Need advise/feedback on location & plan for new car wash

[raisetheprice]

I think the way to go would be 4/1 with the ability to expand your building in either direction. This setup will keep you busy enough to start on your evenings/weekends as far as clean up & maintenance, but you'll cater to more customers with the combo. A good combo location that's run well & kept clean can run unattended and in my opinion should run unattended. That's how the equipment is designed to operate and the model of this particular business. That's the part of the business that I like, no employees. That being said, you'd better not get too far away on a daily basis...as in live & work within 10 minutes of the wash.

 

[Waxman]

rtp

that's not unattended. you would be the attendant when, for the most part, always within 10 minutes of the wash. other than that, I agree with you.

 

[raisetheprice]

Attended to me means having coverage 8-10 hours per day everyday. The owner checking it 2-3 times per day for a total of about 2 hours a day I consider a good way to run a combo wash...unattended.

 

[Waxman]

okay, I'll compromise and say what you have is an 'attendant on call'...you.

 

[raisetheprice]

Wish I could make that happen in my situation, but I don't live that close to mine. Back when I got in they were sold by town, however once all the towns filled up (were sold), guess what? Well we can build another on top of another and let the investors figure out how to stay open. Splitting quarters with a competitor only hurts everyone. There are only so many cars and people who use a carwash so be careful Andy.

 

[Andy]

Great feedback and advise from all!! Thank you!! I?m soaking it all in, so keep it coming.

 

[Greg Pack]

I'm a fan of dual in bay autos, too. In my market, those customers are the cream.

Let me throw something at you: If you have to finance 25 years to make a carwash work, it's not worth it. Before you pay off that wash, you will have to reload those automatic bays twice, you'll never pay the place off; you're signing up for a lifetime of debt.

If you finance today 850K for twenty five years, you'll owe over 600K in the year 2017. It will be time for a autos & cashier reload, which will push your debt up to a million again on the entire property. You'll owe as much or more on it than when you opened it. fifteeen years from now in the year 2022, it'll be time for new SS & Vacs. In twenty years (2027), new autos& cashiers agin, which will likely push that total debt back up to your original financed amount twenty years prior.

In metro area, 25 years areas can boom or bust, What was once a vibrant retail area can be a shuttered warzone. Competition will come. And you're most vulnerable at the ten year mark when you could potentiall still owe a million on the property. In small towns all it takes is for walmart to relocate and they can gut the old area over time. Potentially, your wash will be a tired wash and someone, perhaps with the help of your distributor, will build another one in the newer section of town. After all, your distributor left your area alone for ten years. But now you owe more than ever on your wash.

My personal rule of thumb on a carwash is if I can't make the numbers work on a 15 year amoritization is to pass on the project. For that reason It's getting harder for new carwash projects to make financial sense to me.

 

[OCSJOHN]

Let me throw something at you: If you have to finance 25 years to make a carwash work, it's not worth it. Before you pay off that wash, you will have to reload those automatic bays twice, you'll never pay the place off.

If you finance today 850K for twenty five years, you'll owe over 600K in the year 2017. It will be time for a autos & cashier reload, which will push your debt up to a million again on the whole proprty. You'll owe more on it than when you opened it.

My personal rule of thumb is if I can't make the numbers work on a 15 year amoritization is to pass.

Greg, I generally agree with what you've said. However, Andy did say that he had 200k for a down payment. I'm not sure about construction costs where he is but I would think its reasonable to assume that by reducing his project to a standalone dual bay he could reduce his total project cost to ~850k.

This would bring his total project debt down to a more manageable 650k where he could hopefully reduce the term of the loan to 15 years. This would reduce his payments from $7750 a month for 300 months down to $6220 a month for 180 months. In my opinion, he stands a much better chance of breaking even or even becoming profitible initially and in the long run with the lower payments on a standalone dual bay automatic setup.

Also, I agree 100% with your last comment about 15 year amortizations. Not only because of what you mentioned in your post but also because of the fact that a 25 year note on anything just scares me, and I am a young guy. I can't imagine being in my late 40's or 50's and signing up to pay for something over a term that could quite possibly exceed my life expectancy.

 

[Andy]

That’s very good advise and I agree with you guys whole heartedly about the term. However, my plan is to pay the loan off way before the full term. The nice thing about a 25 year term is that during slow times you’re not strapped to a high mortgage payment.

 

[CleanUp]

If I could piggyback with Andy here...I'm in the initial stages of my research on this industry and the start-up costs on a new build seem to run from the medium six figures to 1mil+. Is there any benefit in purchasing an already established wash? I know there are too many variables to count, but in everyone's opinion which way would you go based on your experience?

 

[rph9168]

It seems you have already decided to build a wash and have done some good groundwork to start with. You can get a lot of good information and guidance here but you need someone you can deal face to face with on a regular basis. For a first timer I would suggest you either work with a distributor that you feel you can trust or hire a consultant. Do your homework and check thoroughly into either way you decide to go. If you use a distributor talk to operators that have worked with them and see how they have been dealt with - not just their references but as many as you can find. Do likewise for the consultant.

 

[AdamA]

One operators thoughts...

I assume you have talked to banks and have an offer in writing? I am an experienced operator with A credit and I doubt I could do a deal with less than 25% down in today''s market. Soft costs hit your collateral pretty hard. If the $100,000 is accurate your collateral coverage is less than 10%, assuming you aren't putting up other collateral. A wash planned in my area where they can't get in financed at 25% down.

$1,500 per self serve bay is optimistic. My autos do more than you are projecting, but have been there for 7 years. Over 5 to hit that level. I would look at a single faster auto and fewer self serve bays/vac's. Build so you can add auto or go with machine that can be sped up as demand calls for it. Value engineer the building and see where that comes out. Check water, sewer, traffic fee's. Professional fee's could run $30,000...I just paid that much on a remodel. My electrical was $60,000 (and isn't really collateral) so you see things can add up quick. Of course all situations are different.

Site sounds good, but overspending means the next guy makes the money...

 

[scott]

Have you approached the owners of the two "run down" washes in your town to see if they'd sell? Putting half of your 200k into down pmt on cheaper wash, then plan on a immediate renovation with a 5 yr total remodel, maybe even tear the old wash down and build new on the slab @ a later date?
My opinion, it takes a big wash to justify a 300k lot, and a lot of them dont work unless youv'e got about 50%+ in cash laying around..

 

[Andy]

This is a thread from over a year ago… looks like someone else revived the thread with a different question.

I still appreciate the two recent replies to my original post. Just to give you guys an update, I purchased the property and own it free and clear. I’ve been working with an architect, general contractor and equipment supplier. I’ve got a couple lenders interested in our project. I’m still moving forward, but am taking things slow to see what happens with the economy.

To say I’ve learned a lot in the last year would be an understatement. Thanks again for everyone’s advise, it has certainly helped.

 

[pitzerwm]

We all understand your thought process and the "going slow" part is smart. My 35 years of experience taught me that you find out all that you can from the smartest people that you can find (and they are right here on the forum) and even when you have done all of that it may not turn out the way that you hoped. Always have a plan B, if you are over 35-40, you better not put the farm on the line. God might be busy and not be there to save your butt.

 

[BoomerSooner]

Several of you have told me that a 1.2 million dollar project for this wash is too much, but until the question above is answered, I have no idea by how much.

Andy I work for a distributor and we are currently building a 2 bay auto with 4 self serve in a town of about 14,000. In this town there are 2 other washes with touchless automatic's and one wash with I believe it is a 8 bay self serve. One of the auto's is in pretty good shape and is well maintained. The owner of the wash that we are building is also spending about 1.2 million on his wash. He is putting it behind his car dealership and it is hidden but on the main highway coming into town. He was going to put in 2 touchless but decided to go with a soft cloth b/c no one else in town has a soft cloth and this is a farming town. After talking to many residents in the area, I feel that for the size of the town that this is, it is going to explode. Many people know the owner of the dealership and know that he takes care of his stuff. I have not read every post on this board but you might also look at what type of other washes there are. I have another customer in another town that has 2 touchless automatics and and does about $30k worth of business a month b/c he takes much better care of his wash that is out of the way then the flex serve does down the street in the middle of town. For anyone to tell you how much money you are going to make and all that good stuff is almost impossible. Every wash is different, every owner is different, every town is different. You have done your research and looks like you have a great plan together. Just make sure that if you are going to spend 1.2 million, it is going to be worth it.

 

[Patrick H. Crowe]

If I am reading this correctly there will be 29 bays, including yours, within a 2 mile radius of your proposed location. Meantime there are 46,000 people within a three mile radius, right? How many within a two mile radius?

I assume there would be about 2/3 as many but please note as you increase from a 2 mile radius to a three mile radius the area more than doubles so it could well be fewer, less than half.

That's far too few people per bay. Do not discount some facilities as too old or two run down. Many owners see these as golden opportunities.
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I saw no mention of what happens if and when an express tunnel opens up near uou. Have you considered that?
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I think it was Greg Pack who noted a 25 year note is way too long. He's 100% on target. In the early days most lenders would only go five years. As time passed and the industry matured some lenders went 10, rarely 15. Moreover it was usually 25% down and closing costs, fees, deposits were not included. The rates were almost always adjustable and many of us paid 15% or more.

Only when the SBA began messing did the terms grow longer, the down payments lower and soft costs got included. There are many bankrupt washes here thanks to SBA loans which banks were willing to make because the fed's would pick up most of the losses.

Your deal strikes me as shaky at best.

Patrick H. Crowe

 

[Mike333]

Andy Still Around?

Just wanted to say hi. My name is Mike and I am a new member. I am starting my research to see if a car wash would be a good idea for me. I see this post is from Andy, how is he doing now? Did he build?

I didn?t quite say that. I was saying it would take $20K per month to make a 1.2 million dollar project worth it. Although, I would think within a year, along with some aggressive advertising, I could see $20K a month from this location? $1500 per self-serve bay as the national average, plus an average of 1500 cars per month through the automatics, would put me between $19K and $20K. The problem is, I think it would take at least a year to hit these numbers and I?m not sure I?d be able to feed this thing for 12 months and still stay a float.




I like your ideas about scaling back, maybe put in 1 automatic, but build for two. I figure I can save $130K in equipment if I do that. But, that?s only $1K per month in savings on the loan. I?m going to need to cut back a lot more then that. Any additional ideas on where I can cut expenses, without affecting revenue?

I figure I can put $200K down and finance $850K, that gives me a mortgage payment of $6560.44 (25 years @ 8%).

I still may be able to save a little on the land and possibly the building. Any additional feedback would be greatly appreciated. Thanks guys!!