Converting a Bay to a Detail shop

[TJ_DOT]

Hello Everyone,

We have been thinking to convert one of an un-used bay into a detail shop. We are in talks with auto detailers who are interested to open a shop in the bay. Trying to come up with a pricing mechanism on how to share the profits. Have not done this before, so not sure what are the market terms.

Can someone please advise how should be this executed between us and the auto detailers. Here are couple of options we are thinking ?

1) Fixed Rent Basis: Rent out the bay to fixed amount and it does not matter how much profits they make. This way we don't have to get involved at the ground level details on how much they make and such. However, not sure how much the fixed rent should be ?

2) Profit Sharing Basis: Share the profits between us and the detailers on a fixed percentage basis. This approach makes us to watch for how many cars are detailed on a daily basis. This can be tricky as our car wash currently does not have an on-site operator, so have to completely depend upon the detailers to let us know how much they make on daily basis. The big question we have going through this approach is, How much percentage cut we should be asking for ?


Any inputs that put us in the right direction are very much appreciated.



Thanks.

 

[MEP001]

Are you planning to rent out a self-serve bay or an empty automatic bay?

 

[TJ_DOT]

@MEP001 - It is an empty automatic bay.

 

[Waxman]

I don't think either option is very feasible. I think you should either run the detail operation yourself or convert the bay to self-serve car wash or install a new IBA.

 

[TJ_DOT]

@Waxman - We currently have 4 SS bays that are under operation and dont have enough funds to get another IBA. Which is why, instead of leaving this bay empty, we are thinking it to open a detail shop that would be operated by a 3rd party. May I know why you think either of the options are feasible ?

 

[Waxman]

I think that trying to tie the monthly rent to the detailing revenue would lead to dishonesty potentially, and transparency and accountability would be difficult to achieve.

Is there a reason why you think another self-service bay Is a bad idea?

 

[TJ_DOT]

@Waxman - We want to add variety of services we offer to the customers. Interior detailing would be a nice complimentary service that we could offer to the customers with very minimal investment. We already have 4 SS bays, adding 1 more on top does not necessarily adds any value to the customer and also needs investment from us to convert it. Versus a detail shop does not take much investment (Assuming, detailer have to bring his own equipment), generates more revenue and most importantly adds value to the customers.

 

[washnshine]

Have you considered an exterior hand wash service in that bay? It could be exterior only - there would not have to be the wide variety of services and products required to run a detail bay. Prices would vary for sedan, small suv, full size sic, pickup etc. Time per vehicle would be much less than a detail shop. You would not need appointments or scheduling. Yes, you would have labor costs, but they could also serve as “eyes” on your property and take care of daily jobs, cleaning pick up etc.

Another reason I would not “rent out” the bay to a third party is because if their quality or customer service becomes lackluster, it reflects poorly on you. No one will know or care that it is a third party - they will just know that they don’t like the detailing service at your wash and as a result don’t like your wash. Whatever you do on that bay should be with your own people.

 

[Roz]

I looked at a wash for sale where the owner was renting a SS bay to a detailer for a flat $1500/month. Detailer charged $150-250/car so he had a good upside incentive to bring in customers. Detailer had incentive to make it work so he could pay the rent, owner did not need to manage his work or the bookings. National SS revenue for a bay is $1500/mo so you can make that money without effort until you can do something with the bay plus you have the detailer helping to market the place for you (win-win). Sounds like a good idea.

 

[MEP001]

I looked at a wash for sale where the owner was renting a SS bay to a detailer for a flat $1500/month. Detailer charged $150-250/car so he had a good upside incentive to bring in customers. Detailer had incentive to make it work so he could pay the rent, owner did not need to manage his work or the bookings. National SS revenue for a bay is $1500/mo so you can make that money without effort until you can do something with the bay plus you have the detailer helping to market the place for you (win-win). Sounds like a good idea.

It can definitely work, but let the detailer be his own business and make sure your customers know. Let him signage himself, ask him to create his own online presence, don't involve him in your business. I inherited detailers with my wash, and getting rid of them was the best thing I've done. They were supposed to keep the place clean in exchange for a very low rent, but not only were they not KEEPING it clean (They would just dump trash at the end of the day) but during the day they were trashing the lot by scooping garbage out of vehicles and leaving it to blow around.

 

[Waxman]

The business model is far simpler with a self serve bay. It wouldn't cost too much for the equipment.

You are imagining things going smoothly by renting to a detailer; they won't. To have a professional detail business you need; equipment, chemicals, lighting, and insurance. If you are planning to add them to your insurance policy that is a problem. In MA, the shop requires a bathroom and customer waiting area.

How are they going to wash the cars? Pay your regular price?

Even if you charged $1500/mo rent you would be far happier with a self serve wadh bay and start saving for an I BA.

 

[Greg Pack]

I know one guy that swapped space to a detailer in exchange for him keeping the place clean and paying a small fee per car(I think $10). In addition the owner gave each detail customer a coupon for a automatic wash in the hopes to gain some regular business. I saw an issue with the detailer taking up space on an already tight lot with a couple of extra cars. It was an upper income area and I think the detailer did well and grew to the point of running an independent shop.

 

[washnshine]

Don’t rule out a used IBA either. I am not asking you the figures you are comfortable with, but the numbers always fly around with needing somewhere between $100 - $150k for a new machine, but you can pick up a used machine for pennies on the dollar.

 

[MC3033]

Speaking from experience, do not charge profit sharing, it will be a headache and all the power goes to the renter.

Do you need to provide power to the bay, close it off or provide heat/different source of water or anything?

What will they be using other then the space. Just some water/electric or equipment as well?

I cannot imagine a single empty bay will generate a bunch of lease revenue (however some revenue is better then none). I believe the value a renter will see is your customer base. This means they will be approaching your customer and could be pushy to get sales. If they are struggling as a business they may start offering cheap hand wash and such that takes away from your business.

If they agree to pay a decent rent that makes it worth your time, keep their area clean and not have vehicle overflow and state that they will bring their own customers in I’d go for it! Try to see what their alternative locations are and how much it would cost them

 

[TJ_DOT]

Great feedback everyone, Thank all for the insight. The prospective detailer we are working with has his own online presence and has been in business of mobile detailing since last 2 years. He has decent reviews and hoping it would be a mutual beneficial relationship for each other and would also add value to the customer.

However I see the concerns that area should be kept clean and anything wrong that they do will impact us. I see there is some risk involved, so have to be cautious.

Sounds like Fixed Rent Basis is the way to go. I am thinking the fixed rent based on the guesstimate revenue to start with. (Which we will better know after couple of months into operation) and it has to be shared into 3 pieces. Once we get a handle on the average revenue, then the fixed rent can be better fine tuned.

33% for Carwash Owner
33% for Detail Shop Owner
34% for Crew & Chemicals

Let's say if they generated average revenue of 9000 per month, we should be getting 3000 fixed rent per month in the long run.

Appreciate sound advise and let me know if this sounds fair share for all the stake holders.

Thanks.

 

[Waxman]

If you are going to do this, you should do it 100%; operate the business yourself. Hire employees, pay payroll taxes and insurance, equip the shop with carpet extractor, air lines, steamer, ozone machine and buffers. Train employees and get workers comp insurance. Get a building permit for the build-out of the bay, including handicap accessible bathroom and office area. Develop the detail packages, a pricing strategy and marketing plan. Get a credit card swiper and internet connectivity.

If this sounds like alot, it's because it is. If you want a 'hands-off' scenario where you simply collect rent from a 'detailer', then I can see it not working out for several reasons. That is why I suggest you add more services by making a car wash bay customers use themselves. If you don't have the funds, that's ok, because the banks do. It's called financing a remodel. Frankly, it's a little insulting to those of us who do have a professional detail shop for you to think that you can rent out a bay to a detailer with none of the aforementioned preparation. A shop like you're suggesting gives detailers like me, and the whole detail industry, less credibility.

 

[JMMUSTANG]

Do you have enough parking spaces?
You will have to add a couple of electric outlets, heat, bay doors and more.
I did this years ago for 1 1/2 yrs. and I can tell you the parking became a big problem.
The guy ended up having 2 other workers plus him (3 cars).
Based on what type of service they were providing each worker worked on 2-4 cars each day
6 days per week (another 6-10 cars that needed parking spaces.
Self service Customers began drying their cars inside the bays because of no where else to do it.
More customer complaints.
Had cars over night. Had to get another insurance coverage since they were driving customer cars on my property and sometimes delivering them.
He was busy but in the end it wasn’t worth it.