Purchasing Used car wash vs building from ground up

[dkittl20]

Newbie here,
been kicking around the idea of getting into the carwash industry in a couple of years and been doing some heavy research latley.

Was wondering about purchasing a used car wash. Does this make any sense? Am I missing somthing... why would anyone want to sell a profitable site? or would the intent be to purchase at a discounted rate, remoldel manage better and hope for new clients? any thoughts on this would be helpful.

Is it easier to get a loan on a used site then building from the ground up?

Thanks for your input, theres alot of great resources here.

 

[Whale of a Wash]

I'll answer why someone would sell a profitable site. I have been at this for almost 22 years. I have worked 70-90+ hour weeks forever. It easter and after i finish this ,head out the door at 5:30am for a 12-13 hr day. I will stop home for lunch for 1.5 hrs. Visit will relatives and such. I am not complaining at all, but at a certain point you start to feel like you are missing something. But if i sold today, I would wake up before 5a without an alarm with nothing to do. Everyday goes by like a coffee break, so not sure if i could handle that either. Probably have to go in for De-programming. I love my washes, but not all the customers, so you need more than the money to own one, you need the extra energy, and drive. A 40hr week would feel like a vacation. This is why someone would sell a profitable car wash.

 

[mjwalsh]

I have been at this for almost 22 years. I have worked 70-90+ hour weeks forever. It easter and after i finish this ,head out the door at 5:30am for a 12-13 hr day. I will stop home for lunch for 1.5 hrs. Visit will relatives and such. I am not complaining at all, but at a certain point you start to feel like you are missing something.This is why someone would sell a profitable car wash.

Whale (John) & dkittl20 & others,

I have been involved in our car wash attached to our laundromat since I helped with the concrete block laying construction back in 1968.

On Whale's comments on hours required ... I can relate. In my opinion, that is why there is a need to have people on payroll who are familiar enough so a "takes turns" situation that tends to be more ideal happens. I think that is a win win for everyone including the families of operators & the families of the employees that hopefully the operator can afford to hire. Especially, in areas of high or potential high unemployment around the country. Better for the country as a whole also!

Easier said than done because the net revenue &/or efficiency factors have to be there to make having employees sustainable. That is why I try hard not to convulse when insensitive & "out of touch" politicians push hard for taxing &/or for maintaining taxing of the gross. Also, I am somewhat cautious about credit card merchant fees which also take from the gross without appreciably increasing volume & simplifying.

Property taxes are also very regressive ... which could have a bearing on dkitts decision of building new vs redoing an older & therefore the older car wash possibly less likely to have a super high property tax evaluation.

Happy Easter Everyone!

mike walsh king koin of bismarck

 

[Earl Weiss]

Newbie here,
been kicking around the idea of getting into the carwash industry in a couple of years and been doing some heavy research latley.

Was wondering about purchasing a used car wash. Does this make any sense? Am I missing somthing... why would anyone want to sell a profitable site? or would the intent be to purchase at a discounted rate, remoldel manage better and hope for new clients? any thoughts on this would be helpful.

Is it easier to get a loan on a used site then building from the ground up?

Thanks for your input, theres alot of great resources here.

1. Unless you have a steller financial statement good luck geting financing in the currrent lending environment.
2. You can perhaps find run down places you can improve. Be prepared to have a chunk of money available for all the needed repairs and overcomiing the slack time that will follow for a year or so to overcome the bad juju.

 

[rph9168]

If you decide to go through with this and can get the financing you have many things to look at before you buy one. Here are a few critical ones.

Location - nothing you can do will overcome a bad location. You need good visibility with easy access and a favorable traffic volume and flow.

Competition - if an area is overbuilt with car washes you will constantly struggle to stay afloat. Some competition is okay but if there are a lot of washes in the area your chances of success are not good.

Advice - find a reliable, honest distributor or consultant to help you. Not everyone that distributes equipment or calls themselves a consultant can be trusted. Do you homework and find one with a good reputation.

Consider the costs - make sure you understand what the total cost will be. An old run down wash can be a money pit. Unless you can get it at a low cost you won't be able to bring it up to a good operating standard. Even a new wash can be costly to repair so get several solid estimates on renovation and rehabbing before taking the leap.

Finally - make sure you understand the commitment. As has been previously mentioned, this is an involved investment. It will require you to be involved in some form 24-7. If that is not your cup of tea don't even consider it.

I am sure others can add to this list but these are some of the more critical concerns you need to look at. Good luck with your decision.

 

[I.B. Washincars]

Definitely proceed with caution, but just because a wash is for sale doesn't necessarily mean it's a loser. I have made a decent living off my four washes, but I am 54 years old and plan on turning over the reigns to someone else by the time I'm 62. I'm not trying, but will sell any of mine right now if a buyer comes along. I'm getting the word out now so that I don't turn 60 and have four washes that I "need" to sell. I would like to be down to one or two by then. I'm sure there are others out there in a similar frame of mind as me (kinda scary when you think about it).

Three of my washes were "ground up" builds. The other was an existing wash and rehab. Buying an existing wash would be my prefernce by far, but it needs to be the right wash. Too much BS and unknowns to deal with when building new.

 

[MEP001]

2. You can perhaps find run down places you can improve. Be prepared to have a chunk of money available for all the needed repairs and overcomiing the slack time that will follow for a year or so to overcome the bad juju.

I would second this advice. This would take more time on your part, but if done right can mean a good long-term payoff without nearly the investment a new build would be.

Easier said than done because the net revenue &/or efficiency factors have to be there to make having employees sustainable. That is why I try hard not to convulse when insensitive & "out of touch" politicians push hard for taxing &/or for maintaining taxing of the gross. Also, I am somewhat cautious about credit card merchant fees which also take from the gross without appreciably increasing volume & simplifying.

Take this advice with a grain of salt. First off, I and others have seen a significant increase in revenue from credit card acceptance that more than offsets the merchant fees and high costs of the equipment. Secondly, he often posts such comments seemingly to instigate yet another discussion about pushing through the killing off of dollar bills in favor of dollar coins.

 

[dkittl20]

Thanks for the replys guys. The more research I do the harder it sounds to break into the industry. I think financing will be the biggest thing to overcome. My credit is pretty much perfect, hopfully have a decent down payment by then. However I understand today's loans on carwashes ( or any business ) are very hard to secrue. And even more for a newbie. That's why I was leaning towards buying used, established wash, just couldn't get my head around It not being a bust. Do you think I will have a better chance with a loan this way or does it not matter because money is money.. Going to the same thing, a carwash

 

[Earl Weiss]

Also, I am somewhat cautious about credit card merchant fees which also take from the gross without appreciably increasing volume & simplifying.

Being a Gasoline retailer I have a particularly bad taste ijn my mouh about CC fees and chargebacks for stolen cards.

I have come to conclude that they are a neccessary evil and these fees exist because the cash paying public and (we) merchants are idiots for not universaly rejecting it.

The cash paying public are idiots because more of what they pay goes to the merchant's costs so they are in fact subsidizing the CC users.

Merchants are idiots because I frequently find that If I use a CC to pay a govenrmernt bill I pay a convenience fee which seems to run about 5%.

This one of the few cases were the govt seems to be smarter. There should be a set surcharge for all CC fees that at least covers direct merchant costs.

 

[soapy]

In this economy my advise is to look for a owner who is willing to fianance the purchase over time. It will require less down payment by you and also has the advantage of letting the owner make a sale that would be difficult in this market. The owner would hold the title to the property until paid off in full and also let him spread the money coming in over time for a lower tax bite. The seller could also get better interest for himself as well as offer you better interest since no third party would be getting a cut
Also as has been stated expect to work long hours an irregular times.

 

[Alan Bussey]

DKitt -

I think that the most difficult thing for lenders to understand is the 'need' for any specific type of wash in a given location. For example, a site that is good for a self-serve might be terrible for an express. So, if you can really establish the need for - the likely success of - a new wash then you shouldn't have too much difficulty getting a car wash loan for a new construction. You may need to bring in a third-party car wash consultant to do a site analysis/feasibility study. Your chosen bank may have someone who they prefer to use, so don't order a feasibility study without asking your banker about this, otherwise you may have to pay for a second one.

I encourage you to take a two-pronged approach: initially investigate buying AND investigate building. Eventually one of the two will become the apparent better approach in your area. Then concentrate on that approach, keeping the other an option.

Good luck to you.

Alan Bussey

 

[robert roman]

“Was wondering about purchasing a used car wash. Does this make any sense?”

It is difficult to answer general questions like this beyond saying “maybe” because of the number of variables involved.

“Am I missing somthing... why would anyone want to sell a profitable site?”

Possible causes could be retirement, illness, loss of interest in the business and/or industry, personal or other business-related bankruptcy filing (not the carwash), divorce, mortality and no one in the family wants to take over, partnership split up, rope-a-dope (selling a profitable business that is less profitable than portrayed).

“or would the intent be to purchase at a discounted rate, remoldel manage better and hope for new clients?”

Since discounted rate can imply weakness in the retail market, buying a distressed carwash property may not be a good idea unless there are mismatches in demand and supply.

“Is it easier to get a loan on a used site then building from the ground up?”

It can be but not necessary so. Again, general questions like this are difficult to answer meaningfully beyond saying maybe.

Allan makes some good points. However, I would suggest that you perform site and location analysis, scoping study and feasibility analysis before you even approach the bank.

The why is; you only want to rely on the bank’s due diligence (appraisal and feasibility study) to confirm the obvious.

During the last carwash boom period, debt was cheap and collateral made banks lazy.

Consequently, due diligence was often based on equipment dealer’s pro forma, equipment quotation, construction bid and property appraisal. Back then, many banks wanted 3rd-party feasibility studies to be a rubber stamp.

 

[robert roman]

Focus on Allan’s point of need.

The need for a carwash or any retail business for that matter should be based on evidence there is a shortfall in the supply of stores in an area (i.e. analysis of demand/supply balance) and that the carwash would be reasonably convenient and useful to the public (i.e. strong segment, propensity to shop and competitive advantage).

 

[mjwalsh]

Take this advice with a grain of salt. First off, I and others have seen a significant increase in revenue from credit card acceptance that more than offsets the merchant fees and high costs of the equipment. Secondly, he often posts such comments seemingly to instigate yet another discussion about pushing through the killing off of dollar bills in favor of dollar coins.

Mep001 & others,

To set the record straight:

I have 13 (most still under warranty) Mars & Coinco Vantage bill acceptors for our self service car n dog wash & my edutainment center within our laundromat. If there is enough support for having proper oversight in making sure the gold colored dollar coins are properly available .... then by all means I am very much in favor of making sure the $1 &/or $2 dollar paper money is available. Addressing the 15 trillion dollar deficit of our country with the most accurate information possible ... is relevant to the discussion.

Sorry, but a comment to an aspiring new operator about payment method options is relevant.

Since there is some truth in what you are saying about going to the credit card offset ... with increased volume. Also, if you subscribe to the mindset that there will be horrific wild out of control inflation you & someone setting up brand new may want to consider going to just credit card ... like when I buy my Sam's Club gas using my membership card.

Just to give some of you "a heads up" ... our decision to address the debit & credit need ... through the use of an ATM starting about a year ago today has already proved to be the best fit for us. I can honestly say that our ATM that gives out 5s with the more sustainable fee structure has now paid for itself 100% in one year! I believe long term wise it is better for our customers because we can pass on that savings to our customers for a more affordable way for them also. Remember we are not just competing with each other but also with the customer who chooses to leave his car dirty because of lack of affordability!

mike walsh king koin of bismarck

 

[Alan Bussey]

Well, Robert, perhaps I could have been clear that I am not suggesting a feasibility study / site assessment as a 'rubber stamp', but as a real, honest, addressing of the factors and a true hard-nosed analysis of the likelihood of success - not a gloss-over. The bank is likely to go along with the applicant's suggestion for a feasibility consultant as long as they can get some information on the experience of the consultant and a good idea of his or her method of analysis. Somone constructing a new wash might as well let the bank get involved in the selection of the consultant at the beginning so that the people at the bank are more likely to accept his or her work and conclusions. This simple involvement of the bank in the selection of the feasibility consultant may make the loan process a little easier and the outcome a little more favorable to the applicant.

Alan.

 

[robert roman]

Alan,

I know you, among some other advisors, would not suggest the rubber stamp approach.

And, yes, by all means, folks should get close to candidate lenders early on as possible.

Analogous to long waiting lines, any self-service operator who doesn’t make it as easy as possible for customers to pay is losing business.