Express wash economics

[soapy]

I just read the Auto Laundry News yearly survey of exterior washes. I summarized the info for Express Exteriors to come up with the following numbers.
A. The average cost to build a new express in the last year was $5,154,000.00
B. The average overhead without rent is 41.6 % if you can get someone to build it and rent it to you add another 14.4% ( I don't see this as being realistic)
C. Average sales per month $95,000 average expenses including labor $40,000 before debt service per month, $55,000 GP for debt service and salary
D. If I had $1,154,000 to put down and took a 10 year SBA loan out for 10 years at current 9.25 interest rate quote The monthly payment would be $51,200
SBA debt service calculator shows a 1.09 debt ratio and anything below 1.25 would be considered too risky
E. It looks like I could make $3800 per month salary along with some owner equity each month.

Some highlight numbers they give. Average wash price $9.69 9,833 cars washed per month 5.6 full time workers per day and 5.2 part time workers per day
$11 per hour average wage

 

[Car_Wash_Guy]

Sonny's had more positive numbers at the show.

A. $3,430,000 avg
B. 34.5%
C. $103,500/mo
D. 10,000 per mo @$10.35

They amortize it over 20 years. The cash flow and ROI are much better.

 

[soapy]

I am always skeptical of manufactures numbers myself but most people only see their projections. I think you should look at several views. At almost 60 I don't think I want a 20 year loan. From what I am seeing around me 5.5 million is more the norm now. That is what the most recent one close to me spent.

 

[Greg Pack]

2 million plus land cost will get you a pretty nice Sonny's tunnel with 80cph capacity in this area.

 

[soapy]

The report said average land cost was just over 1 million. The funny thing about all the 100 foot plus tunnels in my area is that they only out out 45 cars per hour on their busiest days.

 

[Greg Pack]

Its that handful of days when the wash is slammed that you really need that higher capacity.

How about an 40-50' mini express tunnel on one of your existing sites? That's probably a 750K project.

The rush to build and/or buy expresses is crazy. They are doing some wild light shows in some now.

 

[Car_Wash_Guy]

The tunnel near me has 1600+ car days.

 

[Axxlrod]

Your debt service number is crazy high. 9.25% interest rate???? You need to find a new bank. I'm working on a new express wash project now, and my bank's last offer was 4.95% over 20 years. Rates are dropping still...

 

[soapy]

I was just using the SBA web site current rate. I am not looking to build one at all but just wanted to run the numbers as presented by Auto Laundry News.

 

[mac]

Interesting topic. Some random thoughts on this topic.
1. The discussion leaves out a very important factor-competition. In my area of SW Florida these are popping up like weeds. US 41, the main highway running through Ft Myers FL, was already overbuilt with conveyor washes. In the last 2 years there have been at least 6 express things built in the same market area. Think that affects things?
2. Please don't take this as a slam on Sonnys. You can if you want to, but not intended. Sonnys has a showpiece express in Homestead FL that they use to show clients how well their model can do. That wash rocks. What they don't tell you is that there isn't another conveyor within 20 miles. So with free vacs and a low price it works very well.
3. Is equipment life factored into this? I have seen some that do real, real good. And they change out the expensive parts every 3 or 4 years. Having most of our steel being built in China doesn't help at all.
4. I have a friend that has four automatics on one site (yes, Istobals) and he does quite well. Do not want to give out exact numbers, but it's well north of 500K. If he has a major malfunction, he might loose 25% of his business till it's fixed. Can't say that with one conveyor built with cheap steel.

 

[soapy]

Mac, by the end of this year there will be 7 express tunnels for our town of 60,000 and another one starting construction. I can't see a reason to add a mini tunnel to try to compete with them. One thing that really stuck out to me in the survey is that they allocate almost $5,000 per month for damage claims.

 

[steve569]

Interesting topic. Some random thoughts on this topic.
1. The discussion leaves out a very important factor-competition. In my area of SW Florida these are popping up like weeds. US 41, the main highway running through Ft Myers FL, was already overbuilt with conveyor washes. In the last 2 years there have been at least 6 express things built in the same market area. Think that affects things?
2. Please don't take this as a slam on Sonnys. You can if you want to, but not intended. Sonnys has a showpiece express in Homestead FL that they use to show clients how well their model can do. That wash rocks. What they don't tell you is that there isn't another conveyor within 20 miles. So with free vacs and a low price it works very well.
3. Is equipment life factored into this? I have seen some that do real, real good. And they change out the expensive parts every 3 or 4 years. Having most of our steel being built in China doesn't help at all.
4. I have a friend that has four automatics on one site (yes, Istobals) and he does quite well. Do not want to give out exact numbers, but it's well north of 500K. If he has a major malfunction, he might loose 25% of his business till it's fixed. Can't say that with one conveyor built with cheap steel.

When you say it's well north of 500K do you mean yearly gross dollars?

 

[I.B. Washincars]

One thing that really stuck out to me in the survey is that they allocate almost $5,000 per month for damage claims.

On the TCW Facebook page, if you removed the discussions about damage, there wouldn't be anything left but a couple of Tri-Foam discussions.

 

[Earl Weiss]

Suffice it to say "Averages" vary widely from area to area.

 

[mac]

When you say it's well north of 500K do you mean yearly gross dollars?

yes, well north

 

[soonermajic]

Interesting topic. Some random thoughts on this topic.
1. The discussion leaves out a very important factor-competition. In my area of SW Florida these are popping up like weeds. US 41, the main highway running through Ft Myers FL, was already overbuilt with conveyor washes. In the last 2 years there have been at least 6 express things built in the same market area. Think that affects things?
2. Please don't take this as a slam on Sonnys. You can if you want to, but not intended. Sonnys has a showpiece express in Homestead FL that they use to show clients how well their model can do. That wash rocks. What they don't tell you is that there isn't another conveyor within 20 miles. So with free vacs and a low price it works very well.
3. Is equipment life factored into this? I have seen some that do real, real good. And they change out the expensive parts every 3 or 4 years. Having most of our steel being built in China doesn't help at all.
4. I have a friend that has four automatics on one site (yes, Istobals) and he does quite well. Do not want to give out exact numbers, but it's well north of 500K. If he has a major malfunction, he might loose 25% of his business till it's fixed. Can't say that with one conveyor built with cheap steel.

Good gosh. That dude must be averaging 140 cpd +!!! That's still 35 cpd/IBA! That is spectacular! But, I bet he spent $2,000,000 all in. Anyways, thatw ould still be 4x gross. Very good site

 

[Roz]

Be careful with the business model used to justify a new wash or even a purchase of an existing wash. Too many slick presentations available from distributors or owners looking to sell for unrealistic prices that compare a car wash purchase to commercial real estate where you can leverage your amortization and depreciation to pay off the loan. If they start to talk in terms of CAP rates, run.

Commercial property with a secure long term lease where you know your EBITDA exactly for 20 years out is very different than a car wash whose revenue and EBITDA can vary greatly from year to year based on things that are out of your control (equipment breaking or weather).

A car wash cash flow should be able to easily cover your expenses and loan costs without any financial leveraging magic tossed in to make the numbers appear to work. I guess that is why the SS/IBA places with decent locations are being torn down and replaced with donut shops or some fast food box.

 

[mac]

Just a little update on this topic, or a splash in the face with cold water. Here in south Florida it is very common to get rain almost every afternoon. As the sun heats up the atmosphere (remember we have around 90% humidity) it rains for an hour or two, and then stops. Well this summer has seen moisture coming in from the south so for the past month we have been getting tropical storms almost every day. How would you like to be sitting on a 4 or 5 million dollar note on an express wash with this?

 

[rph9168]

I am somewhat amused by some of the projections I have seen. Most attempt to run them out for at least 5 years and I have seen some as long as 10 years. One common thread is that projections for volume and revenue are seldom even close because they are often based on data from existing washes not what could be expected on a new wash. They seldom take into account the time it takes to build a base, existing competition or weather conditions that can have a major effect on the wash. I suspect that many of these projections are designed backwards. They start with how much revenue is necessary to succeed then plug in numbers to support it rather than realistic expectations. I think that is the main reason washes tend to fail or change hands within the first three years.