Deal or no deal

[RockyExpress]

I have found a local tunnel wash 150ft with 20 vacuums stations in my town of 36k population and massive road volume. As this will be my first venture into the car wash business my background is in management car dealerships. The deal is a sublease of $9900 per month and 100k upfront to “Buy the business” no land or building included with the 100k buy in. The wash has been in operation since 2011, 2022 it ran 116k units and 2023 88k units the owner is absentee and there is also a new player several miles into town. The location I’m looking at is on the loop by all the fast food restaurants and box stores. It has amazing road frontage. My biggest hang up is the deal, does it make sense? The lease is negotiable I believe they are motivated to sell. I just don’t know what my offer back to them should be to make it make sense. Any insight?

 

[Earl Weiss]

Can you negotiate an option to Buy and right of first refusal with the Landlord?

 

[RockyExpress]

Can you negotiate an option to Buy and right of first refusal with the Landlord?

Yes after the lease is up in 9 years

 

[Dan kamsickas]

So they are leasing the place and going to sub-lease to you? You give them $100K up front and you might be able to negotiate a buyout in 9 years?

I'm not a big fan of leasing but subleasing would be an absolute deal breaker.

Also, how old is the equipment? Does the site need improvements? Have you seen 3 years of tax returns?

 

[RockyExpress]

So they are leasing the place and going to sub-lease to you? You give them $100K up front and you might be able to negotiate a buyout in 9 years?

I'm not a big fan of leasing but subleasing would be an absolute deal breaker.

Also, how old is the equipment? Does the site need improvements? Have you seen 3 years of tax returns?

I’ll be doing a walk through in a few days and get a better condition report on the equipment.

A negotiable buy out at the end of the lease is a guarantee.

I should get tax returns today. All that I have seen so far is volume count.

The 100k buy in and 9k a month lease rate is like I said negotiable.

I’m sure at some term and agreement I can make the deal make sense.

 

[Earl Weiss]

Yes after the lease is up in 9 years

I am sorry but the meaning of the post is not clear. Is the option at a price that can be determined by a definitive metric NOW exercisable after 9 years?

What about right of first refusal?

 

[Dan kamsickas]

I’ll be doing a walk through in a few days and get a better condition report on the equipment.

A negotiable buy out at the end of the lease is a guarantee.

I should get tax returns today. All that I have seen so far is volume count.

The 100k buy in and 9k a month lease rate is like I said negotiable.

I’m sure at some term and agreement I can make the deal make sense.

Don't just walk through. Pay someone to with industry knowledge to look at it. It may very well be the best money you will ever spend. If the seller balks, walk way.

Volume count can be cooked extremely easily.

If you believe they are "motivated" to sell then you need to find out why. They may just be looking to retire into the sunset or they are over their heads, slowly bleeding out, and trying to get out with their shirts still on. In the latter, you may be buying a terminally ill horse.

I'm still not clear on the "sub-lease" part of your original post.

 

[RockyExpress]

Don't just walk through. Pay someone to with industry knowledge to look at it. It may very well be the best money you will ever spend. If the seller balks, walk way.

Volume count can be cooked extremely easily.

If you believe they are "motivated" to sell then you need to find out why. They may just be looking to retire into the sunset or they are over their heads, slowly bleeding out, and trying to get out with their shirts still on. In the latter, you may be buying a terminally ill horse.

I'm still not clear on the "sub-lease" part of your original post.

They are a group that owns Grease monkeys. They bought 2 local service stations so to purchase the stations they had to take 3 car washes with the deal.

 

[RockyExpress]

I am sorry but the meaning of the post is not clear. Is the option at a price that can be determined by a definitive metric NOW exercisable after 9 years?

What about right of first refusal?

Right so if I buy in and run the business correctly and get the financials rolling I could be shooting myself in the foot if they use those numbers to base the sell off of, compared to using the numbers the wash currently generates.

 

[Dan kamsickas]

They are a group that owns Grease monkeys. They bought 2 local service stations so to purchase the stations they had to take 3 car washes with the deal.

If you can't guarantee being able to buy the dirt, I would probably recommend walking. It would not be unheard of that a big chain has a situation like yours and eventually decides that they want the dirt for something else and the wash ends up under the blade of a bulldozer.

 

[Axxlrod]

Or you could spend time and money getting the wash to do well, and after the lease is up, they say "Thank you very much". And now take everything and run it for themselves.

 

[RockyExpress]

With all that being said there is a way this deal makes sense and isn’t a total waste of time correct.

1. Assuming all equipment is up to par
2. Assuming I can purchase the property and business at fair terms

What else should I be looking out for? Obviously going the 3mill route isn’t something I’m looking to do.

My thought is low cost of entry massive potential of earnings. And with anything there is risk but I think I can bend the odds to my favor assuming the deal is structured properly

 

[Dan kamsickas]

My thought is low cost of entry massive potential of earnings.

That statement always makes me cringe. I put it with "those washes are a license to print money", "It's really passive income", "I'm tired of working long hours so I'm going to buy a wash". Your enthusiasm is great but you may want to temper your expectations a bit.

 

[Waxman]

What is your specific carwash experience? Maybe I missed that in the original post but have you worked at one? If not and you have very little or no experience in the carwash business this might be too ambitious for your first project.

 

[Islandwash]

A significant issue is the distance between you and any other carwashes and what type of wash. A car count dip from 116,000 to 88,000 could be a sign of another carwash entering your market. A town population of 36,000 is sort of thin to support 2 express washes.

 

[Keno]

...

The 100k buy in and 9k a month lease rate is like I said negotiable.
...

That's a $10k/mo lease at $9900, not $9k.

 

[OurTown]

A significant issue is the distance between you and any other carwashes and what type of wash. A car count dip from 116,000 to 88,000 could be a sign of another carwash entering your market. A town population of 36,000 is sort of thin to support 2 express washes.

Although I mostly agree with you I think you might be surprised what is out there. The next town over of 43,000 currently has four EEs, one opened two months ago and one opened a week ago. There is one under construction plus an older conveyor site currently being remodeled but may open as an exterior only. There is also an older C-store wash, two modern C-store washes, and what I consider a high-end C-store wash about ready to open. Don't forget the others: An older remodeled 5 bay SS, a 12 bay SS that is currently being redone and nearly ready to open, an old Super Wash 3 SS/ 2 IBA site, a 5 SS/ 2 IBA with a new Razor Double Barrel, and a freshly redone 4 SS/ 1 IBA Petit/Dencar site. The town has a $69K median household income which is $2K higher than the state median household income.

 

[Islandwash]

In car washing every market is different. I tend to be pessimistic about overly competitive markets because of unhappy personal experience. At the heart of the matter is your location siting and how good of a job you do. I would add in local weather to the mix, above average clouds & rain does hurt.