newbie/potential owner has questions

[mlay]

I know you all get this same post about 5 times a month, but...

I have been looking for, watching, observing, and researching the car wash business for about 7 years now. I want one as a supplement to my income. I don't expect a lot, just to cover the bills while I learn the business. I have an extensive sales/marketing/operations background in a variety of businesses, and believe I can improve on the "typical" SS for this area. I almost built one about 3 years ago but couldn't pull the trigger on it. I now have found what I think is a good deal, but would like some feedback from you.

I found a defunct 8-bay SS on 3 acres of land on a busy main road. The road is low speed and the wash is located on the side that is the way in to town -- so everyone going to work or at the large college in town would pass by on their way. It is set back a ways from the road but a large new sign (allowed by the local govt) would improve on it.
It is on 3 acres, about 1/2 of which is in a partial flood zone. However, I was thinking about either doing some grading to add some storage units or a automatic bay. I only need to come up about a foot to be out of the flood plain. I was also thinking about renting some of the land to some mobile vendors, which are popular in the area (they serve tacos, burgers, snacks, etc -- not the standard roach coach type food), and working some type of coupon deal out with them. For example, the customer buys a "meal deal" and gets a coupon for $1 off of a wash.
The facility itself has been unused for about 5 years and is in rough mechanical shape. The owner died and his family (all out of the area) is just now working through the will, which is why it has been shut down and has not sold. The structure is okay, just needs paint, signage, lighting, and a camera/security system. I've gotten two bids to repair the equipment, the highest of which was $125,000, so I am budgeting $150k.
I think I can get the place for $250k, so I would be into it for $400k total for an 8-bay wash. (It also has 8 vac stations which I would be replacing/updating as well).
So my main question is, if you owned an 8-bay SS facility with good demographics, on a 40MPH road in a pretty good location, with pretty much brand new equipment, is it unreasonable to expect to have net income of $750 per bay per month? To clarify, when I say "net", I mean after all overhead expenses except for the mortgage and property taxes. What do you think?

 

[Whale of a Wash]

$1 off on a self serve cycle seems like a steep discount. What do you have planned for pricing. What is the vehicle count on your road, and the population within 2 mi. of the wash. I'm sure most on the forum will ask those questions to get a little bit of an understanding of your situation. How many other washes, and how many self serves are in your area, and their pricing. For $400K you might be able to buy an existing location from a current owner. alot of possibilities out there. The $750 a month net seems high for my area, as that was my gross per bay for May, but every area of the country is quite different.

 

[robert roman]

To answer your main question(s), "... if you owned an 8-bay SS facility with good demographics, on a 40MPH road in a pretty good location, with pretty much brand new equipment, is it unreasonable to expect to have net income of $750 per bay per month? To clarify, when I say "net", I mean after all overhead expenses except for the mortgage and property taxes. What do you think?"

You have defined net as EBITDA.

If this "someone" had all of the conditions as you described in your question, he or she could expect gross net of roughly 60%. So, a wand-bay would need to gross $1,250 to net $750. Consequently, I would say that $1,250 would be within the realm of possibilities given those conditions.

However, I would not apply my opinion to your specific situation because I don't know if you have good demographics or a good location.

 

[rph9168]

You also need to factor the length on time this wash has been closed. It takes time to build a business back up. Any chance you can get any records of what the wash did when it was open. I know it was a while ago but it might shed some light on potential revenue projections. As Robert stated, without more demographic information about the population and information about existing washes it is tough to answer your questions.

If you are thinking about storage units you also need to see what the competition is around you as well as security issues. If you add that and look at mobile vendors you are also probably going to have to pave the site. This is not a simple project and although the price may make it tempting it may be a lot to handle for someone who also has a day job.

 

[mlay]

more info

Thanks for the responses. The town it is in has a population of around 50,000, and also a state university with about 30,000 students. Lots of rooftops in the area, predominantly middle income and students. Traffic count is about 16,000 per day, it is a main feeder road into town. It is a 2 lane road, no divider, so it so it would be easy to access from both directions. The only competition is a newer wash that was built about 3 years ago that is about a mile away on the other side of the road, and beyond a major intersection that a lot of the traffic takes and so bypasses the newer wash. That one is also on a fairly steep slope and is hidden by trees. Though it is on the corner you cannot easily see it unless you are right in front of it. I am getting this one essentially for land value, so my thought process was that if I can get it working for $150k, that would be better than building from scratch by a long shot.
The last statement the family provided (hand written) showed gross income of $87k, and NOI of $56,000. From what several vendors have told me, the owner was in declining health and not working the wash too hard at that point. However, after looking at about a half dozen potential purchases over the past few years, one thing I am sure of is that nobody keeps real books (no offense intended, thats just the way it works around here) and I would never count on anything the owners provided. At least 1/2 of the owners I talked to actually took me aside and mentioned "the great benefit" of a cash business, and how there "real" numbers were higher. So I prefer to rely on general statistics based on traffic count, typical net and gross profit percentages, etc.
I have no particular plans for pricing at this point, but I will be competitive for the area -- it costs me about $4-$5 on average (if I hustle) to wash my Expedition.
I realize every situation is different, I am just trying to understand what a reasonable average net (EBITDA) would be for a fairly similar situation. Are there any rules of thumb that you should get a certain amount of clients per day based on a certain amount of traffic volume?

 

[robert roman]

I gave you a rule-of-thumb in my previous response.

Based on the additional information you provided, my advice to you would be to begin by looking at this property as if it were just a pad site.

The next step would be to determine if the property is still economically desirable and suitable as a carwash site.

An equipment distributor and/or carwash consultant can help you with this determination.