LEASING IBA at a Gas station

[Andrew MA]

Family has been in the industry for 2 generations now. Many moons ago family had done a few lease’s on entire sites, ran it for years, eventually gave up the lease (ended up owning 15 locations with real estate).

I stumbled upon a gas station in a rather prime time location with no competition in the area, they have a IBA that’s been closed for years. Owner is open to leasing it out. Would rip out equipment and put in all new.
I have a good lawyer that I would feel comfortable to protect me.

My Questions are,

Has any one ever been in a similar scenario where your leasing just the tunnel/IBA at a gas station but not the whole site?

Utility’s are not separated what so ever in the building, so how you accurately go about covering utility cost?

What would be an average lease length to go after? Firing from hip I am thinking 7-10 years (my expectations for life of equipment at location)

What would you expect for a % increase on the lease every year?

Real rough ballpark of what you would expect to pay for a lease like this. No room for Vacs or vending, just a wash. I will be pulling out the old equipment, and purchasing and installing the new.

 

[Eric H]

Locally there was a gas station with a Laser 4000 that used to do great numbers. It was the only touchless in the area with several SS bays and 3-4 tunnels within 3 miles. The PDQ distributor in this area was great. They did an excellent job at supporting their gas station washes. As time went by the station was sold several times and the new owners never reinvested in the wash. Really ran it into the ground and eventually closed it.
I had been eyeing it for a sublease for all the reasons you are interested in doing the same. As I ran the numbers for a proForma it became less and less appealing because of increased competition and decreasing traffic count. The site you are interested in may still be a good location if you run the numbers.
A couple of years ago a local carwash owner (the newest guy in our market) took a lease on this gas station’s Carwash. It doesn’t appear to be working out for him. The floor is almost always dry when I drive by. A mutual friend tells me he is doing less than 10 cars a day with a new PDQ 360. That car count may or may not be accurate but I doubt he is on the positive side of his break even number.
You’ll have to do a ProForma if you want to get any idea if this site will produce enough revenue to be worth it

 

[Roz]

Gas stations are a hit or miss situation, often miss since they are poorly operated by people who do not care or know anything about washing cars. The public figures this out quickly if your product is poor.

My equipment rep does a lease partnership agreement with a few gas station owners looking for more revenue and not laying out any money, that probably is a better way to go as you share the risk to a degree. He handles the installation & purchase of the equipment, the chemicals, and the maintenance. He takes a majority of the profits (after normal expenses) until the equipment is paid off at an agreed upon value. After that is completed the gas station owner and he split the profits after expenses (50/50) for a defined period of time. Owner has a better long term upside, you have a lower risk and no lease payments other than perhaps a loan for the initial renovation costs. A different model to consider....Your risk is well defined and known, and there is an upside for you and the owner. Win-win...