New guy with the standard "should I buy this wash" question (1/3)

[Eule]

Hello all!

New guy here, with the standard "should I buy this wash" question. I'm on the Missouri side of Kansas City.

Caution: long post ahead... so long that I had to split it up. More details in the post (or two) following this one.

The quick version: all one building, with two automatic bays, three "regular" self-serve bays, one "tall" (like, for an RV) self-serve bay, two quick-lube bays. Automatic equipment is Laserwash 4000 wash and Superior dryer. Built about 1992 by the current owner. Asking price is $1.1 million, "real cash flow" is claimed to be $200,000.

The two things that caught my eye about this particular wash are...

1. It's about three blocks from my house.

My last couple of "real jobs" have involved a 35 to 40 mile (which is about 45 to 60 minutes) one-way commute. I think I'd like to trade that hassle for a different set of hassles.

2. I can swing the nominal down payment, and somewhat more than that, in cash (from an inheritance). I'd have to get a bank loan for the rest.

I haven't talked to the bank, the salesman, or the current owner yet... all I know is what I've read in the ads. The ads don't give the exact location, but given the detail in the ad, there's pretty much only one place in town that this can be.

Things the advertising tells me:

Asking price is $1,100,000 dollars (1.1 million).

Down payment is $110,000.

About $200,000 in "real cash flow".

Current owner started the business 22 years ago. Selling due to health issues.

There is a manager (who would presumably stay) and the business operates "semi absentee".

Appraised at:

real estate            $600,000
building, equipment    $350,000
business               $550,000
-------------------  ----------
total                $1,500,000

Things I found out by looking around online:

The automatic and self-service bays are open 24/7. The lube shop is closed on Sunday (M-F 8-6, Sat 8-5).

The property is about 0.86 acres.

The "market value" (per the taxman) has been about $480,000 for each year 2011-2014. It was about $540,000 in 2010, which is as far back as the online tax looker-upper goes.

The company is incorporated. The owner is the president and his wife (or maybe his daughter) is the secretary.

The state knows about their annual company registrations back to 1997. 2000 and up are available online.

The street it is on has a 35 mph limit.

The city has "24 hour acquired traffic volume" counts for locations on the same street, north and south of the wash, in 2012. A location 0.3 miles north had 9600 northbound and 6500 southbound. A location 0.7 miles south had 6500 northbound and 6600 southbound. (I suspect the ~6500 numbers are closer to what goes by the wash, because the 9600 includes people coming out of the local neighborhood and heading for the Interstate.)

Population (2010 census) within 3 miles is 47,500, in 18,400 households. Within 5 miles is 100,600, in 38,900 households.

The wash is about 0.5 miles from the Interstate. The street the wash is on has an exit from the Interstate.

To be continued...

 

[Eule]

New guy with the standard "should I buy this wash" question (2/3)

About me:

I went to college right out of high school, got a bachelor's degree in Computer Science, and have been working mostly in that field since then - about 19 years. (No, I will not fix your PC. )

One of the things I have learned in those 19 years is that me working for other people doesn't work well on a long-term basis. I have had a couple of really great jobs - and some crummy ones - but I think the universe is trying to tell me that I should do something different. (I may also be crazy.)

Right now I don't have a job, so I would plan on working at the wash full-time. I don't have to take a salary from the wash right away, but I would eventually need to (in a couple of years).

I have never owned a business like this before. I have "worked for myself" as a 1099 contractor doing programming stuff. I've never had employees before.

My other half has an MBA and experience managing people. They currently have a daytime job and I would expect that to continue, but I think I can get a little bit of help there. We have talked about the possibility of me buying this wash and they are OK with the idea.

Wash competition that I know of off the top of my head:

There is a defunct (I think) self-serve only wash behind the building across the street. I think this wash dates to the late 70s or early 80s, just judging by the sign and the general appearance.

There are national brand gas stations about 0.4 and 0.6 miles north of the wash (at the Interstate) that each have a single in-bay automatic.

There is a car wash and dog wash about 3 miles away. The last time I went by it, it had a "for sale" sign; I'm not sure if it is currently operating.

There is one brand new wash (last year or so) about 4.5 miles away. I know they have an automatic and I think they might also offer hand washing.

There are two newer (mid-00s) washes about 5 miles away in different directions. Both of these are owned by the same guy. They both have some kind of automatic. They are both open 7 days, but not 24 hours.

I plan to get in my car and drive around and add to this list.

Lube competition that I know of off the top of my head:

There is a Wal-Mart Supercenter with auto service about 3 miles away.

There is a Jiffy Lube about 4.5 miles away.

I plan to get in my car and drive around and add to this list.

Things I found out by going to the wash and looking around (while the other half washed a car in the self-serve bay), part 1:

There are two in-bay automatic washes, each with the same equipment:

Laserwash 4000 wash machine, hanging from tracks on the ceiling.

Mechanical treadle/switch for when the car is in the right spot.

Two "tornado siren" looking things, with nozzles in them, pointed at the car wheels right at the beginning of the bay. (These are the "Gatling guns"?)

Two cycle displays per bay, with about 4 or 5 things per display. Seperate "Rain-X" display (neon, in tube).

Superior dryer, with two side ducts and three top ducts.

Each automatic has its own Unitec Electronics pay station. The pay station can take credit cards or tokens. It has a pay-phone keypad and a credit card reader. There are five 2 line x 16 char LCDs; one is for general information and four of them have a button for picking a wash cycle.

There are PDQ LED dryer time displays just outside the exit of each automatic bay.

There are manual garage doors on each end of both bays.

Poured concrete side walls and concrete block end walls (around the doors), painted white.

PDQ off/manual/automatic switches and joystick manual control next to the entry door of each bay.

There didn't seem to be any lighting in the automatic bays. (It might turn on when there's a car in there, but I didn't see the fixtures.)

Just by looking at the decals on the Laserwash 4000 and dryer, those machines have been there for a while... they might be original to the building.

 

[Eule]

New guy with the standard "should I buy this wash" question (3/3)

Things I found out by going to the wash and looking around, part 2:

There are four self-serve bays, each with the same equipment:

3 of them are "normal" (cars/pickups) and 1 is "tall" (RV).

Adams wand, on a gantry/swivel from the center of the ceiling.

Erie Foam Master tire brushes, on a gantry mounted to the wall.

I couldn't find a manufacturer name on the selector switch / pay station box. It has a rotary switch in the middle of a tic-tac-toe grid and 8 things you can pick. The "time remaining" display is a 7-segment vacuum fluorescent (green). There is a coin/token insert slot and a return slot.

The pay stations in adjacent bays are on the back of the walls from each other. The tokens appear to drop into a box/vault that is accessed from the outside wall, via a door about a foot off the ground.

I didn't see how much you got to start. You get 2 minutes for each additional $1 token.

Steel grates over the pit, with chains that went down into the pit.

One manual garage door on the north side of the building; no door on the south side.

What looked like mercury-vapor lights high up on each wall, 2 on each side.

At least one camera in a dome housing, high up in a corner of each bay. The RV bay had two domes.

Poured concrete side walls and concrete block end walls (around the doors), painted white. Ceiling is painted white, and appears to be maybe plywood? in about 2'x4' sections.

There is a two-bay quick lube shop:

They do oil changes, air filters, maybe wiper blades, coolant flush/fill, transmission flush/fill. I don't think they do any heavier
maintenance than that.

No vehicle lifts. Each bay has an inspection pit; there is one stairwell for both pits.

The "service writer" desk had an old CRT monitor on it.

There were shelves around the edge of the bays with what looked like air filters on them. (It was dark in there and I was just looking through the garage doors.)

The office/waiting area has a full-size soda can machine and a full-size chips/snacks machine.

There are vending machines at two kiosks outside the wash:

Each kiosk has several "Laurel Metal Products" single-item vendors made out of stainless steel. These appear to work on low voltage and have an LED price display. They take quarters or $1 tokens. One also had a bigger Laurel vendor, selling five kinds of tree air fresheners.

Each kiosk has a spot where one or two soda-can sized machines used to live, but they are no longer there.

One kiosk has a stainless steel sink with a hand-cranked set of wringer rollers on it.

There are token machines at two places:

The token machines take cash or credit (card reader on machine).

Cash and credit prices are the same, but there looks to be a $5 minimum for credit.

Tokens are $1/1, $5/5, $10/11, $20/23.

There are 12 vacuums around the wash:

All are Industrial Vac Systems "Power Vac", taking tokens or quarters.

Utilities:

Electric and natural gas.

The electric meter, besides the normal kWh reading, was showing "max 0.76 kW", which seems low to me - the lights in the self-serve bays alone have to be drawing more power than that.

I am pretty sure any water heating is gas, because the gas meter was huge (compared to the one at my house) and had larger pipe - about 2".

Other things around the lot:

A couple of security cameras in Pelco enclosures, looking at the driveways/street.

The lot is a mix of concrete and asphalt and is in pretty good condition.

The outside walls are brown patterned cinder block (the stuff that looks like rock) or brick. The roof is brown asphalt shingles, like most houses... it looks OK from the ground.

And that's all I have for right now. If you've made it this far, please enjoy a tasty beverage of your choosing... you deserve it!

Thanks for your help!

 

[robert roman]

It’s usually a good idea to begin a start-up venture by conducting a sanity test.

For example, you are interested in a 22-year old business that originally had a useful expected life of about 25-years.

4000 may be functional but model is obsolete from both technical and marketing perspective. Superior is out of business.

Also, wand-bay segment has declined.

Moreover, practically no one builds a two-bay express lube anymore because it’s very difficult to obtain benefit cost.

You have no ownership or management experience in carwash or oil change.

So, key to buying this business is income verification.

A statement of risk requires three consecutive years of sales revenues and operating expenses (profit and loss), current balance sheet statement and income tax filing.

If you don’t have this, all the other information you provided is meaningless.

 

[Greg Pack]

I agree income verification is key to this.

And what exactly is "cash flow"- is it the net cash flow?

I'm not going to argue with valuation of equipment, land, but the value of such a business is not 550K in my mind.

If that equipment is 22 years old, it's not worth much.

You know what they say about pictures- a few are immensely helpful.

 

[Greg Pack]

BTW, IBWASHIN, we need a sticky entitled "so you wanna buy a wash?"

 

[Waxman]

i would rather see a whole section of this website devoted to " I wanna Buy/build a Wash'.

For any business you need experience if possible. Working at a car wash/lube/detail/car lot biz is the way to go. Get a feel for the customers, equipment, chemicals, msds, daily accounting, money handling, cleanup of bays/lot, repairing machinery, making change, quality control, payroll, employee management ETC.

Yes, deals of any size should have verified income (federal income tax returns for the business for 3-5 years?).

But why delve further in until you work there awhile? You'll be working there plenty once you buy it!

 

[I.B. Washincars]

BTW, IBWASHIN, we need a sticky entitled "so you wanna buy a wash?"

I liked Waxman's suggestion better, but you get the credit for getting the ball rolling

 

[Eule]

NOTE: I am replying to more than one person at once, here.

[...]a useful expected life of about 25-years. 4000 may be functional but model is obsolete [...] Superior is out of business. [...] Moreover, practically no one builds a two-bay express lube anymore because it’s very difficult to obtain benefit cost.

This is all stuff that I did not know before. Thank you.

Also, wand-bay segment has declined.

I had gotten this impression already by reading the older threads here.

And what exactly is "cash flow"- is it the net cash flow?

I do not know. That was a quote from one of the ads placed by the broker who is trying to sell the thing. I haven't talked to the broker in person yet. I assume (ha ha) that better financial information will be available at that time; maybe I would have to sign an non-disclosure agreement or something, which is OK with me.

I'm not going to argue with valuation of equipment, land, but the value of such a business is not 550K in my mind.

That number came from a salesman. I know enough to multiply all such numbers by a correction factor of 0.25 to 0.5 before using them.

You know what they say about pictures- a few are immensely helpful.

I just happen to have one of those newfangled electric cameras, so I went by there today and took some pictures. Here they are, hosted on an external site. http://imgur.com/a/Klt2O Each one has a brief description below the picture.

But why delve further in until you work there awhile? You'll be working there plenty once you buy it!

I'm not opposed to this idea. Would it be a better idea, for this, to contact the present owner directly, rather than the firm he has hired to sell it? (I know how to get in touch with him from his corporation filings with the state.) I'm not trying to cut the salesman out of his percentage; if I decided to go ahead I'd bring in the salesman. I just figure that going to the salesman and then saying "hey, I want to work there first before I sign" may not be something that the salesman is used to hearing.

Thanks for the replies so far!

Eule

 

[Waxman]

who cares what the salesman thinks.? it's your name on the bank note.

just go to the wash and talk to the owner or manager. offer to work for free. mix it up/weekdays and weekends.morning/afternoon/evening.

this isn't like investing in a passive income stream business. it's alot more hands-on and even the best prepared of us had some trying times when we first opened.

 

[Greg Pack]

Nice construction, but equipment definitely needs some work/updated.

Wash appears to be on narrow, long lot built perpendicular to the road. If so, that is a HUGE strike from a marketing AND land value perspective.

I can see where this guy may have the asking price invested in this wash.

 

[Eule]

Nice construction, but equipment definitely needs some work/updated.

From what I have gathered here, at least new automatic machines and new dryers. Probably also new pay stations for the automatics (or at least appearance upgrades to existing ones), and maybe new timers/pay stations in the self-serve bays. The equipment-room and lube bay stuff I don't know about yet.

Wash appears to be on narrow, long lot built perpendicular to the road.

This is true. It's a rectangular lot and the short side is along the main road. There is a side street along one of the long sides. Diagram at http://imgur.com/GxiJg1y . (Yes, there really is a vacuum island in the middle of a driveway.)

The other thing that seems somewhat odd to me is that the wash "faces" south - that's the "in" side of the automatic and lube bays, and where the office windows and customer door are. The Interstate, McDonalds, KFC, and all that are *north* of the wash - I think it'd be better if it faced that way. The original builder might have been thinking about freezing/ice issues, I guess. Hard to fix without spending lots and lots of money, though.

If so, that is a HUGE strike from a marketing AND land value perspective.

Yeah... there are two similar washes in town (no lube bays, though) and they are both parallel to the main road.

One kind of nice thing (IMHO) is that the sign gets to be on a pole, at right angles to the main road. The way I read the city's sign ordinance, if it was a new build, the sign would have to be on the building, parallel to the road. (I also have no idea how sign ordinances are legal, but I'll leave that particular windmill alone at the moment.)

Thanks!

Eule

 

[I.B. Washincars]

I don't always get the logic that the autos will soon need to be replaced. The Laser 4000 has been a workhorse in the industry for a long time, and apparently fairly low maintenance. So what if they have 100-150K washes or whatever. The customer can't tell or care how old the machine is, his car still gets washed. You're not going to come in one morning and all of the sudden they are bad and must be replaced. I have 7 autos of a different brand, none with less than 100K and have no plans to replace any of them. You can fix them forever.

 

[robert roman]

“I don't always get the logic that the autos will soon need to be replaced. So what if they have 100-150K washes….customer can't tell or care how old….stills gets car washed….I have 7 autos….no plans to replace any of them.”

Where I live, people have had to put up with old, outdated convenience stores for years.

Wawa and Thornton come to the market with modern stores and technology.

Now, a whole lot less people go to the old convenience stores.

Carwash is a support service but it is also a retail business.

Yes, 4000 is a workhorse and low maintenance. However, it has been eclipsed by model that is better, faster, etc.

So, you can run a retail business like NASCAR does or “You can fix them forever” and run like the Friday night feature.

 

[Eule]

So... I've done a little more "research". Which is a fancy word for driving around within a 5 mile drive of the wash I'm thinking about buying, looking for washes and quick-lube places.

I found a lot of gas stations with a single automatic. I found a beat-up looking self-serve wash and a nice-looking one. There is a self-serve 6-bay wash around the corner from the wash I am thinking about buying - it's on a side street and behind another business. It's fenced off and I've never seen it open in the 4 years I've lived here, but somebody cares enough to have the lights come on at night. I discovered that a guy who already has two newer (2006-ish) conveyor washes is building a third one, about 3 miles away from the wash I'm looking at. They have poured the slab and the footings for the walls, so it's coming right along. There is also a 1-year-old conveyor tunnel just outside the 5 mile drive... and that company (a regional chain) says they're planning another one in the suburb where the wash I'm thinking about is - I don't know exactly where, though.

Total on the wash front: 29 self-serve bays (6 of those probably closed), 12 automatics (2 of those possibly not working), and 3 conveyors, within a 5 mile drive. Soon to be 4 conveyors for sure, and maybe 5. That seems like a lot of supply to me.

On the quick lube side, there is a Valvoline and a Jiffy Lube, each one about 3-3.5 miles away. There are plenty of other auto repair places that also do lube, but those are the "quick lube" places.

As far as the "fix vs replace" on the automatics... if nothing else, I can use the "needs new automatics" as a bargaining point.

Thanks!

Eule

 

[Washmee]

Those conveyors are going to eat your lunch. Why would a customer wait in line for an IBA that can wash maybe 15cph when he can get a higher quality wash in 1/4 the time. I think your crazy to buy this wash considering the amount of competition you just listed. The market is becoming over saturated.

 

[chadrpalmer]

I've been washing cars in the kc metro area for almost 20 yrs. Does that make me an expert? Nope. But if you want my 2 cents worth, be glad to talk to you. pm me and I'll give you my cell #.

 

[trentu]

One other thing no one has mentioned yet. You will not be open 24/7 in KC area with manual doors on your automatics. Anything less than about 25 degrees shuts my doors in OK on newer/freeze protected automatics and then have to reopen them when it gets above that. Not usually a problem (5 to 12 days a year) in OK but I live in KC for awhile and you are talking more like 30-40 days if not more. That means new automatic doors (15-20k per set if you get a deal) if you really want to stay open 24/7 which is a sales factor over the express model.