don’t think a well ran modern express is hurt by another express as much as we would think.